AVI predicts a solid rise in profit
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.
“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.
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.