AVI earnings rise 17% as it pushes up prices

Consumer goods group AVI, whose brands include Bakers biscuits and Five Roses tea, says inefficiency at SA ports and failing infrastructure are adding to the cost of doing business.

“Locally, SA’s port inefficiencies, load-shedding and continued infrastructure failures will continue to add cost and complexity to our business.”

AVI said SA ports and the effect of the loss of access to the Red Sea had increased shipping costs and lead times.

The company offset risks through increasing stocks and changing shipping dates and said it was not expecting any material disruption in its second half. Buying extra stock, however, can place pressure on working capital.

It increased interim operating profit 17.1% in a tough trading environment as it lifted the prices of many of its goods to offset input prices.

The owner of footwear retailer Spitz, Romany Creams and seafood company I&J said on Monday its revenue for the six months to end-December rose 7.1% to R8.38bn, while headline earnings per share (Heps) were 17.4% higher at R3.74. Profit after tax was 17.5% higher at R1.24bn. An interim dividend of 202c per share was declared, up 17.4%

The company said performance for the period was characterised by constrained consumer demand and direct loadshedding costs of R21.1m.

Revenue at fishing unit I&J fell 5% due to poor catch rates and loss of export sales due to port inefficiencies. I&J continues to underperform the rest of the portfolio.

Revenue growth in Entyce, which owns the Five Roses tea brand, was driven by improved sales volumes and higher selling prices in response to significant input cost pressures.

Snackworks, which includes Marie and Tennis biscuits and Snacktime crackers, reported revenue growth in both biscuits and snacks on higher selling prices and improved snack volumes. Indigo’s personal care revenue performance dropped 11.7% after the Coty distribution deal ceased in July 2023.

Spitz’s revenue was affected by constrained demand, particularly for the apparel brands, but benefited from a strong December with good demand for core brands, albeit stronger for footwear than clothing.

I&J’s prospects remain materially dependent on fishing performance, fuel prices and exchange rates. A 5% increase in the total allowable catch has been announced for the 2024 calendar year. However, the company’s ability to benefit from this depends on a material improvement in catch rates, which are at 20-year lows. Catch rates are a measure of how easily fish are caught in prevailing weather and climatic conditions.

Savings from the restructuring of the Woodstock processing facility and the closure and outsourcing of I&J’s cold storage in the first half would support profitability in the second half, it said. “Should current catch rates not improve, I&J’s profitability may not exceed the prior year’s.”

It said profit growth in the second half would not mirror that of the first half.