Yowie Group’s Shares Plunged on ASX After Reporting Decline in the Quarterly Sales

The chocolate manufacturing company, Yowie Group Ltd. (ASX: YOW) has via the latest release on ASX disclosed the details about its activities for the quarter ended 31 December 2018. The key highlights for the quarter ended are as follows: 

  • Continued progress on the key strategy of increasing US distribution; 26% increase quarterly versus the previous year with growth in all channels (Grocery, Mass, Drug, Convenience).
  • Q2 sales affected by challenging market conditions. This resilient performance has given significant holiday competitive promotional and display activity from several major confectionery companies responding to vigorous activity from global surprise inside the company.
  • Improved financial performance; unaudited EBITDA loss of -US$534k versus -US$2,689k in the previous year.
  • Improved quarterly operating cash flow of -US$435k, compared to -US$1,854k in Q2FY18.
  • First-half positive operating cash flow of US$146k and a strong cash balance of US$18,751k.
  • New product launch – Yowie Bites.

Although trading was resilient in Q2, with the ongoing competitive activity in the US, the Group now expects Company to trade EBITDA profitably on a run rate basis by the end of FY19 and to deliver on the 5% EBITDA margin guidance during FY20.

In 2HFY19 the Group expects to deliver ongoing growth in US distribution, a new product launch, continued disciplined cost management and an improvement in operating cash flow.

Q2 sales were US$4,070k, lower by 25% versus the pcp due to significant competitive activity in November and December in the US. Several competitors made large investments to respond to the global surprise inside competitor which launched in December 2017 and increased its investments again in November 2018.

Group EBITDA (unaudited) for the quarter showed a loss of -US$534k compared to a -US$2,689k in the previous year and 1H loss of -US$712k compared to -US$4,239k in the previous year. Net operating cash burn for the quarter was -US$435k compared to -US$1,854k. Net operating cash flow was positive for 1HFY19 at US$146k compared to a burn of -US$3,331k for the prior corresponding period. Company’s balance sheet is strong with net cash of US$18,751k.

As regards the outlook, the company expects the 2H revenues to be in line with the prior corresponding period. Addressing sales growth will continue to be the company’s top priority. The company is focused on driving more US distribution with the 50% mark, the next hurdle objective and furthering expanding company’s Australian distribution, as well as pushing broad acceptance of the Bites.

The management continues to evaluate every aspect of the company’s business and cost structure. Cost saving programs commenced last January resulted in US$4.6m of annualized savings (Admin & Selling: US$2.3M, Marketing: US$1.3M & Product design: US$1M).

Now let us quickly look at the company’s stock performance over the last few months. The stock is currently trading at $ 0.075, down by 16.667% during intraday, with a market capitalization of circa $19.60 Mn as on 25 Jan. 2019. The stock has opened the trade at $0.089 which was also the day’s high and reached a day’s low of 0.070. The stock has delivered a YTD return of -1.10%.  The company has posted returns of 2.27%, and -10% over the last six months & three months period respectively, as on 24 January 2019. It has a 52-week high price of $0.170 and a 52-week low of 0.066, with an average volume of 217,412 approximately.


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