UPDATE 1-Distell dividend on hold over South African booze ban uncertainty

  • Reuters
  • Stock Market News
UPDATE 1-Distell dividend on hold over South African booze ban uncertainty
Credit: © Reuters.

* Puts dividend on hold despite 11% first-half profit jump

* Cites concern over possible future alcohol bans

* Says increased duties will fuel illicit alcohol market

(Recasts, adds detail, shares, quote)

JOHANNESBURG, Feb 24 (Reuters) - South African drinks maker Distell DGHJ.J kept dividends on hold on Wednesday despite posting an 11.2% jump in half-year profit, citing the threat of further alcohol bans in its main market.

The wines, spirits and cider producer had flagged that profit could rise by between 8.6% and 13.6% for the last six months of 2020 even though that period included two alcohol prohibitions implemented in South Africa as part of coronavirus restrictions. "resilient" performance in South Africa, solid growth elsewhere and a "marked improvement" in its liquidity position was not enough, however, to prevent suspension of the dividend on uncertainty over potential future alcohol bans.

"The group continues to protect liquidity as a priority given the ongoing impact of COVID-19," it said, adding the dividend decision would be reviewed at the end of the financial year.

South African Finance Minister Tito Mboweni, meanwhile, announced an 8% increase in taxes on alcohol and cigarettes in his budget speech on Wednesday. a separate statement, Distell said the move would entrench an illicit market that had grown during the bans, push cash-strapped customers towards home-brewed alcohol and worsen ban-induced oversupply issues, particularly for wine.

Distell's headline earnings per share - the main profit measure in South Africa - stood at 612 cents ($0.4190) for the period, against 548.6 cents a year earlier.

Shares in the company closed with a 0.6% gain before release of the results statement. ($1 = 14.6079 rand )

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