AVI shares leap more than 7 percent on dividend announcement

The group reported a strong cash generation from operations, increasing by 13 percent to R3.22 billion

AVI’s SHARE price leapt more than 7 percent on the JSE yesterday after the food and beverage company said it was paying a dividend, despite its businesses being under pressure from the Covid-19 pandemic in the year to end June.

The company, with a portfolio of more than 50 brands including Five Roses, House of Coffees and I&J, declared a final dividend of 250 cents a share, taking the full-year dividend to 410c, despite reporting a decline of 8.9 percent in earnings.

AVI reported a strong cash generation from operations, increasing by 13 percent to R3.22 billion.

“Overall cash generation remains healthy and the businesses that were most under pressure from the Covid19 pandemic are expected to recover as lockdown restrictions are lifted,” the group said. The share price rose to an intraday high of R69.82, before closing at R70.50.

Its revenue was marginally up by 0.4 percent to R13.21bn, and the group largely attributed the increase to strong demand for the brands of Entyce Beverage, the home to coffee and creamer brands, and Snackworks, which focuses on biscuits and snacks, during the fourth quarter.

“This additional demand was sufficient to offset the Covid-19 related declines in the fashion brands, Ciro and I&J, as well as a generally constrained environment prior to the onset of the Covid-19 pandemic,” AVI said. Headline earnings declined by 8.6 percent to R1.55bn and headline earnings per share fell by 8.9 percent to 470.8c.

AVI cut its net debt to R1.31bn at the end of the period, down from R2.44bn compared to last year.

In the Entyce Beverages segment, revenue increased by 0.7 percent to R3.85bn while operating profit increased by 1 percent to R846.6 million. Its tea revenue grew by 2.5 percent, mainly due to a 4.4 percent increase in sales volumes arising from increased demand during the lockdown period.

The Snackworks segment grew its revenue by 12.2 percent to R4.37bn, and operating profit rose by 25.9 percent to R910.2m.

In seafoood firm I&J, revenue fell by 7.2 percent to R2.33bn, while operating profit decreased by 41.7 percent to R237.8m, as Covid-19 reduced the number of employees available to work.

Looking ahead, AVI said the Covid19 infection rates appeared to have peaked in many parts of South Africa and there was an expectation that the rates would continue to decline and economic activity would recover.

“I&J’s operations have recovered to normal capacity and thus far we have not had material disruptions at our other manufacturing sites.

“Retail sales should improve as shopping mall footfall improves. However, demand in Entyce and Snackworks is likely to stabilise, as consumers return to normal spending patterns, and it is unlikely that we will annualise the levels of demand seen during the fourth quarter of the 2020 financial year.”