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Alcohol ban costs Distell 20% of its trading year

Will implement pay cuts for SA staff from September 1.
For every rand generated by Distell in revenue, 59 cents went to the government in the form of excise taxes. Image: Moneyweb

Giant liquor group Distell says it lost R4.3 billion in revenue during its year to end-June, as a result of the Covid-19-induced lockdown regulations prohibiting the sale of alcohol.

This means the restrictions reduced its trading year by nearly 20%. The group lost approximately 100 million litres in sales volumes.

Read: Wine industry: Ban lifted a little too late

Group CEO Richard Rushton said measures aimed at improving the liquidity of the group include a decision by the board to temporarily suspend the payment of dividends.

The group’s effective tax rate for the period was 43.6% (2019: 41.9%).

“This is largely attributable to the impairments of Best Global Brands [BGB] and TD Spirits, which are not tax-deductible,” Rushton said.

He said the South African Revenue Service provided payment relief by extending excise duty payment terms by 90 days.

The group has also made good progress on the sale of its two premium wine farms, Alto and Plaisir de Merle, which are classified as held for sale on the statement of financial position.

The group reported a decrease in headline earnings and headline earnings per share by 63.9% to R516.8 million and by 64% to 235.3 cents respectively.

Debt facilities

The group has negotiated with its key funders to increase debt facilities to R7.75 billion to provide sufficient short-term liquidity.

It has managed to fulfil only 54% of open orders for export purposes since the regulations were amended due to local port constraints and customer cancellations caused by a delay at Cape Town City harbour.

Since trading resumed on June 1 it has seen increased debtor payments, which has buoyed the group’s cash flow, enabling it to pay key suppliers.

“We will continue to support vulnerable customers and suppliers with customised credit or payments dependent on their size and liquidity constraints,” said Rushton.

“To further lighten the strain on liquidity, the group deferred over R300 million of capital expenditure while limiting all discretionary spend.”

Salary deductions

South African-based workers will see a salary cut of between 10% and 12.5% from September 1.

“The pandemic has highlighted the resilience of the people and culture of Distell, and we have demonstrated our commitment to doing the right thing in balancing profits and the wellbeing of our consumers, customers and suppliers, while always being mindful of the broader role we play in society,” Rushton said.

Group revenue declined by 14.6% to R22.4 billion on 22.5% lower volumes. Revenue excluding excise duty was down 15.8%.

Other markets

Revenue in its African markets was down 3% due to a 14.7% drop in sales volumes, with volumes in Botswana, Lesotho, Namibia and Eswatini declining 19.1%.

On a positive note, revenue within its Southern African Customs Union operations grew 6.6%, which is key as the group plans to expand its presence in this region.

Rushton said other African markets have remained resilient, despite the current economic climate.

FNB Wealth and Investments senior portfolio manager Wayne McCurrie said the loss in revenue across the group was expected due to the lockdowns implemented.

Read: Alcohol sales ban costs Consol R8m a day in furnace energy

“However, people will start drinking more now that the alcohol ban has been lifted, so this is a company that will recover,” McCurrie said.

The fact that the group paid 11% less in excise duties is an indication of the impact of the lockdown on most liquor groups, he added.

Distell share price

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South Africans need to demand the disbandment of the ANC. You cant have freedom fighters (most are just crooks) rule after winning freedom. Job done, thank you, now …….f!

They don’t have the ability. Clearly demonstrated by this stupidity and continued stubbornness.

Many of those workers probably voted ANC, and after their salary cuts they’ll vote ANC. And even after those companies are destroyed by this government, no prizes for guessing what they’ll vote when they’re homeless and the the street. You guessed it.

End of comments.

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