Distell tumbled on the JSE on Monday after the government reinstated its ban on alcohol sales and transportation on Sunday evening.
Distell fell more than 6 percent during early trade, but closed 3.58 percent lower at R75.12 on the JSE yesterday, compared to Friday’s close of R77.91, as President Cyril Ramaphosa extended strict measures to contain the spread of the Covid-19 pandemic.
However, Distell’s competitor, Anheuser-Busch InBev (AB InBev), closed only 0.12 percent lower at R887.67 on the JSE yesterday after the reinstatement of the ban.
Citadel trader Jordan Weir said Distell wobbled on Ramaphosa’s announcement.
“Yes, it is more than likely that the dip in Distell’s share price was directly linked to the reinstatement of the alcohol ban by President Cyril Ramaphosa on Sunday evening,” Weir said.
Distell, Africa’s leading producer and marketer of wines, spirits, ciders and other ready-to-drink beverages, has already felt the impact of Covid-19 and subsequent lockdown on its operations.
Last month the group reported that its revenues contracted 15.4 percent and its volumes eased 23.3 percent during the year to end June, compared to the prior year.
It said it also took a hit on its operations in the Botswana, Lesotho, Namibia and Eswatini regions, affected by specific country bans on alcohol sales.
As a result revenues and volumes were adversely affected by 14.9 percent and 20.4 percent respectively in those regions.
“The impact of the earlier ban of alcohol sales, implemented on March 26, shows that the reimplementation of the alcohol ban could be extremely detrimental to the alcohol industry and its supply chains,” Weir said.
“Looking at Distell specifically, the initial ban saw the group’s revenue decline around 15.4 percent to the end of June compared to the previous year, while overall volumes dropped by just more than 23 percent.”
On Sunday, liquor and wine producers launched a frantic bid to have the sale and transportation of alcohol remained in place.
The group, which comprises the SA Liquor Brandowners’ Association, the Beer Association of South Africa, VinPro, Liquor Traders Association of South Africa and the Liquor Traders Council of South Africa said a further ban on sales would affect up to 1 million people that are part of the liquor industry value chain.
The group said that it remained committed to a partnership with the government to address the societal challenges linked to alcohol abuse and its impact on the health sector and cautions against further restrictions in sales.
The brandowners association chief executive Kurt Moore said: “In addition to the increased transmission risk, a further restriction in sales would have a disastrous economic impact on the industry and continue to exacerbate the loss of excise revenue.”
Weir said that Distell was already looking at putting two wine farms up for sale by August this year in order to cover losses from the initial alcohol ban.
“It is uncertain how detrimental a further ban will be at this point, but the ‘stop-start’ nature of these bans will likely play a role in damaging shareholder value for investors within the alcoholic beverage industry, while also potentially creating short- to mid-term issues in the supply chain,” Weir said.