Casting Eye on Pental Limited’s Recent Performance and Promising Outlook

  • Feb 21, 2020 AEDT
  • Team Kalkine
Casting Eye on Pental Limited’s Recent Performance and Promising Outlook

Renowned for specialty chemical and soaps business in 1950s, Pental Limited (ASX:PTL) today is a consumer goods powerhouse, managing brands covering household, fabric and personal care, along with fire needs. A full end-to-end service provider of consumer goods in Australia, New Zealand and Asia, it focusses on superior quality products that are constantly innovated and present in perhaps every Australian home.

Through 2019, PTL brands remained well-placed amid a highly competitive market, enjoying strong market shares and positive customer feedback. Let us browse through PTL’s performance in 2019-

The Pental Story in 2019

Financial Stance

Now retired Chairman Peter Robinson firmly believed that the 2019 performance gives every reason for the Company to have immense confidence in its strategy. Pental did not allow the aggressive competition and price cutting in Australia’s consumer goods market to define its performance and reported net sales revenue growth of 32.7% and a 32.5% increase in underlying profit after tax.

On the financial end-

  • Underlying PAT was $3.45 million against $2.602 million in 2018; Reported NPAT was $1.92 million
  • Underlying EBIT was $5.01 million, up by 32.54% on 2018
  • Gross sales were $153.98 million, up by 42.02% on 2018
  • Trade spend (rebates and discounts) was $53.54, 63.43% higher on 2018
  • Total working capital improved by nearly $1.5 million relative to 2018
  • PTL’s cash position remained positive with no debt and net cash of $0.246 million
  • The Board declared payment of a fully franked final year dividend of 1.3 cents per ordinary share and a pay-out ratio of 79.0%

 

Significant Instances

2019 will be recalled as the year when Pental expanded its distribution business and strategically executed its brand consolidation strategy that validated its future growth to be in the right direction. PTL effectively shielded its shelf space and market share by investing in price matching and marketing initiatives in major segments and categories.

Furthermore, 2019 saw better targeting the rising share of private label in the speeding consumer goods space and reduced production costs.

  • Addition of the Duracell distributorship was instrumental in delivering the robust results, cementing Pental’s credentials as an efficient and attractive distribution partner for other multinational brands across Australia and New Zealand
  • The partnership enabled PTL to leverage its existing infrastructure to gain scale and achieve better recovery of our fixed costs- defending brands whilst preserving profitability
  • Over the year, PTL doubled down on its brand consolidation strategy to protect shelf space in tough market conditions
  • The Company co-branded its Lux and Martha’s brand names under the Softly umbrella to build a strong laundry care portfolio. This led to an increase in the presence of the Softly brand more economically due to scale
  • PTL further took a non-cash impairment charge of $1.02 million (net of tax) on its Country Life and Hi Speed brand names, depicting a sustained change in market conditions and consumer behaviors

 

PTL Brands (Source: PTL’s Website)

 

Pental’s Bright Outlook

Mr Robinson anticipates competition and price cutting in the consumer goods market to continue in the medium to long term. However, the Duracell and Pears partnership is expected to support sustainable profitability as the Company seeks additional partnership opportunities.

Trusted brands such as White King, Janola and Huggie will be subjected to strong investment in the field and merchandising support. Besides this, product innovation, improved initiatives, cost improvements will remain key to long term success. The Company is also exploring opportunities to introduce brand extensions and working with key customers to execute a brand realignment strategy within the household laundry liquid wash segment.

In 2020, PTL aims to invest in replacing one of its old liquid lines, to be used for non-bleach liquids, demonstrating the Company’s commitment to its Australian heritage. The new liquid line will also enable the company to tender for private label products.

Currently, Pental is taking a step towards export growth, negotiating terms of trade with a big distributor in China to facilitate a large-scale entrance into the market. South Korea, Indonesia, Thailand and Taiwan also remain in its target list.

It is but known that no-one should underestimate the significance of the challenges in the consumer goods market. However, at the back of strategic partnerships, strong innovation pipeline, and moving in new markets, Pental seems well equipped to lead the business through the challenging market conditions and constant change.


Disclaimer
This website is a service of Kalkine Media Pty. Ltd. A.C.N. 629 651 672. The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. The above article is sponsored but NOT a solicitation or recommendation to buy, sell or hold the stock of the company (or companies) under discussion. We are neither licensed nor qualified to provide investment advice through this platform.

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