Multinational brewing and beverage company Distell has warned that the coronavirus lockdown will have a significant impact on its business.
The company makes a number of popular wines, spirits and ciders in South Africa – including Hunters, Savannah, Richelieu and Nederburg.
In a trading update published on Friday (15 May), the group said that profit attributable to ordinary shareholders for the 10 months ended April 2020 is expected to be about 25% lower than the corresponding period of the previous year – including approximately six weeks of no trading due to lockdown regulations.
It advised shareholders that the group’s basic earnings per share (EPS) for the financial year ending 30 June 2020 is expected to be between 45% (178.4 cents per share) and 65% (257.7 cents per share) lower than the 396.5 cents per share of the corresponding period of the previous year.
Headline earnings per share (HEPS) for the same period are expected to be between 60% (391.7 cents per share) and 80% (522.3 cents per share) lower than the 652.9 cents per share of the corresponding period of the previous year.
Distell warned that its results could be further exacerbated by a number of factors over the next month and a half, to the end of June. Key will be whether the group will be allowed to sell limited alcohol under the country’s level 3 lockdown restrictions.
These restrictions could impact trading as well as the potential impairment of stock dependent on restrictions and timing, it said.
On a more positive note, Distell said that there is potential for a temporary short-term spike in demand following the easing of lockdown provisions.
“The group has resumed limited operations in certain locations related to the production and transport for export purposes only, in line with Level 4 regulations,” it said.
“Production facilities involved in alcohol production and blending for sanitizer purposes remain operational in line with lockdown guidelines and classification of essential items.
“Current inventory levels are sufficient to satisfy both export and domestic retail channels upon further relaxation of regulations.”
The Liquor Traders Association of South Africa (LTASA) has called on the government to allow for the sale of liquor under level 4 lockdown restrictions.
The association represents 1,410 off-consumption liquor stores that employ over 14,000 people.
Alcohol sales will likely be allowed again under level 3 lockdown restrictions, which president Cyril Ramaphsa said is likely to happen before the end of the month.
Under current level 3 proposals, off-premises consumption of alcohol will be allowed, subject to limited hours (Mon-Wed 08h00 – 12h00), and subject to an approved industry plan on social distance and quantitative restrictions.
However, the group said that its members cannot wait until alert level 3 to trade, as ‘it will be too late’.
Instead, it has proposed strict rules around the sale of alcohol in South Africa under level 4, including:
- Limited trading hours;
- Restrictions on quantity sold per transaction and restrictions per sale;
- Strict adherence to all Covid-19 health and safety protocols;
- Rules to manage the initial surge in demand – such as limitations on who may purchase based on surnames.