South African Drinks Firm Distell To Consider Mozambique Expansion
South Africa's Distell will consider a possible expansion into Mozambique during the next 12 months, chief executive Richard Rushton said 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 of South Africa performed strongly in the period, but a weak home market meant Distell's profits fell 5% during the six months to December 31, 2019, newly-published results have shown, while the company kept its interim dividend unchanged.
Rushton told Reuters that Distell will continue to invest and scale up in markets where it is already active, such as Kenya, Nigeria and Angola. He said that entering Mozambique is 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 ($0.36), Distell maintained its interim dividend at 174 cents, using income reserves.
The company said that its final dividend will be assessed at the end of the year.
Rushton said that its decision to keep its interim dividend unchanged signals confidence in the long-term strength of the business, although the final dividend could be cut if circumstances in South Africa worsen or if coronavirus outbreak has 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%.