February 27, 2020 / 6:02 AM / a month ago

UPDATE 2-S.African drinks firm Distell to consider Mozambique expansion

(Recasts with Mozambique, adds CEO quotes, shares)

JOHANNESBURG, Feb 27 (Reuters) - South Africa’s Distell will consider during the next 12 months a possible expansion into Mozambique, Chief Executive Richard Rushton said on Thursday, 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 South Africa performed strongly in the period but a weak home market meant Distell’s profits fell 5% in the six months to Dec. 31, results published on Thursday showed, while the company kept its interim dividend unchanged.

Rushton told Reuters Distell would continue to invest and scale up in markets where it was already active, such as Kenya, Nigeria and Angola. He said entering Mozambique was 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 its final dividend would be assessed at the end of the year.

Rushton said its decision to keep its interim dividend unchanged signalled confidence in the long-term strength of the business, although the final dividend could be cut if circumstances in South Africa worsened or if coronavirus outbreak had 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%.

Distell shares were down 0.5% by 0718 GMT, after initially rising at the market open following the results announcement.

$1 = 15.2377 rand Reporting by Emma Rumney; Editing by Sriraj Kalluvila and Edmund Blair

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