Weaker trading, blackouts see AVI record decline in earnings
DURBAN - South African consumer brands company AVI reported a decline in earnings for the six months to end December, hit by weaker than anticipated trading which was exacerbated by load shedding and aggressive competitor pricing in certain categories.
The group reported a 3.8 percent decline in headline earnings per share (Heps) to 293.8 cents a share while revenue was marginally up by 1 percent to R7.14 billion as the trading environment remained difficult with continued pressure on consumer spending resulting in sales volume weakness in many of its businesses.
During the period, its division I&J sold its interest in a joint venture with Simplot for R633 million and a capital gain, after tax, of R374m.
“This resulted in a 35.3 percent increase in basic earnings per share for the semester to 410.2c,” the group said.
AVI, with a portfolio of more than 50 brands, which include Five Roses, Bakers, Freshpak and Spitz, also saw its headline earnings declining by 3.5percent to R970m.
The group declared an interim dividend of 160c a share out of income reserves.
The group has six segments which include I&J, Entyce Beverages, Snackworks, Personal Care, Spitz and Green Cross.
I&J reported revenue of R1.18bn but this was slightly lower than last year's while operating profit increased by 10.60 percent to R169m.
“Core hake revenue was 3.8 percent up on last year due to higher sales volumes in line with a better wet fleet fishing performance and better export exchange rates achieved," the group said. "Selling prices in some export markets were lower due to increased competition."
Entyce Beverages’ revenue declined by 32 percent to R1.97bn while operating profit fell by 1.8 percent to R459.7m.
The group said tea revenue decreased 3.5 percent due mainly to lower sales volumes while coffee revenue declined by 9.1 percent due to lower sales volumes of mixed instant and speciality coffee as a result of sustained aggressive competitor activity.
Snackworks' revenue increased by 5.3 percent to R2.24bn while operating profit rose 13.8 percent to R489.3m.
The Personal Care division benefited from a 17.7 percent increase in revenue in Indigo due to a change in the Coty business model while Spitz revenue declined by 4.4 percent due largely to an 8.5 percent drop in footwear volumes. Green Cross's revenue fell by 21.8 percent, largely due to lower sales volumes.
Looking ahead, the group said the trading environment will remain difficult with constrained consumer spending presenting an ongoing challenge in many of its categories.
“We expect that some of our categories will continue to have low, or even negative, growth rates until there is a meaningful improvement in the economy. Furthermore, our competitors and retailers are likely to continue to behave aggressively in search of market share and constrained profit opportunities,” the group said.
AVI closed 0.67 percent lower at R74.32 on the JSE yesterday.