Tuesday, Feb 26 2013
Continued growth in sub-Saharan Africa, including South Africa, and the benefits derived from a weak rand resulted in the Distell Group raising revenue year-on-year by 9,3% to R8,7 billion for the six months to December 2012. In a climate of mostly muted markets because of the continued global pressure on disposable consumer income, sales volumes increased by 6,6%. With operating expenses 10,0% higher, the company nudged its operating profit up by 5,3%.
Net operating margin dropped marginally to 14,0%, compared with 14,6% for the same period a year ago.
Headline earnings grew 12,9% to R877,4 million, while headline earnings per share increased 12,6% to 433,0 cents.
An interim cash dividend of 152 cents has been declared (2011:143 cents), up 6,3% on the comparable period.
Notwithstanding a difficult domestic market compounded by the impact of excessive excise duty hikes, domestic revenue increased by 9,9% on sales volumes that were 6,7% higher. As expected, the raised duties eroded spirits sales, and, to a lesser extent, those of wines, while the company's growing portfolio of comparatively lower-priced RTDs, including leading cider brands, Hunter's and Savanna, delivered excellent growth.
Group FD, Merwe Botha, said: "We have been careful to protect brand equity in an environment of aggressive discounting. It is worth noting that in a recent study of liquor consumption patterns in South Africa, Nederburg was the third of four top players in the premium and super-premium wine category when it came to volumes sold but emerged as the undisputed leader as far as sales value was concerned, by a margin of 32%."
He added that thanks to assiduous brand building, Amarula had succeeded in growing volumes, despite the advent of several me-too marula cream drinks.
International sales volumes grew by 6,5%. Revenue, derived from a less favourable sales mix, did, however, benefit from a weaker rand to grow by 8,5%. Ciders and RTDs performed best, although Amarula, ranked one of the most requested liqueur brands in a global survey among the world's top 100 bars, and Nederburg, still South Africa's most awarded name in wine, also produced impressive results in some of their key markets.
He confirmed that, for 2012, Distell's wine portfolio had also outperformed the South African bottled wine category on export markets, increasing its total volume share to 27%.
Once again, the company's sub-Saharan African markets gave rise to strong growth, to contribute 64,4% to foreign revenue (excluding South Africa).
Botha said the steep increases in excise duties, locally and in several other markets, as well as the cost of certain raw materials, had been offset by the benefits from improved efficiencies elsewhere in the business. Foreign currency translation gains had amounted to R21,9 million, compared to R118,9 million the previous year.
He confirmed that for the 12 months to June 30, 2012, the company had made adequate provision for additional excise duty on wine aperitifs, with no further provisions needed.
Total assets increased by 12,0% to R11,0 billion.
Capital expenditure amounted to R264,4 million, of which R119,9 million was spent on the replacement of assets. An amount of R144,5 million was spent to increase cider production capacity and to extend whisky maturation facilities, while investment was also made in additional cognac and whisky inventory to meet anticipated market growth.
Botha said the group was well-placed to tackle the challenging trading conditions that were likely to continue. "We are in robust financial health. At the same time, our portfolio of well-respected brands is sufficiently versatile in terms of product and pricing to give us the scope to capitalise on prevailing opportunities."