South African snacks maker AVI delivers 2.3% growth in interim earning

SOUTH AFRICA – South African food producer and retailer AVI reported a 6.9% climb in half-year profit for the six months ended December 31, 2021.

Its headline earnings per share (Heps) during the period under review was 316.9 cents, up 6.6% from the previous period.

According to reports by Money Web, the group saw a 2.3% increase in revenue to R7.3 billion (US$475.75m) and earned R1.5 billion (US$97.7m) in operating profit, a 6.7% increase compared with 2020 figures.

Despite delivering a good performance, the group suffered from tight trading conditions across its divisions on the back of pandemic-related market disruptions, the July unrest, and rising inflationary pressure that impacts consumer spending.

AVI suffered direct costs of R36.9 million (US$2.4m) in its snacks and biscuit division Snackworks and its fashion division Spitz due to lower consumer footfalls, compromised supply networks, and the severe levels of damage to looted malls.

Supply chain disruptions led to an overall spike in the group’s selling prices to balance out expensive supply chain and raw material costs.

Despite the challenges, the group’s food and beverage segment performance improved as it posted 3.8% growth in revenue to R5.8 billion (US$377m) and a 4.8% rise to R1.6 billion (US$104m) in operating profit in its division.

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The food and beverage segment includes tea and coffee producer Entyce beverages, biscuit and snack maker Snackworks and wholefish provider I&J.

AVI’s Snackworks division houses biscuit maker Bakers and chip brands Willards and Baker Street Snacks, which make Cheese Curls chips, Jumpin Jack flavoured popcorn and Tennis biscuits.

“Revenue growth in Entyce and Snackworks was underpinned by selling price increases taken in response to pressure from rising commodity input costs. Volumes grew marginally compared to the prior year, which had benefitted from lockdown-related demand in the first quarter.

“Encouragingly, Snackworks’ biscuit demand was robust through the second quarter. I&J’s revenue grew marginally with difficulties in the fishing business offset by a sustained recovery in the abalone business following a myriad of Covid-related market disruptions during the last 24 months,” AVI said in a statement.

The group also earned R20 million in interest from the proposed but unsuccessful disposal of its Snackworks division to Mondelēz International.

This follows the announcement in November that it was in talks with the Oreo cookie maker to sell the business unit.

The potential takeover deal would have expanded the presence of the Cadbury maker in the South African market.

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