Distell ready for alcohol-free lockdown


Distell ready for alcohol-free lockdown

Published Date: 2020-03-27 | Source: Stephen Gunnion | Author: Stephen Gunnion

Distell ready for alcohol-free lockdown

The wine and spirits producer is halting most of its production but will continue to make alcohol for sanitisers.

Distell is already starting to see the negative impact of the Covid-19 pandemic on revenue and volumes. And as the 21-day lockdown gets underway, with a ban on alcohol sales, the wine, spirits and alcoholic beverages group says cash generation will come under pressure.

While local sales will stop from today, Distell says exports will also be impacted by the lockdown. About 70% of its Africa revenue excluding SA, Botswana, Lesotho, Namibia and Eswatini (formerly Swaziland) is exported to local operations on the continent. It said it would only be in a position to accurately quantify the full effect on revenues and profitability after the lockdown was completed.

The majority of its production facilities will close but the group has committed to the production of 100,000 litres of alcohol for hand sanitisers and hygiene products. Current inventory levels sat at around 41 days cover and it said it had enough raw materials to meet customer demand beyond the end of the current financial year once the lockdown was over. Although its cash generation will be affected, it said its balance sheet remained strong and borrowings were secured by mortgages over immovable property.

In the meantime, it said it would continue to unlock value and lighten its balance sheet. It plans to reintegrate the Premium wine unit of Libertas Vineyards & Estates back into the business and will put the Alto and Plaisir de Merle wine estates on the market to be sold.

It said it was also committed to finding ways to support its small and more vulnerable customers, as well as its long-term suppliers in the wine farming industry as the largest procurer of grapes for wine.

Voluntary changes had been implemented to its marketing code of conduct to promote moderate and responsible in-home consumption of alcoholic beverages.

Distell's shares rose 3.7% to R75.19 yesterday.

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