Consumer goods group AVI, whose brands include footwear retailer Spitz and seafood company I&J, says earnings fell in the year to end-June after the group wrote down the value of struggling shoe business Green Cross.
SA’s economic malaise is taking its toll on fast-moving consumer goods producers and major retailers, which have struggled to grow volumes or pass higher costs on to cash-strapped consumers.
AVI said on Wednesday that it had written down the value of Green Cross by R87m following a restructuring of that business and in recognition of the time it will take “to return the business to acceptable levels of profitability”. The restructuring process cost R27m.
The group said full-year consolidated headline earnings per share probably fell 4%-6%. AVI’s share price fell 4.65% to R88.78, its biggest one-day fall in six months.
Total revenue rose just 1.2% as weak consumer spending limited sales volumes in many categories, “exacerbated in some categories by competitor discounting, which we were unwilling to match”. Volumes in December were lower than the previous year.
Selling prices were raised in categories affected by specific cost pressures, but were generally “maintained” throughout the year.
Lower sales volumes placed pressure on operating profit, “despite ongoing efforts to reduce selling and administrative costs across all business units”.
Group operating profit was also dented by an unrealised mark-to-market loss on I&J’s fuel hedges of R13.4m.
“Finance costs were higher than last year in line with higher debt levels,” AVI said.
The group’s shares were 3.7% down at R89.64 on Wednesday afternoon.