AVI expects drop in earnings due to the Covid-19 pandemic
The coronavirus pandemic has dented AVI’s earnings, while increasing expenses, with the company now expecting headline earnings per share for the year to decrease by between 7% and 12%.
The group said, however, that the business’s diversification has helped it offset weak trade in some divisions, like fashion, with increased sales in others, such as its snack businesses.
The company, whose brands include Five Roses, I&J, Lentheric, Yardley, Spitz, Lacoste, and Gant, warned the markets of the expected fall in earnings in a trading update for the year to end-June on Thursday.
Not every business was badly affected with its snack portfolio that includes Bakers, Provita and Willards seeing increased demand. This was somewhat offset by weak growth in its Ciro and Lavazza coffee brands that it sells to restaurants, hotels and conference centres — most of which were closed to customers during the lockdown.
Western Cape-based I&J were hard hit as the pandemic started there, it said.
The “quarantine protocols reduced the number of employees available to work, resulting in reduced processing capacity and a reduction in fishing activity”.
In addition shipments of sea food for export were delayed due to congestion at the Cape Town port.
Weak demand overseas during global lockdowns meant there was low demand for abalone, often eaten at restaurants, and this was “compounded by limited airfreight availability due to flight restrictions”.
AVI said “significant time and resources were invested to achieve compliance with Covid-19 regulations”, to ensure staff were safe at work.
Sales in the clothing and footwear division were weakened because companies that retail these products were shut from March 27 until the end of April.
It said that trading in fashion and footwear since May had been “subdued” as low numbers of people visited malls.
“Group cash flow from operations remained healthy and debt levels at year-end are expected to be lower than last year, as are finance charges,” said AVI.