AVI pre­dicts a solid rise in profit

The Star Early Edition - - COMPANIES - Sandile Mchunu

FOOD pro­ducer AVI yes­ter­day said it ex­pected its in­terim head­line earn­ings per share (Heps) to be up by up to 9 per­cent.

The group said this growth re­flected a com­bi­na­tion of price in­creases in re­sponse to a weaker rand and higher raw ma­te­rial costs and pleas­ing vol­ume growth in most of its gro­cery cat­e­gories.

The group said the com­pany will move from 281.6 cents per share re­ported last year to a range of be­tween 301c and 307c per share when the re­sults are pub­lished.

Solid rev­enue

“The over­all per­for­mance by AVI’s Fash­ion Brands for the se­mes­ter was sound. De­mand dur­ing De­cem­ber for our core brands was good, with Spitz in par­tic­u­lar achiev­ing solid rev­enue growth com­pared to De­cem­ber last year. Both Spitz and Green Cross achieved op­er­at­ing profit growth for the se­mes­ter, de­spite pres­sure on footwear sales vol­umes at the ma­te­ri­ally higher price points nec­es­sary to pro­tect gross profit mar­gin,” the group said.

The com­pany noted that Indigo Brands also showed gains in mar­ket shares in key cat­e­gories. In the gro­cery port­fo­lio, the com­pany said the sell­ing prices have yet to re­cover fully from ris­ing in­put costs. “How­ever, En­tyce and Snack­works both per­formed soundly with good growth in op­er­at­ing profit for the se­mes­ter,” it said.

The com­pany’s fish­ing busi­ness, I&J, achieved profit growth for the se­mes­ter from favourable ex­change rates and im­proved fish­ing in the sec­ond quar­ter. The re­sult was tem­pered by a three-week-long il­le­gal strike at the fish­ing op­er­a­tions in Au­gust which re­sulted in a short­fall of about R25 mil­lion of op­er­at­ing profit and im­pacted neg­a­tively on the group’s trad­ing re­sult for the first half, the com­pany said.

AVI also ex­pects an im­prove­ment in earn­ings per share. “The con­sol­i­dated earn­ings per share, in­clud­ing cap­i­tal gains and losses, are ex­pected to in­crease by be­tween 8 per­cent and 10 per­cent over the com­pa­ra­ble pe­riod in the prior year, trans­lat­ing into an in­crease from last year’s 279.9c to a range be­tween 302c and 308c per share,” the group said.

Damon Buss, an eq­uity an­a­lyst at Elec­tus Fund Man­agers, said Heps guid­ance was slightly be­low the 10 per­cent con­sen­sus ex­pec­ta­tions. “AVI man­age­ment tar­get at least 10 per­cent per an­num,” he said.

Buss said there were pos­i­tives for the com­pany. “The pos­i­tives were that rev­enue growth of 11.6 per­cent was well ahead of con­sen­sus ex­pec­ta­tions of 8.8 per­cent and they got vol­ume growth de­spite the con­sid­er­able price in­creases they put through,” he said.

The group is ex­pected to re­lease its re­sults on March 6.

AVI shares closed 0.29 per­cent higher at R92.53 on the JSE yes­ter­day.

PHOTO: NI­CHOLAS RAMA

AVI ex­pects its earn­ings to be up by be­tween 8 and 10 per­cent for the past six months. The ex­pected earn­ings were boosted by price in­creases in stores re­spond­ing to a weaker rand.

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