Distell expects profit slump amid SA’s liquor prohibition
The group expects profits to fall as much as 80% in its year to end-June, although there could be a spike in demand if regulations ease before then
Distell, the maker of Amarula, Klipdrift and Hunter’s Dry brands, expects a hefty fall in profits after SA liquor sales evaporated during the Covid-19 lockdown.
The group expects headline earnings per share (HEPS) to fall by between 60% and 80% in its year to end-June, and faces even more uncertainty regarding the easing of lockdown regulations in SA, and write downs of its stock. Headline earnings per share is a widely used profit measure in SA, stripping out exceptional items to give a better indication of underlying performance.
There is also the chance of a short-term spike in demand as lockdown regulations ease, Distell said, while its ability to export to countries that have less severe restrictions is also in question.
SA implemented a lockdown on March 27, but has since moved to a level 4, although liquor and cigarette sales remain prohibited.
The easing of export regulations related to agricultural products in level 4 meant that approximately R440m worth of open orders could now be processed for delivery to customers and operations in regions with open ports and no restrictions on the sale of alcohol, Distell said.
Production in relation to the group's export business has also begun at a reduced capacity. “The group will leverage this opportunity to generate revenues notwithstanding the bottlenecks that are being encountered at the ports and with current transport regulations in SA,” Distell said.
In morning trade on Friday, Distell's share price was flat at R78.09, having fallen 40.78% so far in 2020.