SOUTH AFRICA – AVI Ltd, a Johannesburg-based FMCG company, has posted a 7.2% rise in revenue for the six months ended 31 December 2022 on the back of price increases to offset input cost pressure.
The company said the quarter had a challenging trading environment with record levels of load-shedding negatively affecting its manufacturing, distribution, and retail operations.
According to Avi, the impact was mitigated through backup power solutions but added R22 million to direct operating costs, with unquantifiable indirect costs, which exacerbated the complexity of its operations, supply chains, and distribution logistics.
The group produces and distributes frozen foods, food ingredients, and cosmetics. AVI has operations in the packaging industry as well.
The group’s consolidated gross profit margin improved marginally. The annualization against the prior year’s write-offs following the July 2021 riots, fastidious cost control, the benefits of the trademarks acquired from Coty, and improved footwear and apparel profitability contributed to the improvement.
Overall consolidated operating profit was 1.7% higher than last year with branded consumer business, excluding I&J (declined), improved operating profit by 8.4% with only I&J’s earnings.
Avi said its fish I&J unit saw a decline in revenue “with lower catch rates and the re-emergence of lockdowns in China and Hong Kong affecting the abalone sales mix.”
The company added that I&J’s gross margins were also substantially constrained by materially higher diesel costs for the fishing fleet that were not fully recovered through selling price increases and the unfavorable abalone sales mix.
The group’s Entyce and Snackworks businesses, which make coffee, tea, and biscuits, as well as its fashion division, benefited from the price hikes, with “sound volume growth” in the six months that ended Dec. 31.
“Whilst we have strong and resilient brands, affordability is a growing constraint for consumers, limiting their ability to digest higher prices,” the maker of Five Roses and Freshpak tea and Bakers biscuits said.
“Sales volumes were lower in some categories, exacerbated by competitor discounting, with cost pressures not always recovered through higher prices.”
Food and consumer goods companies worldwide are grappling with soaring costs for raw materials, energy, and transportation.
Many of these companies are passing on the cost to consumers. However, rising inflation, higher interest rates, and unemployment are constraining spending.
Nonetheless, experts think the AVI service will stay solid and the obstacles positioning the business under stress will certainly go away significantly by its year-end.
Elderly equity expert at Intellidex Tinashe Kambadza explained: “Despite competitors and high input expenses, our company believes AVI’s efficient brand name administration approach– especially in the food groups–will certainly allow the team to browse the dominating inflationary atmosphere over the short-term and secure margins.”
“Brand stamina continues to be at the core of AVI’s item costs and underpins the affordable benefit about its peers on the market.”
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