AVI diluted HEPS up 5.7%

Diluted HEPS from continuing operation was up 14.5% to 157.6 cents and HEPS from continuing operations rose by 14.9% to 159 cents.

A final dividend of 47 cents per share was declared, while the total dividend for the year was up 10% to 80 cents per share.

Revenue from continuing operations was up 14% to R6.7 billion as a result of volume growth, particularly in the tea, biscuits, creamer and personal care categories, and higher selling prices in all categories.

Operating profit from continuing operations was 14% higher at R799 million.

AVI said demand for the its brands over the year had been "pleasing", with robust growth in the first half supported by satisfactory demand over the remainder of the year, notwithstanding reducing consumer disposable income.

Selling prices increased in all categories in response to steep and sustained increases in the cost of soft commodities and energy as well as the impact of a weaker rand on imports.

AVI's policy of hedging a portion of future raw material and foreign exchange requirements ameliorated the extent of price increases required to support the responsible management of margins.

However, margins started to come under pressure in the second half which waspartially offset by volume driven operating leverage in the tea, biscuits,creamer and personal care categories.

In June AVI announced it would disinvest from the Argentinean hake and shrimp operations conducted by Alpesca, a wholly owned subsidiary of Irvin and Johnson Holding Company (I&J).

Notwithstanding the value inherent in Alpesca's long term hake and shrimp fishing rights and strong processing capabilities, this asset has proven difficult for I&J to achieve consistent economic returns and it has detracted significantly from the focus on optimising I&J's South African operations.

In accordance with accounting standards Alpesca has been classified as a discontinued operation, AVI said.

Looking ahead, AVI said it is clear that volume growth is slowing down and it will need to work hard to maintain sales volumes, especially as further selling price increases have already been implemented post 30 June 2008 as a consequence of wage increases and sustained high raw material, packaging, transport and energy costs.

It is increasingly difficult to predict consumer demand but clearly slowing volume growth will have an adverse effect on margins and heighten the focus on seeking internal efficiencies, it said.

AVI's strong portfolio of brands, with their associated supply chains, still contain material opportunity for improvement in terms of capacity, technology and overall cost efficiency which management is addressing in a progressive and structured way.

A depreciating rand in 2009, which seems increasingly to be the prevailingview, will benefit the group with its strong export revenue stream in I&J South Africa, although the other operations will have to deal with the higher cost of imports.

In addition there are indications that some commodity prices have started reducing from their highs, which may ease the pressure on margins in the latter part of the year.

"While there is no doubt that trading conditions will be tougherin 2009 we remain confident that AVI's strong defensive brand portfolio,combined with planned efficiency and product initiatives will underpin theGroup's ability to sustain earnings growth over the medium term," AVI concluded.

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