Revenue leaks 5% at KWV, but wine sales fill up in export markets
September 11, 2009
A combination of the recession and the disposal of some operations led to a 5.3 percent drop in revenue to R693 million for the former KWV wine and spirits conglomerate in the year to June, although wine sales grew in some export markets.
Headline earnings a share lost 20.1 percent to 37.8c and the dividend was down by 30.4 percent to 8.7c a share. But the net asset value climbed 10.1 percent to R4.19 a share .
In July the company was unbundled and split into two. Its investment arm, Capevin, whose top asset is its 15 percent stake in competitor Distell, is now listed in the JSE's beverage sector, while the operating company, KWV Holdings, remains unlisted.
The directors explained that the unbundling released more value for the shareholders, who retain their interests in KWV Holdings, by increasing the value of KWV Holdings assets.
Capevin and KWV Holdings are now completely separate, each with its own board and chairman. Directors of the old KWV believed the unbundling was in the best interests of shareholders.
A consequence of the unbundling would be an estimated accounting loss of R750m in the financial statements of Capevin for the present year in terms of a new accounting standard for distributions of non-cash assets to owners, effective from July.
But the directors pointed out that this was only a book loss as the economic reality was the shareholders remained the owners of the same assets "being shareholders of both entities following the unbundling".
"The loss stems from the fact that the market has always valued the group's operational assets at a significant discount to its net asset value - which means that the share price of the group was always significantly less than the book value of its assets as determined according to accounting rules.
"The estimated loss is the difference between the carrying value of assets being distributed to shareholders by way of a dividend in specie, and the valuation of R279m of KWV Holdings," they said.
Chief executive Thys Loubser said that, during the year, 90 percent of wine sales had been in the export market, but sales of spirits were generally down and 93 percent of brandy sales were in this country.
KWV's share of total South African wine exports to Scandinavia was 15 percent, to Germany 5 percent, to Canada 12 percent and to Japan 27 percent. Its new market focus was in Africa and Asia.
Loubser said South Africa had this year experienced one of the best wine grape harvests in history. Healthy grapes, low yields and concentrated flavours led to expectations of outstanding wines this year.
Despite difficult market conditions globally, "sales volumes of wine generally held up well". Growth of more than 10 percent was achieved for the Laborie, Roberts Rock, Pearly Bay and Cafe Culture brands in Scandinavia, the UK, Japan and Asia.
Capevin shares fell 0.65 percent yesterday to close at R76.50, valuing it at R3.2 billion.
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