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South African Winemaker Distell Reaps From Weaker Rand, Angolan Sales Drop

South African Winemaker Distell Reaps From Weaker Rand, Angolan Sales Drop

South African wine and spirit maker Distell Group posted an 18 percent profit rise in its half year result, helped by a weaker rand in its local market, but poor sales in Angola due to falling oil prices dampened the its earning in the region.

According to a Reuters report, Distell’s sales rose 14.6 percent in South Africa where the local currency depreciated 22 percent in 2015, boosting earnings from overseas exports when converted to rand.

Distell Chief Executive Richard Rushton told a press briefing that the double-digit growth for the company’s cider, wine and spirits brands in most Southern African markets had been diluted by challenging trading conditions in Angola.

The oil-rich country is facing economic challenges due to lower crude prices globally. The country accounts for 50 percent of Distell’s African business, BDlive reported.

The firm has decided to scale back on plans to build a $40 million Greenfield production plant for spirits and read-to-drink products in Angola.

“We planned to build a plant with a production capacity of 400,000 hectolitres with sufficient capacity for five years. Now we will track this back to a 100,000-hectolitre plant with capacity for 18 months, and use the proceeds to reinvest back into the plant. It’s essentially a ‘pay-as-you-go model’,” Rushton said.

Distell, whose brands include Amarula liqueur, Two Oceans wines and Savanna cider, is part of a host of South African companies increasingly looking to fast-growing African markets to offset sluggish performance at home, where consumers are hampered by high debt levels and sluggish economic growth.

South African multinationals such as Shoprite, Distell, Diageo, SABMiller and MTN Group, are juggling cost-cutting and aggressive marketing pushes at home, while plotting to boost their business in smaller but promising African countries like Ghana, Ethiopia and Kenya, the Wall Street Journal reported.