Distell dividend on hold

South African drinks maker Distell 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.

A “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.

In 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.