Its share price increased nearly 3% to R94.82 on Tuesday morning following a trading update, which market commentators described as surprisingly strong. AVI said it expected to report on March 6 that revenue grew 11.6%.
Despite the drought pushing up grain prices, AVI said its food brands Entyce and Snackworks managed to grow operating profit. Fishing subsidiary I&J grew revenue, benefiting from exchange rates and improved fishing conditions. But this was constrained by a three-week strike in August.
Fashion brand Spitz experienced growth in both revenue and operating profit.
Earnings per share were diluted by an increase in the number of shares in issue for incentive schemes.
AVI is a company made up of more than 50 consumer goods brands in a range of categories including hot beverages, snacks, frozen foods, personal care and cosmetics, shoes and other fashion-related items.
Some of the most well-known brands in its portfolio include Five Roses, House of Coffees, Bakers, Douwe Egberts, Willards, I&J, Yardley and Lacoste. AVI has a well developed internal supporting infrastructure that provides it with scale economies that allow the group to keep growing.
Christopher Gilmour, investment analyst at Absa Wealth and Investment Management, said the results were impressive given the conditions faced by the group. He said that I&J’s performance was particularly good given that it had grown despite the stronger rand as it traditionally performed better in a weak rand environment. Gilmour said the group had delivered a strong performance because of good management and its diversified portfolio of brands.
Ron Klipin from Cratos Wealth said the results for the interim period were solid despite the challenging environment. "The food division, which encompasses a wide range of strong brands which were defensive throughout the cycle, have some pricing power that enabled volume growth, leading to an increase in profits."
He said the same applied to AVI’s fashion brands "where pricing power appears to have enabled gross margins to have been maintained."
He said a stronger rand and lower input costs should lead to continued good results for AVI in the first half of 2017.
Klipin said he expected an attractive dividend of about 5% for the year.
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