Asaleo Care has reported a strong half-year result for the six months ended 30 June 2020, boosted by panic buying during the early stages of the COVID-19 lockdown in Australia and New Zealand.
Net profit for the half was $18.8 million, more than double the $7.8 million for the first half of 2019. The company reported earnings before interest, tax, depreciation and amortisation (EBITDA) of $49.4 million, up from $39.8 million recorded in 1H FY19.
Sid Takla, CEO and MD, said the company’s strong brands, diverse business model and its local manufacturing footprint combined to deliver strong revenue and earnings growth during COVID-19.
“Our priority has been to ensure all our staff remain safe and healthy during the COVID-19 pandemic. Strict measures have been put in place to ensure all manufacturing sites and distribution centres remain in operation.
“No closures or downtime have been experienced. We remain vigilant to ensure we can continue to supply our essential goods and have contingency plans in place to deal with issues if they were to arise. Our office-based staff have and continue to, successfully work remotely,” Takla said.
“Pleasingly, our strategy to drive growth with investment in our brands and putting the needs of our customers and consumers first is gaining traction. We have delivered market share growth in all our key categories.”
The B2B segment delivered revenue growth of 4.6 per cent during the first half. The company said it experienced significant demand for products during the initial stages of COVID-19.
As lockdown measures were maintained later in the first half, a drop in away-from-home activity negatively impacted sales to the hospitality, office cleaning and education sectors.
However, this impact was softened by an increase in demand for hygiene consumables in the healthcare and food processing sectors. Sales of its high margin, proprietary ‘Hero Systems’ continue to increase.
TENA healthcare revenue increased by 11 per cent, with underlying growth in demand from the residential aged care and in-home care sectors.
Tork Professional Hygiene revenue increased 2.5 per cent notwithstanding the COVID-19 lockdown measures adversely impacting end customers.
B2B EBITDA was up 17.3 per cent to $24.4 million as a result of the higher sales volumes and lower pulp costs. This was partly offset by the weaker local currencies and higher insurance costs.
According to the company, revenue growth was strong in the retail segment, up 15.6 per cent to $103.6 million with all categories (excluding NZ Baby) experiencing double-digit growth.
Whilst the business benefitted from the panic-buying during the early stages of the COVID-19 lockdown in both Australia and New Zealand, this did start to unwind in the later stages of the half.
The company said its recent increased brand investments, together with the local manufacture of most of its retail products, enabled the business to capitalise on this demand and increase market share in most categories. Retail EBITDA increased 31.6 per cent to $25 million.
This resulted from strong revenue growth driving high production volumes combined with low pulp costs. These were however, partly offset by weaker local currencies and higher insurance costs.
The COVID-19 panic buying that occurred in March and April had a positive impact on the first half result, however, Asaleo Care anticipates this will continue to unwind in the second half of the year.
The ongoing lockdown measures are also expected to continue to temporarily dampen away-from-home activity and therefore demand in the professional hygiene business.
The full year outlook for FY20 remains unchanged, however the company now expects underlying EBITDA to be at the upper end of the $84 – $87 million range. No interim dividend was declared.
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