Distell, the South African wine and spirit group, has reported a 52 per cent increase in operating profits for the first six months of fiscal 2002/03 to R389.6 million (€43.3m), helped by operating efficiencies, a better product mix and the continued international expansion of the company.
Total sales for the six months rose 16 per cent to R2.9 billion, with international sales growing by 31 per cent to account for 18 per cent of the total.
Distell chairman David Nurek said that while the international sales growth was encouraging, the company continued to suffer at the hands of currency exchange rates, which pushed down pre-tax, pre-exceptional profits by 0.8 per cent.
Excluding these exceptional items, however, pre-tax profit rose 26 per cent to R291.1 million.
Distell managing director Jan Scannell said that the company's cream liqueur brand Amarula Cream had been a major contributor to the higher international sales revenue, with total sales up 37 per cent for the six months to December 2002. Sales in the US were showing healthy growth, he said, while in Canada, Amarula volumes increased 83 per cent, with a recently launched television campaign likely to prompt further growth.
He added that while Amarula's Latin American sales had come under pressure from the difficult trading conditions in the region, Distell's policy of operating simultaneously in several major markets to counter economic instabilities had clearly paid off during the six month period.
Amarula was not the only good performer during the period, however. Revenue from international wine sales rose 39 per cent on volumes 32 per cent higher than for the comparable period the previous year.
"A balanced portfolio of established and emergent wine brands addressing a range of markets and consumers is playing a key role in promoting the company's wine business, supported by regional office and agency networks," said Scannell. "Brands that really shone were Nederburg, with international sales volumes excluding Africa, increasing 37 per cent, and Two Oceans, which boosted sales by 72 per cent. Both had been identified earlier as having the potential to build a presence abroad."
Scannell said these and other brands were being taken up by major supermarket chains in the UK, such as Asda and Morrisons, as well as by multinational chains such as Makro and Metro. In addition, chains in Germany and the Benelux countries and government-controlled liquor retailers in Scandinavia and Canada were also listing the company's major brands.
He added that there had also been volume growth at home, with spirit sales rising 4 per cent and wines by 5.3 per cent. Flavoured alcoholic beverages (FABs), however, suffered from more aggressive competition from multinationals in the local market, Scannell said. Campari, for example, has just launched its Cinzano Five brand in the South African market.
Elsewhere in Africa, the company increased volumes by 14 per cent and is committed to strengthening its presence on the continent through investments in Tanzania, Zimbabwe, Kenya and Mauritius.
Discussing the outlook for the remaining six months, Nurek said the company was continuing its strategy to drive revenue growth by building brand equity augmented by improved product service and product supply. "Although slower growth is foreseen for the next six months, we are expecting satisfactory growth in trading income for the full year."