Distell suffers forex babelaas


Distell suffers forex babelaas

Published Date: 2019-08-08 | Source: Stephen Gunnion | Author: Stephen Gunnion

Distell suffers forex babelaas

The wine and spirits maker has impaired its Angolan investment and recognised a credit loss provision in Zimbabwe due to currency issues.

Distell has forecast a sharp slide in full-year earnings due to a devaluation in Angola's kwanza and foreign exchange issues in Zimbabwe.

In a trading statement, the wine and spirits maker said earnings per share for the year to end-June would probably be between 44% and 49% lower than the 750.3c it reported last year. It expects headline earnings per share (HEPS) to be down by between 1% and 6% from last year's 668.2c. Normalised HEPS, adjusted for currency movements, are expected to be between 4% and 9% higher than the 777c previously reported.

The close to 50% devaluation of the kwanza and its impact on the Angolan economy had a negative effect on Best Global Brands, in which Distell owns a 26% stake. Although the business had grown volumes and maintained market shares since the investment two years ago, Distell said it decided it would be prudent to impair its investment by R524 million, which is about two-thirds of its value.

In Zimbabwe, Distell supplies African Distillers, in which it owns an indirect 31% interest. Due to the shortage of foreign exchange in the country, it said African Distillers was unable to settle all of the trading debt owed to Distell. In the face of further currency devaluations and to protect the value of the trading debt owed to it, Distell said it had accepted payment in local currency and invested the proceeds with the Reserve Bank of Zimbabwe in US dollar-denominated savings bonds yielding 7% and maturing at the end of 2020.

The credit loss provision for the investment in the savings bonds amounts to R266.1 million.

Distell said comparable revenue rose 9% over the year and it improved on its margins.

Its shares declined by 1.1% to R127.82 yesterday.

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