Johannesburg-based AVI will decide by June whether to go ahead with construction of a 15000-ton plant, CEO Simon Crutchley said yesterday.
“We recognise the unbanked opportunity of producing a product in the appropriate format and price form for lower-income consumers,” Crutchley said. “We've been working on it for about 12 months. We're getting to the point when we will make a decision to do (it) or not. I'm reasonably confident about doing it.”
About a quarter of AVI's turnover comes from biscuits. It produces 30000 tons of sweet biscuits, about 65% of total market share. In addition to selling to a wider customer base, a move along the spectrum would boost sales in what many food producers say is likely to be a protracted downturn. Many middle-income consumers have traded down to cheaper alternatives in the recession that has seen disposable household income shrink for five successive quarters.
Such a move would also continue the practice of spreading risk across different areas that has served AVI well during a tough six months.
Total sales ticked up 1.1% to R4,05bn, as turnover from units such as seafood producer I&J fell but was offset by gains in the tea and coffee business.
Operating profit fell 52% to R59,87m at I&J as a strong rand and weaker European demand hit profit. At the same time, operating profit rose 35.2% to R167,8m in the fashion brands business.
“Things could have been worse. They've managed the business well,” said one analyst, who declined to be named.
“It looks like other businesses are covering up for the lost I&J operating profit. That is what investors want to see.”
Investors liked what they saw. AVI shares were up 80c, or 3.5%, to R23.40 yesterday.
The company's shares have risen 49% over the past 12 months, making them the fourth-best performer on the JSE's food producers index.
Source: Business Day
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