By - Kunal Sawhney
Summary
- In the Financial year 2019-2020 ending June, Consumer Staple sector contributed around 6.5% to the Australian economy and has delivered a performance of 10.17% in the last one year.
- During the March Bear market, the S&P/ASX 200 Consumer Staples sector index sailed through without experiencing many troughs, backed by panic buying among customers which kept demand for Consumer staples intact.
- BWX Limited reported growth in revenue and EBITDA driven by a significant increase in the online sales and basket sizes across all regions and strong revenue from the APAC engine market.
- Asaleo Care Limited aimed at concentrating on its core business and withdrew from New Zealand Diaper Business as return generated was not up to mark.
Consumer Staple companies involve organisations that manufacture and distribute perishable goods including food and beverages and personal goods to be found in grocery stores, supermarkets and hypermarkets and online/offline food retailing companies. During the March Bear market, the S&P/ASX 200 Consumer Staples sector index sailed through without experiencing many troughs, primarily because of panic buying among customers which kept demand for Consumer staples intact. Also, the consumer staple industry is considered to be less sensitive to market conditions as they meet essential personal needs of Human, irrespective of which economic cycle the world is experiencing.
In the Financial year 2019-2020 ending June, Consumer Staple sector contributed around 6.5% to the Australian economy and has delivered a performance of 10.17% in the last one year. The YTD performance of the index was 7.46%. By the end of the day’s trade on 16 July 2020, most sectors on ASX have settled in the red zone with the S&P/ASX 200 Consumer Staples sector recording a 0.82% decrease on the previous close.
In this backdrop, let us see the performance of five ASX-listed consumer staple stocks and see their recent update.
BWX Limited (ASX:BWX)
BWX Limited is engaged in the beauty and wellness business and produces and distributes beauty and personal care products.
On 16 July 2020, BWX Limited announced its unaudited preliminary revenue and EBITDA for the Financial Year 2020. It also announced the launch of an equity raising to fund the construction of a new manufacturing facility and support office. The funds would also strengthen the balance sheet of the company.
FY2020 Results showcasing growth in revenue and EBITDA
On the preliminary and unaudited basis, the company reported a 25% growth in its revenue to $187.6 million. On a post AASB-16 basis, EBITDA was $30.9 million while on a pre-AASB 16 basis, EBITDA for the period was $27.5 million. It represents a growth of over 30% as compared to the previous corresponding period.
Statutory NPAT grew 48% to $14.1 million. Gross margin across the Group improved to 58%. By the end of the FY2020 on 30 June 2020, the debt position of the company was $32 million.
The company performance in the second half was driven by a significant increase in the online sales and basket sizes across all regions and strong revenue from the APAC engine market.
$50 million Equity Raising
BWX announced the launch of $50 million equity raising. Out of these funds, around $33.7 million would be used to finance the development & construction of a new manufacturing facility and support office.
As on 16 July 2020, share price of BWX closed at $3.660, down by 0.498%on previous close.
Asaleo Care Limited (ASX:AHY)
Asaleo Care Limited is a leading personal care and hygiene Company and manufactures and distributes Personal Care and Tissue products.
Withdrawal of its New Zealand Diaper Business
On 25 June 2020, Asaleo Care Limited announced their withdrawal from the Baby Diaper segment in New Zealand by closing its Te Rapa manufacturing facility has closed.
The decision to end its diaper business is pursuant to the Company’s strategy to focus on its core brands in the higher growth & higher-margin Personal Care and B2B businesses. The company has decided that it would invest in these brands for long-term growth.
The company also highlighted that it had invested in the Treasures brand, innovation and manufacturing technology for the past five years. However, the business could not generate enough return. It also took steps to review all options to continue the business, but none of them was commercially possible.
The company assured that all the 26 affected employees would get full entitlements along with severance benefits and support arrangements. It would work with customers & suppliers to help transition arrangements.
As on 16 July 2020, share price of AHY closed at $1.00, down by 0.498%on previous close.
Select Harvests Limited (ASX:SHV)
Select Harvests Limited Australia’s major vertically integrated nut & Health Food Company. Its core capabilities include Horticulture, Orchard Management, Processing, Sales and Marketing.
2020 Crop Update
On 8 July 2020, Select Harvests announced that it had completed the harvesting and the overall crop has been delivered to the Carina West processing facility. 60% of the crop has been processed, and the company projected the crop volume to be ~23,000 MT.
The overall quality of the crop was good. However, some part of the crop was impacted due to late harvest rains and wet storage conditions.
Current Market Conditions
SHV’s export customers have started taking shipments at near-normal levels. The domestic market has been balanced with a move from the Food Service division into the Retail division.
As per the April 2020 Almond Board of Australia Position Report, YoY Australian almond exports declined 29%. The china market remained with a 1% drop while India and Europe decreased by 72% and 16% respectively. Many markets delayed the shipment because due to lower demand caused by COVID-19 impacts.
As on 16 July 2020, the share price of SHV closed at $5.55, down by 0.716% on the previous close.
Fonterra Shareholders’ Fund (ASX:FSF)
Fonterra is a global dairy nutrition firm which is owned by 10k farmers and their families.
Fonterra Shareholders’ Fund provided Global Dairy update
On 30 June 2020, FSF reported a growth of 4.3% in the monthly milk production in New Zealand for May 2020 as compared to the previous corresponding period (pcp). The milk production for 12 months improved by 0.4% ending May 2020.
In Australia, the milk production for April 2020 increased 6.4% on pcp while 2.3% for 12 months to April 2020.
New Zealand monthly exports declined during April 2020 on pcp and Australia exports softened in the same time frame. EU dairy exports increased by 2.3% in March while US dairy export increased by 7.1% in April 2020 on pcp. Global import in Latin America, Asia and the Middle East and Africa declined firmly while China import softened.
As on 16 July 2020, the share price of FSF closed at $3.630, up by 2.254% on the previous close.
Do Read: Curious Case of Fonterra Shareholders’ Market
Ridley Corporation Limited (ASX:RIC)
Ridley Corporation Limited is the leading provider of high-performance animal nutrition solutions in Australia.
Commissioning of its New Feedmill At Wellsford, Bendigo
On 29 June 2020, Ridley Corporation Limited announced the commissioning of its new feedmill at Wellsford, Bendigo that enables the predicted rationalisation of its processes in Central/Northern Victoria.
The construction and commissioning of the new state of the art poultry and pig feedmill were completed on budget and commissioned as planned in Q4 FY2020. The production has been effectively transitioned from the previous Bendigo feedmill to Wellsford. Thus, the old site has been closed now.
With a 350,000 tonne annual capacity, the new feedmill at Wellsford can absorb the production capacity of the old Bendigo feedmill along with existing Mooroopna feedmill. In the coming six to nine months, the company has plans to transition Mooroopna production and customers to the new Wellsford site. Once this program gets executed successfully, the Mooroopna site will be shut, made safe, and get ready for divestment.
As on 16 July 2020, the share price of RIC closed at $0.750, down by 1.961% on previous close.
Disclaimer: All currencies in Australian Dollar, unless specified.