AVI lifts annual profit
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South African food producer and fashion retailer AVI reported a 6.2 percent rise in full-year earnings, boosted by lower net finance costs and an easing of Covid-19 curbs but warned of further price hikes to protect profit margins.
The company, whose brands include Bakers biscuits, Five Roses tea and Spitz footwear, said on Monday that headline earnings per share, the main profit measure in South Africa, rose to 499.9 cents in the year ended June 30, up from 470.8c in 2020.
Group revenue was up by 0.5 percent to R13.3 billion due mainly to increased sales volumes at its I&J frozen food division and higher selling prices generally.
Food producers experienced huge demand for grocery items at the height of the pandemic as consumers stocked up on food items in the absence of restaurants and to avoid making multiple trips to the shops.
Demand for AVI’s snack and beverage brands has normalised from the peaks of the hard lockdown as consumers returned to more normal spending patterns, resulting in lower sales and volumes.
This was partially offset by improved sales from its fashion, fragrance and beauty brands as the sector recovered from severe lockdown restrictions.
AVI said sales volumes in the next financial year would be a function of consumer demand, competitor activity and management of selling prices in the context of higher input costs.
“Our consistent hedging practices for both currency and commodity prices will provide some protection for the first semester of the new financial year, but it is likely that further selling price increases in some categories will be necessary to protect gross profit margins,” AVI said.
Peer RCL Foods also said earlier it expected continued higher input costs, which will be passed on to consumers, due to a significant rally in agricultural commodity prices.
AVI declared a final dividend of 275c per share.