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AVI’s revenue benefits from tea and coffee sales

| Supplier news

Strong tea and coffee sales helped fast-moving consumer goods group AVI grow its overall interim revenue nearly 12% to R7bn for the six months to end-December.

"Tea revenue increased 19.9% due to price increases necessary to offset significantly higher rooibos tea input costs and the impact of the weaker rand on other raw material costs," CEO Simon Crutchley said in AVI’s interim results statement released.

"Coffee revenue was up 19.3% with price increases to ameliorate the impact of the weaker rand on raw coffee bean prices and an 8.3% increase in sales volumes. "

The group’s tea brands include Five Roses and its coffee brands Ciro and Frisco. Their sales growth helped AVI’s Entyce Beverages division grow revenue 15%, but profit growth of 10.8% failed to keep pace.

"Entyce did not adequately recover the significant increase in raw material costs," AVI said.

The group raised its interim dividend by 8% to R1.62, in tandem with its net profit growth of 8% to R1.4bn.

Entyce contributed a balanced 28% to both the group’s top and bottom lines.

Snackworks contributed 31% of the group’s revenue and 29% of its profit. This division includes Willards chips which suffered from a potato shortage during the reporting period.

But consumers appear to have switched to biscuits, helping Snackworks grow its revenue 12.3% to R2.2bn and its profit 11.9% to R412m.

Despite a three-week strike at fishery business I&J, the division grew revenue 14.2% to R1.1bn but profit grew only 4.8% to R167m.

"Revenue growth largely reflects the benefit of the weaker rand on export sales, and selling price increases in both the domestic and export markets. Sales volumes were 5.7% lower than last year, impacted by the illegal strike in August 2016 and lower catch rates," AVI said.

The contribution of the group’s cosmetics and clothing brands fell to 25% of revenue from 27% in the matching period. Its contribution to profit remained at about 31%.

"Green Cross revenue grew 11.1% to R193.8m. Retail revenue increased by 17.3% due to price increases in response to the weaker rand and increased trading space, with one new store opened in addition to the eight new stores opened in the 2016 financial year," Crutchley said.

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