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June 26, 2020

Profit warning from S Africa’s AVI

South African consumer goods group AVI has warned its full-year earnings are expected to be down more than 10% after problems at seafood arm I&J.

By Dean Best

South African consumer goods group AVI has warned its full-year earnings are expected to be down more than 10% after problems at seafood arm I&J.

In a trading update ahead of the end of AVI’s financial year, which comes to a close on Tuesday (30 June), the company said its consolidated headline earnings per share for the year are expected to be 7-12% lower at between ZAR4.55 and ZAR4.81.

Headline earnings per share is a metric closely-watched by investors in South Africa.

Consolidated earnings per share, including capital gains and losses, are expected to increase by between 16% and 21% to between ZAR5.67 and ZAR5.91 a share.

AVI said its performance in the second half of the financial year was “materially impacted” by Covid-19. 

I&J’s production was “disrupted” by what AVI said was the “relatively earlier build-up” of Covid-19 infections in the Western Cape. The company said compliance with isolation and quarantine protocols reduced the number of employees available to work, leading to a fall in processing capacity and a concomitant reduction in fishing activity during the fourth quarter.

In addition, AVI pointed to congestion at the Cape Town port, which delayed export shipments, hitting margins.

The challenges at I&J will lead to “a lower second half profit than last year”, AVI said. The company’s full-year operating profit is expected to be between 5% and 10% lower than the previous 12 months.

However, the company said its “essential businesses” were able to “sustain production and supply our retail partners throughout the period”.

AVI’s Entyce drinks unit and Snackworks arm benefited from increased demand for many products due to increased consumption during the lockdown period in the country. 

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