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Distell to consider Mozambique expansion

The company is pursuing a plan to expand across Africa.
Distell CEO Richard Rushton. Image: Moneyweb

South Africa‘s Distell will consider during the next 12 months a possible expansion into Mozambique, Chief Executive Richard Rushton said on Thursday, as the drinks maker reported a 5% fall in six-month profits on slower sales in its home market.

The company, which makes wines, spirits and ciders, is pursuing an ambitious plan to expand across Africa that it hopes will in time see it become the continent’s premier drinks brand.

Operations outside South Africa performed strongly in the period but a weak home market meant Distell’s profits fell 5% in the six months to December 31, results published on Thursday showed, while the company kept its interim dividend unchanged.

Rushton told Reuters Distell would continue to invest and scale up in markets where it was already active, such as Kenya, Nigeria and Angola. He said entering Mozambique was a possibility.

“It’s the one very attractive growing country and economy that we may well consider… I think we’ll take a call in this next 12-month period,” he said, adding that Distell was not currently considering any major acquisitions in Africa.

Despite the 4.8% fall in half-year headline earnings per share – the main profit measure in South Africa – to 548.6 cents Distell maintained its interim dividend at 174 cents, using income reserves.

The company said its final dividend would be assessed at the end of the year.

Rushton said its decision to keep its interim dividend unchanged signalled confidence in the long-term strength of the business, although the final dividend could be cut if circumstances in South Africa worsened or if coronavirus outbreak had a bigger impact on the global or local economy.

Distell’s revenues in its home market grew 1.7%, but sales volumes fell almost 8%, as South Africa‘s economy has stagnated, leading to high unemployment and rising living costs that have hit consumer spending.

Group revenues were up 2.7% thanks largely to double digit revenue growth outside of South Africa, but this did not keep pace with cost growth of 3.6%.

Distell shares were down 0.5% by 09:18, after initially rising at the market open following the results announcement.

Distell six-month share price movement

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Pretty much every other company that’s gone into Mozambique has been extorted / bankrupt it’s local operations there in the last 10 year period.
Distell hoists sail for an exciting adventure indeed…. Reminds me all Woolworths heading into Africa – to sell champagne to the masses.

End of comments.

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