Our opinion on the current state of A-V-I(AVI)Anglovaal Industries (AVI) is a diversified producer of consumer products in the food, cosmetics, and apparel sectors. It boasts a range of well-known South African brands such as I&J fish, Five Roses tea, Salticrax, Frisco, Provita, Yardley, Spitz, and Kurt Geiger. The company announced that it had sold its Australian seafood company Simplot for R633 million, yielding a net after-tax profit of about R370 million.
Over the decades, AVI has undoubtedly been one of the best blue-chip shares trading on the JSE. Its share price has shown a remarkable rise over the past twenty years. Twenty years ago, the share was trading for around 150c, and today it trades for about R65 at a cyclical low point. It has been a steady payer of dividends throughout that period. An investment in Anglovaal is an investment in the South African economy, but one which has shown itself to be virtually recession-proof until COVID-19. The coronavirus had an impact on consumer spending, and the AVI share price fell quite heavily because of this. More recently, it has been falling due to the crisis in Ukraine.
In its results for the six months to 31st December 2023, the company reported revenue up 7.1% and headline earnings per share (HEPS) up 17.4%. The company said, "Revenue growth in Entyce was driven by a combination of improved sales volumes and higher selling prices taken in response to significant input cost pressures. Snackworks achieved revenue growth in both biscuits and snacks due to higher selling prices and improved snacks volumes. I&J had a difficult semester with revenue declining 5.1% due to poor catch rates."
In a trading statement for the year to 30th June 2024, the company estimated that HEPS would increase by between 21% and 25%. The company said, "Group revenue increased by 6.3% underpinned by selling price increases to offset cost pressures and volume growth in the beverage categories. The Group's consolidated gross profit grew ahead of revenue supported by improved gross profit margin in most categories. Selling and administrative expenses increased at rates marginally higher than CPI."
On a P/E of 15.98 and a dividend yield (DY) of 4.21%, the share looks reasonably priced, even cheap. In our view, this company will improve as the South African economy improves, and it should be accumulated on any significant weakness. We advised waiting for a clear break above its long-term downward trendline, which happened on 8th November 2023 at a price of 7418c per share. The share has subsequently moved up to 9734c.
