Distell suffers a Monday babalas

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Distell suffers a Monday babalas

Published Date: 2020-07-14 | Source: Stephen Gunnion | Author: Stephen Gunnion

Distell suffers a Monday babalas

The drinks group had started to recover from previous restrictions, generating cash flow and protecting jobs.

Distell's shares fell close to 7% at their worst yesterday as investors reacted to the latest ban on alcohol sales due to the escalation of the Covid-19 pandemic. The about-turn threatens to derail the recovery in trading and cash generation the drinks group reported since lockdown restrictions were eased on 1 June.

Just two weeks after Distell reported an improvement, which it said would protect jobs in the sector, President Cyril Ramaphosa on Sunday night announced an immediate ban on sales to help contain the spread of the virus and free up hospital beds for Covid-19 patients. The move came as total infections topped a quarter of a million and deaths resulting from the virus reached more than 4,000. Ramaphosa said a number of people had taken to organising parties and going on drinking sprees, while walking around crowded spaces without wearing face masks. He also reintroduced a nighttime curfew.

In a trading update on 30 June, Distell said Covid-19 and the lockdown had taken their toll on earnings. Despite an initial spike in demand as restrictions were eased, volumes for the year to end-June fell by a quarter, resulting in an 18.3% reduction in revenue. It expected to report a decline of between 45% and 65% in basic earnings per share (EPS), while headline EPS were likely to be 60% to 80% lower.

Its operations in Botswana, Lesotho, Namibia and eSwatini (Swaziland) were also impacted by specific country bans on alcohol sales but its Africa business outside the region had proved resilient, led by Kenya Wine Agencies which recorded a 2.3% increase in comparative revenues. Its international Spirits business was also buoyant, with increased volumes and revenues.

Meanwhile, wine industry association Vinpro said it had received no advance warning of the latest alcohol ban, nor an opportunity to consult with the National Coronavirus Command Centre before a decision was made. It said no consideration was given to the immediate logistical difficulties it posed for suppliers, distributors or retailers. It said the industry had already suffered direct losses of close to R3 billion, with about 18,000 jobs already at risk from the previous 5-week ban.

Distell's shares recovered some of their losses to close 3.6% down at R75.12 yesterday. It expects to release its results on 27 August.





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