AVI expects stronger rand to lift earnings
Consumer brands group AVI expects a rise in half-year earnings lifted by a stronger rand.
On Tuesday, the retailer said its consolidated headline earnings per share for the six months to December were expected to increase by as much as 327c per share, up 7%-8% from 302.9c in the period a year before.
The group expects its consolidated earnings per share, including capital gains and losses, to increase 6%-7% to range at 324c-327c per share from 305.4c reported in the same period in 2016.
AVI will release its half-year financial results in March.
The group has a R38bn market capitalisation and its trading subsidiaries operate in manufacturing, processing, marketing and distribution of branded consumer products in the food, beverage and fashion categories.
Its brands include Five Roses, House of Coffees, Bakers, I&J, Yardley, Lentheric, Spitz, Carvela and Kurt Geiger.
In its trading update, the group reported revenue for the six months to December was expected to grow by 2.3% with the effect of selling price increases taken during the prior financial year, partially offset by declines in sales volumes in some key categories. Operating profit will increase by 8.7%.
“As anticipated, revenue growth for the first semester was constrained by a challenging trading environment,” AVI said.
CEO Simon Crutchley said the operating profit margin was “pleasing”, considering the demand environment coupled with an increase in operating profit margin.
The Spitz brand was the star performer. It pulled off a record December profit with volume growth supported by the core brands and the stronger rand.
The company said exchange rates secured for the remainder of the financial year were at better levels than in the prior year, underpinning AVI’s opportunity to manage sales volumes and profit margins in the constrained environment and grow earnings in the second semester, provided “consumer demand was reasonable”.
Seafood brand I&J benefited from the nonrecurrence of the unprotected strike at its fishing operations in August 2016, which resulted in an increase in operating profit.
The bulk of I&J’s profit haul comes from the hake business, with the balance generated almost equally between an abalone farming venture and the Simplot seafood business in Australia. In 2017, I&J’s hake fishing quota was reduced by 3,344 tonnes due to a lower total allowable catch and lower allocation of inshore rights.
The share price gained 2.12% to close at R111.