Distell share price sinks on lower sales
Asset manager CEO says the government has been milking the company in recent years
The share price of Distell Group, maker of Klipdrift brandies, Three Ships whiskies and Nederburg wines, fell 4.1% to R104.58 on Wednesday after the company said sales had fallen in the September quarter.
Distell said revenue in the first quarter of its 2019 financial year was flat because of single-digit volume declines on the previous year.
Opportune Investments CEO Chris Logan said the government had “milked” Distell in recent years.
Excise duties as a percentage of total revenue have lifted from 18.8% in 2001 to 26.4% in 2018, he said. Nevertheless, the government has not helped Distell and other SA producers to gain duty-free access to the rapidly growing Chinese wine market.
Logan said it could make sense for Distell to list elsewhere, possibly in London, so that it could access deeper pools of capital to fund its growth.
Distell, whose ownership structure was overhauled recently, said volume was lower in SA because of the higher cost of living and price increases on products a year ago.
The group said its ready-to-drink products, which include the Esprit range of alcoholic fruit-based drinks, were winning market share from beers, while revenue from spirits remained “stable”.
“We anticipate a stronger second quarter given festive season demand and cyclical customer orders over this period.”
In other African countries, the group registered “excellent volume and revenue growth” in the first quarter, led by its businesses in Kenya, Botswana, Zambia, Mozambique and Zimbabwe. The mainstream spirits unit was “a standout performer”.
“Increased commodity pricing should allow commodity-producing countries to improve meaningfully, while investment-led growth will benefit many of the noncommodity-producing countries.”
The group said it will expand its local production and distribution footprint in the rest of Africa through new investments and joint ventures.
“The group continues to defend and grow its domestic market share, integrate its new African route-to-market acquisitions while creating a more agile and efficient business which aims to enhance margins going forward.”