AVI’s headline earnings a share increased only 0.6% to 318.9 cents in the six months to December, 31 as it fought crimping demand and rising costs by lifting prices across all its branded food product categories.
The interim dividend was raised 1.2% to 172 cents a share. Gross margins were stable despite cost pressures and operating profit increased by 1.7%, CEO Simon Crutchley and chairman Gavin Tipper said yesterday.
Demand had been constrained by inflation, rising interest rates and unemployment. Increased load shedding disrupted operations.
“The protracted load shedding added layers of complexity to our operations, supply chains and distribution logistics. We have invested in back-up power options for a number of years and continue to do so; there is however a material cost to this,” the two directors said.
Fishing product company I&J was impacted by higher fuel prices, reduced quota, and an unfavourable abalone sales mix due to the Chinese lockdown.
Group revenue increased by 7.2%. Footwear and apparel growth was underpinned by price and volume gains.
Operating profit, excluding I&J, was up 8.4%. Selling and administrative expenses increased at rates well above inflation, due to higher fuel prices on distribution costs, fair value accounting of hedge positions, and non-recurrence of insurance proceeds recognised last year.
I&J’s revenue of R1.22 billion was 2.3% lower than last year and operating profit fell to R72.2 million from R160m.
Revenue growth in Entyce and Snackworks, with products such as Provita, was driven by price increases. The personal care divisional revenue improved moderately, underpinned by growth in aerosol and fragrance categories, but offset by reduced manufacturing revenue due to the acquisition of the Exclamation and Gravity trademarks from Coty in the prior year.
The retail brand portfolio saw sound volume growth and price increases lifting revenue by 17.4%. December’s retail sales were “particularly strong”, and well ahead of pre-Covid-levels, the directors said.
Financial prospects would depend on the domestic economy. Renewable power solutions were being investigated in the parts of the group that were commercially feasible, “but they come at considerable capital cost”, the group said.
Hedging of currency and commodities was expected to provide some support to the second semester performance. Balancing price and volumes would be a challenge in the context of aggressive competitor activity, constrained consumers and the need to ameliorate higher input costs, they said.
“Our focus on cost management remains a key underpin to protecting margins with benefits expected from factory efficiencies and procurement savings. Profit growth in many of our categories will be dependent on our ability to increase volumes and raise selling prices,” directors said.
BUSINESS REPORT