Consumer goods group AVI expects to report a rise in annual earnings despite a challenging consumer environment, with “anaemic” demand in many categories.
The group said on Friday it expected consolidated headline earnings per share (HEPS) for the year ended June to increase by 5%-7%, translating to 721.5c-735.2c per share from 687.1c a year ago.
The group said its full-year results improved despite the previous year’s 21.7% annual operating profit growth and exceptional 27.8% in the year before’s second semester profit growth. This financial year’s second semester’s operating profit growth was 6.4% despite the high prior year base, it said.
Group revenue rose 1% to R16.02bn, underpinned by selling price increases to ameliorate input cost pressures, partially offset by lower sales volumes in all categories.
AVI’s brands include Five Roses, House of Coffees, Bakers, Lenthéric, Kurt Geiger and Spitz.
The food and beverage unit reported a 3% increase in revenue to R13.5bn. Entyce Beverages’ grew revenue 5.4% and I&J by 4.4%. The personal care’s segmental revenue was 9.6% lower, while that of fashion brands and footwear & apparel fell 8.5% and 7.9%, respectively.
The group, which is valued at R31.9bn on the JSE, said its consolidated gross profit grew ahead of revenue supported by improved gross profit margins in the beverage categories with gross margins across the remainder of the business effectively managed.
Despite increased investment in marketing activity to support AVI’s brands and innovation, and one-off costs of R42m associated with restructuring initiatives, selling and administrative expenses were well contained ending marginally lower than last year. This, together with the improved gross profit, supported growth in the group’s operating profit of 7.8%, with its operating profit margin 6.7% higher than the previous year.
The group said Entyce delivered profit growth off a strong prior year base, supported by higher selling prices, the annualisation of efficiencies from factory automation, effective cost management and operational leverage.
Snackworks’ operating profit improved, benefiting from a stronger second half and supported by cost management.
I&J’s operating profit improved with a stronger fishing performance offset by a decline in the abalone category. The abalone category continued to experience weak selling prices, poor demand in Asian markets and an unfavourable biological asset revaluation of R38.1m.
Fishing profits improved with benefits from improved selling prices, capacity from the new freezer vessel, favourable realised currency rates, lower fuel prices and marginally better catch rates.
Indigo’s operating profit performance was negatively affected by aggressive competition in the deodorant body spray category.
Footwear and apparel’s operating profit ended lower with the challenging first semester further affected by a difficult second semester. Demand was subdued and affected by widespread discounting by apparel and footwear retailers and worsened by supply chain disruptions in the first semester impacting sales in Spitz’s critical December trading month.
The second half was further affected by the decision to close the Green Cross retail business, which required increased discounting with lower gross margins and one-off closure costs, AVI said.
The group will release its annual results on September 8.
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