Spirited performance at Distell

On Wednesday Distell reported a 7.6% rise in sales volumes to 223 789 litres for the interim period ending December 2007, which translated into a 12.9% jump in revenue to R4.8bn.

Distell owns well known brands like Fleur du Cap, Zonnebloem, Tassenberg, Savanna, Klipdrift, Esprit, Nederburg, Amarula, Mainstay, Richelieu, Chateau Libertas and Graca.

Despite the competitive environment for liquor (particularly wine and white spirits) locally and abroad Distell managed to show a 17% increase in trading income to R795m.

This means Distell achieved a trading margin of 16%, which is ahead of the 15% target set by the group a few years ago. Management...take a bow.

Asked whether the trading margin could improve if market conditions improved in the next six months, FD Merwe Botha said the group still had spare throughput capacity in most businesses and that management's focus was still on maintaining operational efficiencies.

"But we are not obsessed with achieving a trading margin of 20% or 21%."

Bubbly showing

Once again Distell's performance was helped by a bubbly showing by its RTD (ready-to-Drink) and cider brands, which saw sales volumes rising over 10% despite packaging and carbon dioxide shortages as well as "own capacity limitations" (which have subsequently been addressed).

RTDs and ciders now account for between 20% to 25% of Distell's locally derived gross revenue.

Scannel said the wine brands endured another tough year, but had managed to "grow a bit". "The mix of wine product sales has turned for the better, and we are seeing growth in the higher categories. We gained profitable volumes."

There was good news on the export front too.

Scannell said major progress was made in international markets (outside Africa), where revenue rose an encouraging 20.7% on sales volume growth of 17.7%.

He said Distell's performance in Germany, Scandinavia and Canada was strong, while sales showed promising growth in the Far East (albeit off a low base).

Continued growth

Revenue earned from African markets grew 23.8% on a volume growth of 19.7% with the area beyond the BLNS countries (Botswana, Lesotho, Namibia and Swaziland) managing revenue growth of over 33%.

As usual Distell's cash flow was reassuring, coming in at R572m for the interim period.

Capital expenditure (mainly a capacity boost for RTDs/ciders and refurbishment of the Wadeville plant) accounted for R253m, leaving the group with a healthy R173m in the bank at the end of December.

Looking ahead, Scannel conceded that higher fuel and food prices and increased debt-servicing costs would put the brakes on spending. But he still expected Distell to show continued growth in revenue and earnings.

Distell's board showed some confidence in robust second half trading by declaring a 104c/share dividend Previously 87c/share), which was covered roughly two-and-half times by earnings.

Distell, which is controlled by Remgro and KWV Limited, ended about 1% lower on the JSE at 5 100c in tight volumes.

- Fin24