Johannesburg - Despite lower consumer demand, higher input costs and increased competition in the local market, AVI increased revenue by 11.2 percent in the year to June thanks to acquisitions, the listed food, personal care and fashion manufacturer said yesterday.
However, the group said pressure was felt in its Entyce beverages division and frozen fish brand I&J, resulting in lower profit for both.
“We focus most of our brands on consumers; sales are dependent on disposable income. There have been fewer jobs created in the economy and the credit lending is tightening,” AVI chief executive Simon Crutchley said.
Headline earnings a share from continuing operations increased 6.6 percent to R3.41.
The company said Entyce had a difficult year as input costs were “significantly” higher and competition in all its categories led to a 4.2 percent year-on-year decline in operating profit to R397.8 million.
I&J suffered the biggest decline in operating profit, with a 7.2 percent fall to R165.8m. The frozen fish brand was affected by constrained export selling prices and low consumer demand. It recovered from a first-half loss of R54.3m caused by lower catch volumes.
AVI benefited most from improved sales in its fashion brands, which increased annual operating profit by 24.4 percent to R576.9m.
AVI’s footwear and apparel division, which trades through Green Cross, Spitz and Kurt Geiger chains, lifted revenue by 25.6 percent to R2.52 billion.
A large portion of the increases in the fashion division was due to the Green Cross acquisition, which was included from July 2012.
Revenue from the group’s continuing operations grew 11.2 percent to R9.22bn.
Operating profit rose 11.2 percent to R1.53bn. A final dividend of R1.70 a share was declared as the dividend cover ratio was decreased from 1.5 times earnings to 1.25.
The company increased selling prices as the consumer environment worsened and sales volumes declined. “We try to find the best balance between price and volume, and work at managing that,” Crutchley said.
Daniel Isaacs, an analyst at 36One Asset Management, said AVI was well managed with great prospects. Although AVI had a wide range of brands”, he said the group specialised in “brand building”, which was the link between all its brands. He said AVI was hit by the slowdown in consumer demand and higher input costs.
Isaacs said raising its prices led to consumers opting for alternatives to its coffee and creamer brands, as reflected in lower sales volumes. “It’s a solid company, but they’re feeling the effect of a tough consumer environment like a lot of the guys in the space.”
AVI shares dropped 0.78 percent to R56.27 yesterday. - Business Report