Wine and brandy hangover eases

THERE are many reasons to cheer the latest interim results from Stellenbosch-based liquor brands conglomerate Distell. There were the usual reassuring cash flows, stout margins and a well-reinforced balance sheet, but local liquor industry pundits will be most heartened by CEO Richard Rushton’s contention that there are early signs the prolonged hangover in the brandy market is starting to lift, and wine sales in SA have grown across all categories.

The brandy market — seemingly lost to a new generation of aspirant whisky drinkers — has seen an awful decline in the past decade.

So any signs of life can’t be disregarded, and maybe speak volumes about the brandy industry’s willingness to change with the times. The wine market, perhaps flooded with too many boutique brands, has been flat for many years. Rushton, at an investment presentation yesterday, reckoned wine sales in Distell’s interim period reflected double-digit growth, driven largely by entry-level brands such as 4th Street, Autumn Harvest and Paarl Perle.

Despite this sales uptick, Rushton did admit Distell owns a big portfolio of wine brands and wine estates that could offer an opportunity to unlock value and streamline the offering.

Distell’s Paarl-based rival KWV, whose portfolio is largely underpinned by wine and brandy, will surely have noted his remarks.

PRIVATELY owned airline operator Comair has completed its fleet renewal programme, in which it replaced older, less fuel-efficient jets with five modern Boeing 737-400s during the half-year to end-December. That brought its fleet to a total of 26 jets, 18 of which it owns while the balance is leased.

Even more spectacular about the Comair story is that it embarked and completed the whole sevenyear, multibillion-rand fleet renewal project without begging its investors for a cent. Instead, Comair has paid a dividend most of the years since it listed on the JSE in 1998. The company has been profitable for the past 69 years since it was founded by former Second World War pilots in 1946.

It is not only the owners who have benefited — hundreds of millions of rand have been paid in tax over the years. In the reporting period under review tax amounted to R63.6m, more than half the R109m it paid in the year to June.

Bizarrely, those taxes have helped prop up Comair’s stateowned rivals, especially South African Airways and SA Express. Those companies, operated by deployees of the ruling party in recent years and serving as employment-creation and foreign policy promotion agencies of government, have yet to prove they are worth their existence in the first place.