AVI hit by constrained consumer spending
By Dineo Faku - Mar 13th, 12:42
Food and beverage company AVI Limited felt the pinch of constrained consumer spending as income from its shoe brands Green Cross and Spitz slid in the half year to December, resulting in revenue in the footwear and apparel category declining by 9.2 percent to R1.14billion.
The JSE-listed company, a maker of Bakers biscuits, said operating profit in the footwear and apparel category fell by 20.9 percent to R270.8million, while the operating profit margin decreased to 23.8 percent from 27.3 in the period.
Green Cross suffered a 20.4percent drop in revenue on lower sales volumes in the half-year to December 2018 on lacklustre revenue for the summer collection. “Sales volumes were impacted by soft demand and widespread discounting in the mid-price comfort footwear segment, exacerbated by the poor performance of the summer range in retail,” Avi said.
In November Green Cross embarked on a consultation process with affected employees following an in-principle decision to stop all manufacturing operations at its facility in Epping, Cape Town.
The company said it had set aside R15million in restructuring provisions in the first-half result pending finalisation of the consultation process.
“Including these costs, Green Cross recorded an operating loss of R18.8m compared to a profit of R4.4m last year,” the company said, adding that it expected the consultation process to be completed before the end of the year.
Premium footwear brand Spitz recorded a 7.8 percent decline in revenue due largely to an 8.2 percent drop in footwear sales volumes.
“Selling prices of core ranges have not been increased since April 2016. However, consumer demand was subdued and the business was not able to repeat last year’s record December sales performance,” the company said.
The trading environment was expected to remain difficult, with constrained consumer spending. “Our expectation is that many of our categories will continue to have low, or even negative, growth rates until there is a meaningful improvement in the economy,” the company said.
Some of the highlights were the 2.3 percent growth in tea revenue, due mainly to selling price increases taken in the prior financial year in response to higher rooibos and black tea prices, offset by a 3.5percent decrease in volumes.
Biscuits revenue grew by 4.4 percent due to a 3.9percent increase in sales volumes. However, the gross profit margin decreased due to a temporary period of poor yields in the Isando factory and commissioning write-offs in the Westmead factory where the new chocolate lines were ramping up to normal production.
Snacks revenue grew 1.8 percent due mainly to 1.9 percent growth in sales volumes.
However, at I&J revenue decreased by 2.1 percent to R1.17bn from R1.2bn, while operating profit decreased to R146.5m and the operating profit margin decreased from 12.5 percent from 15percent.
“The revenue decrease is mainly attributable to lower fish trading and by-catch sales, while core hake revenue was slightly up on last year, despite lower quota, due to an improved sales mix and better export exchange rates achieved,” the company said.
AVI shares closed 1.43 percent up at R91.99 on the JSE yesterday.Business Live
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