Picture: 123RF / BELCHONOCK
Picture: 123RF / BELCHONOCK

Consumer goods group AVI, whose brands include footwear retailer Spitz and seafood company I&J, said on Thursday it had sold its 40% stake in its joint venture with Australian food company Simplot for R633m.

Simplot, which makes and supplies seafood snacks in Australia and New Zealand, will snatch up the stake held by AVI subsidiary I&J.

The group cited as reasons its lack of managerial control in the venture, as well as a desire to exit businesses whose return on capital prospects did not meet its expectations.

The sale will result in an after-tax capital gain of R370m, AVI said, and a 35%-45% increase in the company's basic earnings per share for the six months to end-December.

In its integrated report for the year to end-June 2019, AVI said I&J's joint ventures had yielded equity earnings of R42.2m, down 25% from the prior period.

The joint venture with Simplot delivered reduced profits due to increased raw material input costs that were not fully recovered by price increases, as well as unfavourable foreign-exchange movements, the group said.

In a separate statement on Thursday, AVI chair Gavin Tipper said the group had seen a 2% increase in revenue for the first quarter to end-September. Growth in the group's food and beverages categories was partially offset by volume pressure in its fashion business, he said.

“The consolidated gross profit margin was well protected and costs were tightly managed, resulting in growth in operating profit for the quarter of 2%,” Tipper said.

AVI's share price had slipped 0.93% to R56.97 as at 12.45pm on Thursday, bringing its year-to-date loss to 14.67%.

gernetzkyk@businesslive.co.za