AVI profits from price increase strategies
Headline earnings up 9.4%
JSE-LISTED AVI’s strategy of increasing prices and trading spaces on some of its subsidiaries because of the weaker rand has paid off as the group posted improved results for the period end-June.
Headline earnings per share increased 9.4 percent to 507.7 cents a share, up from 464.1c, while headline earnings rose 10.3 percent to R1.65 billion from R1.49bn compared with last year.
The group declared a total dividend of 405c a share, an improvement of 9.5 percent compared with last year.
Although the group increased profits during the period, it said it expected the trading environment to remain difficult in the year ahead with little prospect of meaningful improvement in consumer spending and increasing com- petition in categories with low or even negative growth.
In response to such challenges, the group said it would continue to react quickly to market changes as it pursued the most appropriate balance of price, sales volumes and profit margins for each of its brands.
The AVI group is currently home to more than 50 wellknown local brands, including Five Roses, Bakers, Freshpak and House of Coffees and it also holds the licences for top international brands such as Rimmel, Kurt Geiger, Yardley and Lavazza.
During the period, group revenue increased 8.2 percent to R13.18bn, up from R12.19bn.
Revenue growth was substantially due to higher selling prices in response to weaker rand exchange rates achieved and higher raw material costs, offset by volume pressure in a constrained spending environment.
Gross profit margins dropped slightly from 43.9 percent to 43.7 percent and recovered in the second semester as exchange rate-driven cost pressure eased in line with the rand strengthening.
Gross profit rose 7.8 percent to R5.76bn, while operating profit increased 10.7 percent to R2.39bn, up from R2.15bn, underpinned by the improvement in gross profit and the containment of selling and administrative expenses.
The operating profit margin increased to 18.1 percent from 17.7 percent.
The board said it was confident that AVI remained well positioned to compete effectively, even though it did not foresee an improvement in the economy going forward.
The group’s subsidiaries performed reasonably well during the period in the light of the subdued economy.
Entyce Beverages reported a 9.8 percent increase in revenue to R3.76bn, while operating profit increased 11.1 percent to R735.1m with the operating profit margin at 19.6 percent.
The Snackworks division reported a 8.6 percent increase in revenue to R3.96bn, while operating profit rose 9.4 percent to R666.4m.
I&J’s revenue increased 8.8 percent to R2.36bn, while operating profit increased to R389.1m.
Footwear and apparel as well as Kurt Geiger and Spitz grew revenues by a modest 3.2 percent and 2 percent respectively, while Green Cross revenue increased 9.4 percent to R371.9m, boosted by four new stores opened during the period.
AVI shares closed 0.22 percent lower at R97.33 on the JSE yesterday.