AVI profits increase

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Brands group AVI (AVI) has reported a 28.2% rise in diluted headline earnings per share from continuing operations to 305.2 cents for the year ended June from 238.0 cents a year ago. HEPS from continuing operations were 30% higher at 320 cents.

Revenue from continuing operations was up 11% to R8.29 billion‚ while operating profit from continuing operations grew 23% to R1.37 billion. Operating profit margin from continuing operations improved from 14.9% to 16.6%

The group declared a final dividend of 120 cents per share making a total normal dividend of 203 cents per share - up 62% from a year ago. It also declared a special dividend of 180 cents per share.

The group said its portfolio of consumer businesses performed well in a year characterised by constrained consumer demand‚ increased competition and rising soft commodity input costs.

“Many of our brands grew sales volumes in the year and together with our on-going focus on‚ and investment in‚ manufacturing improvement drove good profit leverage‚” it said.

The Fashion Brands businesses‚ Spitz and Indigo‚ achieved sound volume growth and realised strong gross profit margins supported by favourable import exchange rates that were secured before the rand weakened during the first half of the year.

I&J benefitted materially from the weaker rand‚ supported by ongoing good performance from its catching and processing operations.

Snackworks had a strong second half driven by recovery in sales volumes and improving manufacturing performance‚ resulting in a material improvement in full year profits.

Entyce had a better second half performance‚ benefitting from new coffee and creamer capacity as well as a recovery in Ciro's out-of-home coffee business driven by volume growth.

Revenue from the rest of Africa grew in line with the domestic market and healthy profit margins were maintained.

On the project front‚ Indigo's new aerosol plant‚ the packaging automation at Isando biscuits and Entyce's new creamer tower and coffee granulation plant were all successfully commissioned during the year with benefits expected to accrue more materially in the 2013 financial year. In addition the expansion of the Isando distribution centre was successfully completed and SAP was implemented at Entyce and Snackworks with minimal disruption to sales volumes.

A number of other material projects are on track to meet commissioning dates in 2013.

The Green Cross acquisition was concluded in July 2012 and AVI is excited about the additional scale and growth opportunity this business brings to our Fashion Brands portfolio. AVI will consolidate Green Cross' financial results with effect from 1 July 2012. The initial payment of R382.5 million was made in July 2012.

Looking ahead‚ the group said it expects the current constrained consumer demand environment to persist and consequently expects increased competition in its categories which‚ coupled with raw material and other cost pressures‚ will put pressure on margins in the FMCG sector generally.

I&J has secured more than half of its export foreign exchange requirements at rates comparable to last year and Entyce and Snackworks have implemented selling price increases to help offset the impact of higher commodity prices and the strong US dollar.

The performance of key categories in the 2012 financial year reinforces AVI’s confidence that with its strong brand portfolio‚ improving manufacturing performance and effective sales and marketing activity it can continue to compete effectively in the year ahead. In addition the capital projects commissioned in the last year will make a greater contribution and the group continues to work on new projects and other initiatives that should deliver organic profit growth over time. These include local and regional market opportunities‚ factory improvements and the ongoing development of shared and support services.

“The establishment of our new AVI International structure during the year under review will help to accelerate the sound growth that our Africa business has achieved over the last few years‚” it said.

Green Cross' performance since the conclusion of the acquisition has been encouraging and will add meaningfully to the growth of our Fashion Brands portfolio.

The Board is confident that AVI is well-positioned to continue pursuing growth from the current brand portfolio while remaining vigilant for brand acquisition opportunities both domestically and regionally. - I-Net Bridge


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