I&J, Spitz lift AVI's headline earnings

A muted domestic retail environment saw AVI's rivals experiencing weak growth in revenue in SA.

CEO Simon Crutchley said the consumer environment had been constrained during the year and this was expected to continue into the new financial year.

Despite the challenging environment, the owner of food and beverage brands such as Five Roses, Bakers and Willards grew operating profit 23% to R1.37bn and revenue 11% to R8.29bn.

AVI also increased its total dividend 63% and paid a special dividend of 180c per share.

Investec analyst Anthony Geard said yesterday the company had delivered a superb set of results, especially when other listed food producers had been struggling to grow earnings in real terms. "AVI's limited exposure to maize and wheat as key raw material inputs is a significant plus," he said.

"The increase in the dividend payout ratio (announced at the interims in March) and the generous special dividend are testimony to a confident and shareholder-friendly board and management, not to mention a strong balance sheet," Geard said.

For SA's biggest food producer, Tiger Brands, the muted local environment, however, led to domestic turnover growth of 3.4%, negatively affected by lower volumes across a number of products in the half year to March.

AVI grew revenue in its Entyce division thanks to higher selling prices for tea, coffee and creamer in response to increased raw material and wrapping costs.

"Volume performance was pleasing in the context of constrained overall category performance, with volume declining in both the tea and coffee categories in the year," the company said.

Better price points on key lines in its Snackworks division drove volumes up in the second half, the company said. Improved factory performance also enabled the division to recover significant raw material cost increases and still improve operating profit margin.

In its chilled and frozen convenience brands division, revenue increased 10.7% from R1.37bn thanks to currency gains.

AVI's personal care, footwear and apparel division achieved sound volume growth and strong gross profit margins, the company said. It also concluded the purchase of the Green Cross brand.

Source: Business Day