AVI reports decline in revenues on constrained consumer spending

SOUTH AFRICA – AVI Limited, a South Africa based food and beverage company, posted a decline in overall headline earnings down 6% to US$69.38 million during its six months to end December 2018.

AVI said that the trading environment was expected to remain difficult, with constrained consumer spending.

“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.

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.

Comparably, the food and beverage business of the Johannesburg Stock Exchange (JSE) listed company posted strong performance against other investments run by the firm across different sectors.

According to a report by Business Report, AVI’s Entyce Beverages which includes; the tea, coffee and creamer brands like Five Roses, Freshpak, Ciro, Frisco and Ellis Brown, noted an increase in sales 3.8% to US$145.69 million.

The operating profits were up 10% to US$32.4 million while Margins increased to 22.1% against 20.8% posted during a similar period last year.

Despite a strong pricing, the company noted increased revenues in the key tea segment but volumes of premium brands declined, with indications of the shift to more affordable brands being the major driver of increased revenues.

Tea revenues grew by 2.3% mainly due to selling price increases taken in the prior financial year in response to higher rooibos and black tea prices, offset by a 3.5% decrease in volumes.

Coffee profit decreased due to increased competitor activity, though Simon Crutchley AVI’s Chief Executive stressed that profitability remained healthy.

However, the weaker coffee segment was fortunately offset by huge volume gains, which were up 22.5% in the creamer segment.

AVI’s snacks segment, which includes Bakers biscuits and Willards chips, posted an increase in revenues by 3.8% to US$156.8 million while operating profits declined 5% to US$29.76 million with the margin squeezed to 19% down from 20.8%.

The Bakers biscuits business had 4.4% revenue growth — driven 3.9% by volumes and 0.5% by price with the Market share of its savoury category declining to 13.8% from 15%.

In its interim results presentation, AVI’s highlighted that it is set for acquisition of high-quality brand opportunities “if available”.

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