Strong consumer demand boosts AVI

Strong consumer demand boosts AVI

FMCG SUPPLIER NEWS

Fin24.com - Sep 5th 2011, 12:55

Johannesburg - Branded consumer products group AVI [JSE:AVI] on Monday reported a 31.1% rise in diluted headline earnings per share (Heps) from continuing operations to 239.7 cents for the year ended June 2011, from 182.9c a year ago. Heps from continuing operations was up 31% to 248c.  

Revenue from continuing operations grew 5.7% to R7.69bn and operating profit from continuing operations was up 25% to R1.1bn, while cash generated from operations increased 24% to R1.4bn.

During the period, R496m was returned to shareholders via a special payment and share buy-back. A final dividend of 75c/share was declared, for a total normal dividend of 125c/share - up 25%.

The company said it had enjoyed strong consumer demand in the fashion brand businesses during the 2011 financial year. Both Spitz and Indigo achieved strong volume growth and strengthened their respective market positions.

In the food and beverage portfolio most of AVI's brands performed well in a competitive environment where consumer spending was relatively constrained.

The tea category had a strong second half, gaining volumes and market share for the year, the coffee category continued to grow steadily despite a price increase in the second half and the creamer category benefited from strong demand.

Biscuit volumes declined due to selling price increases and product rationalisation during the year, compounded by rising local and imported competition.

I&J's sales volumes were in line with last year, with higher quota volumes offset by a reduction in purchased raw material.

Looking ahead, the group said recent local and international data indicate that economic growth in South Africa over the next few years is likely to be slower than expected.

In line with this, consumer demand is likely to remain restrained in the year ahead and AVI will need to earn future profit growth by competing effectively in the marketplace and continuing to reduce our cost of doing business.

"There is a strong portfolio of initiatives planned for the next financial year, covering local and regional market opportunities, factory improvement and ongoing development of shared and support services," it said.

In addition, the group has a material level of forward exchange cover in place to protect the cost of imports. Commodity costs have started to soften, both of which will allow more leeway to manage the balance between price, volume and profitability with the flexibility constrained trading environments require.

I&J has the advantage of increased quota and will benefit materially if the rand weakens against the euro.

"The board is confident, despite prevailing market conditions, that AVI will continue to deliver profit growth from the current brand portfolio while remaining vigilant for brand acquisition opportunities both regionally and domestically," the group concluded.