by Michael Fridjhon
Taking extra profit from consolidating operations and shaving overheads, Distell South Africa´s largest wine and spirits business - announced a revenue increase of 16.6% on a sales volume increment of 11,0%. A closer examination of the
company´s interim performance saw basic earnings up by 69.7%. Dragging down these surprisingly bouyant figures was the cost to company of the Black Economic Empowerment (BEE) transaction entered into in the previous year. Headline earnings, prior to the BEE adjustment, saw a 60.8% increase. However, after expensing the effect of the transaction, this dropped to 30%.
Operating margins increased from 14.0% to 15.7%, an indication that Distell is still achieving economies of scale from the merger of the two businesses, Distillers and Stellenbosch Farmers Winery, out of which it was formed.
Some of the enhanced profit is coming from the depressed grapes prices which have lately become a feature of the South African wine industry. Distell, as one of the country\\\'s biggest buyers of grapes and bulk wine, has now cleared its pipeline of product purchased at the highly inflated prices of 2002 and 2003.
Another key income contributor was the cider category, where the brand leaders - Hunter\\\'s and Savanna boosted sales volumes in the lucrative RTD market and showed a year on year growth of 25%.
With increased cashflows and a significant reduction in interest bearing debt, Distell continues to inspire investor confidence in an industry which has begun to look increasingly fragile.
