Distell reports strong growth in Africa, focus on Ethiopia, Nigeria and Zimbabwe

Distell delivers impressive FY2018 results but warns that it faces an uphill battle in South Africa, which accounts for 3/4 of its revenues. Distell’s CEO has also indicated that it sees Ethiopia, Nigeria and Zimbabwe as key focus markets.
Highlights
  • Revenue growth in RTDs, Spirits and Wine in South Africa
  • Revenue growth outside SA of 21.1% year on year, driven by Kenya, Mozambique and Zambia
  • Markets outside the Southern African Customs Union delivered revenue growth of 43.0%
  • Revenue growth from 12 of its 15 largest brands
Analysis

In its African markets, Cider & RTD revenues rose by 14.8%,  spirits revenues rose by 38.5% and wine revenues were up 14.9%. In Kenya, a key focus market, volumes rose by 67.1% and revenues rose by 54.6%. EBITDA in Kenya was 18.7% – a strong showing in a growth market.

There have been negatives: in Angola, a key target market, despite an 18% rise in volumes, currency depreciation means that revenues fell by 20% – an indication of how hard trading has been. The company also forecasts heavy going in South Africa – 75% of its revenues – with continued challenging macroeconomic conditions, rising costs and consumers under pressure throughout 2019. There are several underperforming smaller markets too. If Botswana, Lesotho, Namibia and Swaziland were excluded, Distell’s interim volume growth in Africa was more than 16%, with revenue increasing 43%.

Distell CEO Richard Rushton has also said that, “Ethiopia is a big market that, along with Zimbabwe and Nigeria, is on our radar screen.” Distell co-owns African Distillers (Afdis) with brewer Delta Corporation (part of AB InBev) in Zimbabwe. In February, Afdis reported that half year revenues had risen by 57% from $16.4m to $25.9m, profit after tax had doubled and volumes were up 40%. Trading has been tough in Zimbabwe because of the currency crisis. These results are extremely impressive in that context.