AVI brands show resilience with revenue growth despite market challenges

AVI's revenue increased 4.9% in the six months to December 31 supported by volume growth in several brand categories and higher selling prices to offset inflationary cost pressures.

The owner of household brands in food, beverages, frozen seafood, personal care, footwear, and fashion apparel said in a trading update Wednesday that the trading environment had remained challenging.

Nevertheless, consolidated headline earnings per share were expected to increase between 10.5% and 12.5% over the prior year, translating into an increase from last year's 407.5 cents to a range of between 450.3 and 458.4 cents a share.

Revenue growth of 4.5% in Entyce, the hot drinks and coffee unit, was achieved across all categories. Tea demand was sound with sales volume growth across both the Freshpak and Five Roses brands. Creamer demand was sound albeit with price deflation to combat aggressive competition. Coffee commodity costs increased, necessitating higher selling prices which cut sales volumes.

The Snackworks division revenue growth of 5.9% was supported by innovation and good demand for Bakers Choice Assorted through the festive season. Overall Biscuit sales volumes for the semester improved over the prior year.

I&J's revenue grew 9.4% with improved fishing revenues driven by selling prices increases and higher domestic and export fish sales volumes. Catch rates improved, which together with increased capacity from the freezer vessel commissioned in February 2023, supported hake volumes. Abalone sales remained challenging due to over-supply, weak selling prices and poor demand in key Asian markets.

The Indigo personal care and cosmetics division continued to face falling demand in the deodorant body spray category and the concomitant competitive disruption. A number of innovations were launched towards the end of the semester with "good initial demand" that would help to off-set the decline in the body spray category over time. Personal care sales fell by 7%.

SPITZ, the premium footwear and fashion retail arm, had a strong December with good demand for core footwear brands and the non-repeat of last year's supply challenges, supported by an improvement in footwear sales volumes. Retail competition was intense, constraining sales in apparel brands. Footwear and apparel sales increased by 3.4%.

The group's consolidated gross profit margin improved over the prior year supported by I&J's profitability and the ongoing management of margins across the business.

Selling and administrative costs were tightly managed, and with the benefits from the restructuring initiatives in the prior year, costs were maintained at previous levels."This, with the improved gross profit, supported an improvement in the group's operating profit margin and operating profit," the directors said.

Net finance costs were largely in line with last year. The group tax rate was largely in line with the corporate tax rate of 27%. The average number of shares in issue is expected to be 0.5% higher than last year due to the issue of new shares in terms of the group's share incentive schemes.

The share price fell 1.6% on the JSE on Wednesday to R107.22, a price only slightly higher than R103.75 a year earlier. 

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