AVI limits the pain with higher selling prices
Hedging is helping the consumer brands and food group maintain consistent margins, with little improvement expected in the ‘constrained spending environment’
Consumer brands and food group AVI used higher selling prices to limit the damage to its margins, as a “constrained spending environment” hit volumes in the year to end-June. In results released on Monday, the group reported a 9.4% rise in full-year headline earnings per share (HEPS) to R5.08, which was in line with its recent guidance. Revenue rose 8.2% to R13.18bn after it increased selling prices to counter the deferred effects of a weaker rand in the second half of the 2016 financial year. AVI said rand hedges had deferred the effects of the weaker currency until the 2017 financial year, “with the result that last year’s profit margins were protected while we had opportunity to negotiate compensatory selling price increases that have carried into the current year”. But raw material prices also rose in the 2017 year, and its cost of sales growth was faster than revenue growth, at 8.5%. The gross margin was 43.7%, little changed from 43.9% a year earlier.
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