Distell profits surge on South African demand for alcoholic drinks
South African drinks maker Distell reported a 36.7% jump in annual profit on Thursday as consumers bought more wine, ciders and spirits despite cost of living pressures, but said rising costs were weighing on margins.
Distell, set to be taken over by Dutch beverage company Heineken, was hit hard by prohibitions on the sale of alcohol in 2020 and 2021, when South Africa enforced lockdowns to combat the Covid-19 pandemic.
Thanks to eased restrictions and strong demand, the maker of JC Le Roux sparkling wine, Savanna cider and Klipdrift brandy sold more alcohol than expected, as all three categories grew revenues by double digits.
The company said the sustained rise in global inflation, with resultant increases in input costs, supply chain disruptions, and glass and aluminium can shortages in its domestic market, all contributed to a "minimal" decline in its gross profit margins.
To alleviate the pressure, the group has identified additional suppliers from various countries from which raw materials are sourced, it said, without naming them.
"We are working closely with our suppliers to address the supply shortages and expect a gradual improvement in supply in the next 12 to 18 months," Distell said.
Its operating costs in the year ended June 30 rose by 20.2%
Headline earnings per share, the main profit measure in South Africa, increased to 1,051.8 cents from 769.6 cents a year earlier.
Group revenues beat analysts' consensus forecast, climbing 20.8% to 34.1 billion rand ($2.02 billion), on 17.6% higher volumes, significantly ahead of pre-Covid levels. According to a Refinitiv poll, analysts had expected sales to rise 15%.
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