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Distell relies on brand strength

Johannesburg - Amid continued market uncertainties, wine, spirits and cider group Distell has expressed confidence that its "versatile and strong" portfolio of brands would continue to shield it against adverse trading conditions.

Speaking after the group posted its first-half results, in which it reported revenue growth but lower headline earnings per share (Heps), Distell MD Jan Scannell said it was difficult to predict performance in the last half given prevailing market conditions.

"With current conditions, it's difficult to forecast. We believe consumers will remain under pressure. But results in the last six months shouldn't be worse than what we have seen [the first-half results]," said Scannell in an interview.

Scannell said SA's deepening job losses and rising energy costs threatened to put further pressure on the country's already debt-laden consumers.

"Nevertheless, we are confident our versatile portfolio of strong, appealing and diverse brands and our capacity to trade across a spectrum of markets will keep bolstering us against adverse trading conditions," said Scannell.

In the six months to December 2009, Distell said its revenue grew by 9.3% to R6.6bn, lifting operating profit by a marginal 1.9% to R949.2m. However, Heps declined by 2% to 303.2c compared with the previous corresponding period.

Challenging trading conditions resulted in a 4% sales decline in the spirit portfolio in line with global trends, and a 1% sales drop in the wine division. Cider and the ready-to-drink brands performed strongly, delivering a 17% sales growth, Scannell said.

Nevertheless, the group maintained its 124c interim dividend payout.

During the period Distell also signed a contract with Fifa to market its cream liqueur Amarula and some of its Nederberg wine brands during the 2010 Fifa World Cup. Scannell said although the contract would result in material changes in Distell's earnings, it would nevertheless help market the brands to international visitors to SA during the tournament.

On Wednesday, Distell shares closed at 6 766c, 0.5% down for the day.

- Fin24.com

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