Distell Group posted on Wednesday a 1.8% drop in its full-year profit after the South African alcoholic beverages company was hit by currency swings in Angola and an economic crisis in Zimbabwe.
The company, which makes Amarula liqueur and Hunter's and Savanna cider, said earlier in August its profit could drop as much as 6% following an about 50% plunge in the value of the Angolan kwanza and severe shortage of foreign exchange in Zimbabwe.
Distell's headline earnings per share (HEPS) - the main profit measure in South Africa that strips out certain one-off items - stood at 656.4 cents ($0.4308), compared with 688.2 cents in the previous year.
"Looking ahead, we anticipate the current tough domestic environment to continue and economic growth to remain subdued throughout next year," CEO Richard Rushton said in a statement, adding that changes made by the company would leave it well-positioned to capture growth opportunities.
Distell, striving to become Africa's premier drinks brand, is pursuing an ambitious expansion plan focused on the continent, and is also eyeing other emerging markets.
While analysts cheered the company's strategy and the underlying health of its business, the issues faced by Distell in Angola and Zimbabwe underscore the risks as it pushes into tougher markets in Africa.
However, the rest of the continent offers attractive growth that contrasts with an ailing economy at home. Sales volumes outside of South Africa were up 10.3%, driven by markets such as Kenya, Nigeria and Ghana.
That compared with a 0.9% decline in sales volumes in South Africa, which suffered its worst economic contraction in a decade in the second quarter.
International sales volumes were down 10.6%, which according to Distell were in line with its strategy to shift away from lower-margin products and move towards premium wine and spirit portfolios.
The South African company said its international business would operate as three business units - international spirits, exports and premium wine - going forward to increase specialisation.
Distell has also been on a drive to restructure and optimise its operations. This led to 223.3 million rand of retrenchment and other related costs in the year.