Afdis resolves not to pay interim dividend

SPIRIT maker African Distillers (Afdis) has resolved not to pay an interim dividend for the half year to December 2012 as the company’s funding requirements remain paramount.

Report by Taurai Mangundhla

This follows a similar decision not to declare a dividend for the company’s last full financial year for the period to June 2012, citing growth restricted by working capital constraints.

At the time, Afdis announced it anticipated the position to remain until the extended supplier credit position normalised, adding further capital expenditure was needed to complete basic upgrades to its production facilities to meet the expected increase in demand.

In the six months under review, Afdis reported a US$1,03 million profit in the half year to December 31, 2012 after a 22% growth in sales volumes to 3,2 million litres. The company saidlocal production grew 21% to 1,7 million litres to account for 62,9% of the US$16,6 million worth of revenue, a 15,9% increase from US$14,4 million recorded in the same period in 2011.

However, earnings per share decreased to 1,1 US cents from 1,3 US cents due to a one-off exchange gain of US$750 000 in the prior period.

The increase in local production is in line with the company’s prospects to drive future growth on the basis of local production.
“New product development, standardisation of packaging and product upgrades have been favourably received in the market and are ongoing,” company secretary Lydiah Mutamuko said in a statement. The company said growth was being experienced in the more profitable brown spirits market, with new opportunities having been identified in the white spirits market.

“Strategic focus remains on production efficiencies and entrenching market leadership,” the company said.

As part of efforts by the group to invest in volumes, MD Malcolm Hollingworth told an annual general meeting in November last year the company would commence cider production in the country in February after completing feasibility studies.

“Afdis, in conjunction with its technical partners Distell, are developing a product (Esprit) which will be ready for the market in February,” he said.

Generally, ciders have been well accepted than beer and have a ready captive market with good margins.However, analysts say the production of ciders is more complicated than that of beer, especially in an environment with intermittent power supply, as this required refrigerators to run 24 hours a day.

In its last full financial year to June 2012, the spirits maker overturned a loss performance after a 28,3% growth in sales volumes to 4,7 million litres at US$25,701 million.

Revenue in the period was at US$19,54 million after taking out US$6,154 million, which the company paid out in excise duty and grants.

The group reported a net profit of US$1,14 million from a loss of US$932 200 last year, leading to earnings of 1,20 US cents per share.

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