Asaleo Care Limited (ASX:AHY) disappointed the market after downgrading its FY18 Guidance and announcing preliminary results.

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The Company released its preliminary half-year results for the six months period ending 30 June 2018 2018 with a reduction in its full-year guidance for the financial year ending 31 December 2018  It reported revenue of $267.2 million as compared to $294.2 million in 1HFY17 and a decline of 24 per cent in its underlying EBITDA. This was mainly due to significantly higher pulp and electricity costs of approximately $10 million, lower sales volume in the consumer tissue business, lower sales in the baby care business, ongoing investment in product quality improvements for the longer term, due to the lease cost on Springvale property in 1H18 as a result of the sale and lease back in June 2017 and due to an increase in expenditure in trade to support market share as a result of continued heavy discounting by competitors.

These results are just preliminary and remain subject to review and approval by the Audit and Risk Committee and the Board and will be reviewed by the Company’s external auditor. The Company revised its FY18 Guidance and it expects that the second half result will be weaker than the first half, contrary to historical half on half performance. Initially, the Company expected that the underlying EBITDA for FY18 will be in the range of $113-119 million but now it expects this to be between $80-85 million. The Company now anticipates that historic high pulp prices will continue in 2HFY18 and expects that pulp costs will be approximately $24 million higher year on year.

The Company will recognise material charges for impairment and write-down of assets which will be primarily non-cash once the accounts are reviewed by an external auditor. The Company is implementing initiatives from the strategic point of view to come back to a strong and sustainable position. The Company will release its half-year results on 21 August 2018. After this the stock price plunged by 32.9 per cent and the stock was trading at $0.875 (as on 17 July 2018; 03:30 PM AEST).

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