South African drinks maker points to strained volume trade and other trends during lockdown

Multinational brewing and beverage company Distell says that the South African government’s restrictions on the trading of alcoholic beverages, during lockdown has had 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.

Distell said in an update to the market on on Tuesday (30 June), that the subsequent easing of export restrictions and lifting of the ban on alcohol sales on 1 June 2020 has provided a marked improvement to the financial health of the company and its ability to protect jobs.

However, the group said that as the spread of infections in the country continue to rise, it has recorded a total of 58 Covid-19 infections across its local operations.

“This has also resulted in the closure of 5 distribution sites during the month of June 2020, all of which have been re-opened and are currently operating at expected levels. As per Government protocol, sites are immediately closed and deep cleaned before any resumption of operations,” it said.

Financially, Distell said that its basic earnings per share (EPS) for the financial year ending June 2020 is expected to be between 45% (178.4 cents per share) and 65% (257.7 cents per share) lower than the reported 396.5 cents per share of the corresponding period of the previous year.

Headline earnings per share for the same period is expected to be between 60% (391.7 cents per share) and 80% (522.3 cents per share) lower than the reported 652.9 cents per share of the corresponding period of the previous year.

The group also provided an update on year-to-date trading performance for the period 1 July 2019 up to and including 19 June 2020.

It said that the easing of export regulations related to agricultural products in Level 4 of the lockdown meant that open orders to the value of approximately R440 million could be processed.

“The group managed to fulfil only 54% of the value of these orders due to the fact that local ports were operating at a reduced capacity and customer cancellations were experienced due to the delay caused by the restrictions,” Distell said.

Resumed trading in South Africa has seen an initial spike in demand from customers which are anticipated to normalise in the coming months, it said. “This activity has surpassed conservative estimates but not at levels equal to the previous financial year period. To date, revenues and volumes are cumulatively down by 18.3% and 25.6% respectively.”

Given the pandemic’s effect on global travel and subsequent reduction in airport passengers, Distell said that international operations, specifically travel retail sales, were negatively impacted earlier in the period.

The restricted export of Amarula from South Africa also contributed to overall revenues and volumes declining by 10.3% and 15.4% respectively. Distell’s International Spirits business proved buoyant, with positive volumes and revenues recorded in the fiscal period.

Overall, as a result of the above, Distell said that group revenues to date contracted by 15.4%, alongside reduced volumes of 23.3%.

“Whilst this period has been challenging, the pandemic has also presented a significant opportunity for the group to re-align its business model to shifts in consumer behaviour and economic impact,” Distell said.

Read: The maker of Hunters and Savannah is counting the cost of South Africa’s liquor ban

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South African drinks maker points to strained volume trade and other trends during lockdown