Distell Shares Gain as Festive Drink Discounts Lure Shoppers

  • Wine and spirits producer posts record festive-season trading
  • U.K. sales slide as retailers cut back on variety of products

Distell Group Ltd. shares rallied the most in more than three years after South Africa’s biggest wine and spirits producer said sales growth accelerated amid record festive-season trading propelled by discounts.

“Our South Africa performance was strong, under difficult conditions, with promotions attracting customers’ attention,” Managing Director Richard Rushton said by phone on Wednesday. About 74 percent of revenue comes from the Cape Town-based company’s home market, where consumer spending has been under pressure from unemployment of more than 25 percent and rising inflation.

Distell shares rose 8.5 percent to 167.60 rand by the close in Johannesburg, the biggest jump since January 2013. That reversed a decline for the calendar year, meaning the stock is now 1.6 percent higher, valuing the company at 37 billion rand ($2.4 billion).

Distell’s sales by volume climbed 7.7 percent in the six months through December, compared with 3.7 percent a year earlier, the company said in a statement. Net income rose 18 percent to 1.2 billion rand. The company will pay an interim dividend of 1.65 rand, compared with 1.58 rand last year.

The South African consumer “faces more and more disposable-income pressure,” Rushton said. The company’s products, such as Two Oceans wine, Scottish Leader whisky and Klipdrift brandy, perform well in a weaker economic environment, he said.

While export revenue rose with the declining value of the rand, volumes in international markets excluding Africa fell 15 percent. That was led by a drop in wine sales in the U.K., where retailers including Tesco Plc reduced the variety of wines for sale.

“We did lose business, but quite a lot of that business we believe we can get back,” Rushton said. “The U.K. retail environment is challenging and very competitive, but we are working hard with our team in the U.K. to build out new listing and new promotional slots into this coming European summer.”

In Angola, which has historically contributed 50 percent of Distell’s African export revenue, sales halved as the country’s excise and import duties climbed and restrictions were placed on access to import permits, he said.

Distell is expanding in the U.S. with an agreement to combine spirits with that of family-owned Terlato Wine Group Ltd. Chicago-based Terlato is also importing four Distell wine brands, including Nederburg and Two Oceans.

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