AVI's Revenue Remains Steady Amid Challenging Domestic Market

Consumer goods group AVI has reported steady revenue in the four months to end-October, compared to the same period last year. Chair Mike Watters attributed the stable performance to growth in some product categories offset by weaker performance in others. At the company's AGM, Watters noted that domestic trading conditions remained challenging, while regional markets had collectively been more buoyant.

AVI's snack food business, Snackworks, recorded revenue growth driven by sound demand and product innovation. In contrast, Entyce, the company's coffee, tea, and creamer business, reported lower revenue due to intense competition in the creamer category, which forced price reductions. Despite this, the company said lower prices supported an improvement in sales volumes but weighed on margins.

I&J, AVI's fishing and seafood business, increased revenue through higher selling prices, introduced to offset rising fuel costs, and improved sales volumes in export markets. However, the company's fashion businesses continued to face a constrained consumer environment, with deep discounting by retailers and competitors in personal care categories.

AVI's footwear and accessories retail business, Spitz, was well-positioned ahead of the December festive trading period, with lay-by units 7% higher than a year earlier. The company's consolidated gross profit margin fell marginally in the period, mainly due to R90.1m in one-off wage restructuring costs at Entyce and Snackworks.

Watters said the company expected the restructuring to pay for itself in less than 18 months. AVI reported that margins improved in most categories, while competition continued to put pressure on Entyce's creamer margins. The group kept costs broadly in line with the previous year, with savings from restructuring and favourable foreign exchange movements offsetting inflation and higher fuel costs for distribution.

Operating profit increased year on year before the R90.1m restructuring costs but was marginally lower on a reported basis, against a strong prior-year base. The company said its performance was supported by a buoyant regional market, with growth in some product categories offsetting weaker performance in others.

AVI's steady revenue performance highlights the company's resilience in a challenging domestic market. The company's diversified portfolio and focus on product innovation and cost management have helped mitigate the impact of tough trading conditions. As the company looks ahead to the festive season, it remains cautiously optimistic about its prospects.

Key points

• AVI's revenue remains unchanged in the four months to October despite challenging domestic trading conditions.
• The company's snack food business, Snackworks, recorded revenue growth driven by sound demand and product innovation.
• AVI's operating profit increased year on year before restructuring costs but was marginally lower on a reported basis.