Distell records flat group revenue growth

During the first three months - 1 July 2018 to 30 September 2018 - of the new financial year ending 30 June 2019, Distell recorded flat group revenue growth with single-digit volume decline compared to the corresponding period in the previous financial year.

Distell said in a trading update on Wednesday that in South Africa, tough trading conditions persist where consumer disposable income remains constrained due to the rising cost of living. Lower volumes were recorded compared to the first quarter of the 2018 financial year due to a price increase taken in October 2017.

It has, however, seen a positive revenue effect across the portfolio due to further pricing decisions taken in the first quarter of the 2019 financial year. This needs to be balanced appropriately with market share ambitions in the midst of a constrained consumer environment.

Growth in the ready-to-drink (RTD) segment continues to take share from beer, which Distell will continue to leverage and drive focused investment. Revenue trends from mainstream and premium wine continued in the first quarter of the 2019 financial year without the effects from the drought being experienced yet.

Revenues from spirits remain stable and the group will aim to capitalise further on trends in the segment and its strong position in brandy and single grain whiskey, while it will build on its 2018 financial year vodka performance.

"We continue to invest behind core brands and execution to deliver an increased customer footprint and market share gains. We anticipate a stronger second quarter in the 2019 financial year given festive season demand and cyclical customer orders over this period," it said in a statement.

Rest of Africa

In the rest of Africa Distell achieved what it calls excellent volume and revenue growth, led by Kenya, Botswana, Zambia, Mozambique and Zimbabwe.

All three categories contributed to the growth, with a standout performance from the mainstream spirits category. Increased commodity pricing should allow commodity-producing countries to improve meaningfully, while investment-led growth will benefit many of the non-commodity-producing countries.

Distell expects its Angolan operations to capitalise on an improved environment and sees its Kenyan operations to continue on previous trends.   

"We will continue to expand our local production and distribution footprint in Africa by further investments, alongside select joint-venture opportunities," it said.

In the international markets, the UK, Taiwan and Nordic countries are showing higher volume and revenue growth, with the global trading environment remaining highly competitive and trade tensions at heightened levels.

Scottish Leader and Drostdy Hof was able to achieve good growth, recovering from the volume losses of the previous year.

"We will continue to invest behind select international markets whilst we refine our operating model and portfolio in these regions," the group said.

"The outlook for economic growth remains mixed with varying levels of political and economic risks in many of the markets in which Distell trades."

The group said it continues to defend and grow its domestic market share and integrate its new African route-to-market acquisitions while creating a more agile and efficient business which aims to enhance margins going forward.

The trade update does not constitute an earnings forecast and has not been reviewed and reported on by the company’s external auditors.

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