Unlike many South African alcohol companies that were negatively impacted by the Covid-19 alcohol sales bans in the last 16 months, Distell is expecting a strong profit growth for its financial year that ended in June.
The owner of brands like Savanna, Hunter’s Dry and Klipdrift expects its headline earnings to jump by more than 230% to stand at between 735.6 and 782.7 cents, compared to the previous year’s 235.3 cents.
This will also be almost 20% higher than the earnings it accumulated during the 2019 financial year, which it derived from its core businesses. The multinational brewing and beverage company’s earnings in 2019 before the impact of the pandemic was 652.9 cents.
Why did Distell perform so well?
The head of investor relations at Distell, Frank Ford, says the strength of its route-to-market in South Africa, alongside improved customer execution, innovations and brand strength translated into further market share gains across all categories in the period. Route-to-market is the way in which a company brings the right products to the right point of sales at the right time.
“This has resulted in the South African business achieving revenue and volume growth of 29.4% and 28.7% respectively when compared to the prior period,” he says.
Ford explains that this represents a 5.8% improvement in revenue and a 3.5% volume decline when compared to pre-Covid levels in the fiscal year of 2019, despite a 20% reduction in trading days in the current reporting period.
Ford shares those operations in the Botswana, Lesotho, Namibia & Eswatini regions also performed admirably well despite being adversely affected by specific country bans on alcohol sales.
“Revenue and volumes in this market improved by 23.6% and 22.2% respectively when compared to the prior period,” he says.
The alcohol group says it expects a 26.3% and 26.2% growth in revenue and volume respectively. This represents a 6.7% revenue improvement with near flat volumes when compared to 2019 financial year.
The group’s Africa business outside of BLNE has also continued to perform resiliently during the current reporting period, led by Mozambique, Nigeria, Ghana and Zambia as a result of continued RTM investments.
“Comparative revenue and volumes are expected to be up by 22.4% and 38.6% respectively when compared to the prior period. Compared to 2019 financial year, revenue is expected to increase by 30.5% and volumes by 24.5%,” says the group.
Ford says that Distell’s international operations were negatively affected early in the onset of the global pandemic given the adverse effect on global travel retail sales, combined with Amarula and wine export challenges to markets outside of South Africa.
“The business has subsequently recovered well in its focus on key markets, premium spirits and increased digital channel execution. As a result, a 10% revenue increase is expected compared to the prior period, with a flat revenue but meaningful margin improvement compared to 2019 financial year levels,” he says.
Agility and innovation
Overall, as a result of the above, the group is expecting a rise of 26.3% in revenue and 26.2% volume growth compared to the prior period. This represents a 7.7% revenue increase and a 2.1% volume decline when compared to 2019 financial year.
“The group’s agility to respond in the face of major business disruption enabled by strategic investments in RTM, brand development, innovation, true supplier partnerships and supply chain optimization supports our confidence in our ability to fully recover and compete effectively in the long-term,” indicated Distell.