Nompumelelo Magwaza
AVI’s brands showed signs of resilience amid a tough trading environment in the six months to December.
Most of the company’s categories achieved good volume growth, the branded food and apparel group said in a trading update on Friday.
AVI expected consolidated headline earnings a share for the period to increase by between 8 percent and 11 percent.
However, consolidated earnings a share, including capital gains and losses, are expected to decrease between 5 percent and 8 percent, a decrease from last year’s 269c a share.
AVI share price fell as much as 2.6 percent to R79.49 on Friday before being closing 0.7 percent lower.at R80.99
Mark Saner, an equity analyst at Imara, said the group continued to show signs of resilience. “Although the share price is down the trading up was slightly ahead of Reuters consensus. It is not a bad update,” he said.
Saner added that the company highlighted the constrained local consumers at their year-end results as a possible headwind, however, the recent respite given to consumers from the drop in fuel prices could filter down into more sales as consumers disposable income increases.
“Overall sales performance was sound in a tough trading environment with the group realising higher selling prices in all categories following significant accumulated costs pressure from the weaker rand,” the group said.
AVI owns brands including Willards, Bakers, I&J, Kurt Geiger and Spitz among others.
The group said volume growth was achieved in most of its categories, with I&J’s export revenue benefiting from the rand weakness.
“The consolidated gross profit margin and operating profit margin both improved in comparison to the same period in the prior year,” AVI said. The group’s total revenue increased by 11 percent to R6 billion.
Entyce beverages and Snackworks were star performers and were able to increase revenue by 10.8 percent and 13 percent respectively. Footwear and apparel also increased revenue by 11.8 percent.
“Entyce and Snackworks both performed well in the constrained environment and Spitz enjoyed continued strong demand for its brands and achieved record sales in December,” the group said.
I&J’s profit growth was tempered by unrealised losses on fuel hedges following the significant decline in oil prices, despite increasing revenue by 19.2 percent.
The group said Indigo’s revenue from owned brands increased by 8 percent, however, total revenue which declined by 5.7 percent was impacted on by the revision of trading terms with Coty.
AVI said the first semester of the prior financial year included a net after tax capital gain of R122 million in respect of a payment of R150m from Coty to Indigo Brands following the revision of their commercial relationship.