Johannesburg - AVI - home to brands such as I&J, Entyce and Spitz - says volumes are declining in some of its categories as consumers continue to be under pressure.
The listed food and fashion company, in a statement issued on Monday, says revenue gained 8.4 percent to R12.19 billion in the year to June, while its operating profit grew 12.5 percent to R2.15 billion. It added its gross margin was maintained, despite cost pressures, and it generated R2.76 billion in cash from its operations, an increase of 15.3 percent.
AVI explains the weaker rand “had a significant impact on costs,” especially in the second half of the year.
It says, to mitigate this, it implemented proactive and tactile selling price management, supported by its consistent foreign currency and commodity hedging policies.
AVI realised higher selling prices in all categories to offset cost pressure from the weakening of the rand and an increase in wage costs of R45.9 million, in line with the new wage equalisation legislation effective from April 2015.
Read also: AVI: Hedging policy deflects impact of weak rand
Headline earnings, a key measure of profitability, rose 11.5 percent, from R1.34 billion to R1.49 billion. Headline earnings per share gained 10.6 percent from 419.7 cents to 464.1 cents, although shares in issue grew 0.8 percent as share options vested.
AVI says, however, in its outlook that consumer demand remains constrained, and most category growth rates have slowed and, in some cases, volumes are declining.
“It is exceptionally difficult to anticipate consumer demand with high confidence and we will continue to focus on reacting quickly to changes as we pursue the most appropriate balance of price, sales volumes and profit margins for each of our brands.”
AVI adds 2016’s results enjoyed foreign exchange protection, as well as protection from rising spot prices.
It adds Entyce, Snackworks and Indigo have well established capabilities to defend market share and profit margins in tough times, and will grow market share where there is opportunity. Spitz, Kurt Geiger and Green Cross retail stores should benefit from refurbishments and space growth to help offset the pressure on demand from recent selling price increases.
“Our International business is well positioned to maintain volumes and profitability in core geographies while continuing to expand our brands presence in new markets, supported by our South African manufacturing capability.”
I&J will benefit from the weaker rand on export revenue, and the board is confident AVI can compete in the current environment. It’s also keeping an eye out for acquisition opportunities.
A final dividend of 220 cents per share was declared, bringing the total dividend for the year to 370 cents, an increase of 11.5 percent on last year’s normal dividend.
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