AVI trusts in its brands

Johannesburg - Forecasting continued spending restraint, diversified consumer goods group AVI said it remains confident its "market leading brand portfolio" will enable it to compete effectively in tough trading conditions.

Delivering interim results to end-December 2009, AVI said despite signs of an upturn in the South African economy, it believed consumers will remain cautious for some time and this would impact on its second half performance.

"We think consumers will continue being under pressure. But we're cautiously optimistic that we will get a reasonable demand for our products in the second half," said AVI CEO Simon Crutchley in an interview.

He added that the group would continue cost cutting measures and brand promotions to counter tough trading conditions.

In the interim results, AVI - whose brand portfolio ranges from tea and coffee beverages to fashion outlets Spitz - reported a 9% growth in headline earnings per share to 112c while revenue was marginally (1.1%) up at R4.05bn. An interim dividend of 39c/share was declared, 8.3% up from the previous corresponding period.

AVI said I&J's (the frozen sea food business) exports were materially impacted by lower prices and a stronger rand, resulting in a R138.5m decrease in revenue while the rest of the group's businesses achieved an overall revenue increase of 5.8%.

As a result, the group said I&J's results for the second half will be much lower than last year, should weak prices for seafood products and the strong rand continue to prevail.

Crutchley said given the tough conditions, especially in the I&J division, the results were "satisfactory" and "it was pleasing" that the fashion business Indigo Cosmetics and Spitz achieved higher gross margins and volume growth during the period.

Over the period, I&J said it did not manage to find a credible prospective purchaser for its Argentinean hake and shrimp operations, but it remains committed to disinvesting from this business.

AVI said its ongoing focus on profit enhancing opportunities across its brand portfolio as well as remaining vigilant for strategic acquisition opportunities underpins the group's medium term growth objective.

"We're a strongly cash generative business, and our focus has always been on growing the business through brand acquisitions," said Crutchley.

- Fin24.com