Distell reports 15% revenue growth and 9% sales increase

23 August, 2012

Distell, South Africa’s leading wine and spirits producer, has reported a 15% growth in revenue for the year to June 2012 and a 9.9% increase in sales volumes across its portfolio of wines, spirits and RTDs in both domestic and international markets.

Earnings were impacted, however, by a one-off extraordinary excise duty provision amounting to R297.8 million, as a result of a reclassification of wine aperitifs by the South African Revenue Service (SARS).

Distell group MD, Jan Scannell, said that RTDs and ciders, in particular, performed exceptionally well. A suite of strong brands across the portfolio also meant revenue growth could be achieved without sacrificing margins. Gross margin improved to 34.7% from 32.7% a year ago.

Scannell said the company was on track in its goal to increase the year-on-year contribution of export sales to revenue. Revenue derived outside South Africa, on a non-duty-paid basis, comprised 27.5% of the total, up from last year’s 26.4%.

In the domestic market, Distell had outpaced the rate of growth achieved in the national retail alcoholic beverage sector for the reporting period, he said. Whereas AC Nielsen data had shown a 3.0% increase in sales volumes and 8.2% in value, the company had grown local sales volumes by 9.6%, while revenue had risen 13.8% to R10.6 billion.

Distell’s ciders, Hunter’s in particular, and its ready-to-drink (RTD) brands were the star performers, says the company, reflecting double-digit growth.

Growth within the company’s spirits division came from brand leader Amarula, off a well-established base, as well as from cognac brand Bisquit, and the Three Ships whisky range. All three brands achieved double-digit growth, says Distell. The impact of these gains was muted by the weaker performance of the brandy category.

Wine sales growth had been slightly below the national average of 4.3%, but there had been highlights, Scannell said. Nederburg, given additional visibility as a result of its participation as a sponsor in the debut Master Chef SA series earlier this year, had performed well in the premium sector. Paarl Perlé and Autumn Harvest Crackling had also delivered good results in the popularly priced category. The company’s sparkling wines had marginally outperformed the industry average, while fortified wines had shown exceptional growth in volume and value, led by Sedgwick’s Old Brown.

International sales volumes increased by 10.7%, with revenue up 21.1% to R3.4 billion.
Sub-Saharan African markets, in particular, delivered another year of strong growth, contributing 60.8% to foreign revenue.

“What is most pleasing is that international volume growth was achieved across all important categories, with spirits and wine sales volumes growing by 13% and 6% respectively, while RTD volumes rose by 19%.”

Bisquit’s international volumes increased 5% and revenue by 33%, with exciting growth occurring in developing markets in the East, Eastern Europe and Latin America.

Although the company’s wine sales were still dependent on the developed markets of the UK and western Europe, both of which had been affected by the economic downturn, volume growth of 6%, and revenue growth of 15%, were achieved. While wine sales growth occurred across all regions, the biggest increases came from sub-Saharan Africa, South America and Asia.

Scannell said that contrary to the view of some wine producers, the UK could still offer good growth. “Our investment in 2010 in Brand Phoenix is yielding good results. We are now far better represented in the retail channel than ever before and continue to unlock the potential in this market."

RTD and cider exports also saw strong volume and revenue growth, mostly derived from Africa. Distell is now the world’s second largest cider producer by volume.

Looking ahead, Scannell said that while the prevailing uncertainty of the global macro-economic environment made it difficult to anticipate trends in demand, consumer spending was expected to remain modest both domestically and internationally.

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