Consumer Staple Stocks On A Downtrend: BAL, BKL, CGC, ING

  • September 08, 2019 08:15 AM AEST
  • Team Kalkine
Consumer Staple Stocks On A Downtrend: BAL, BKL, CGC, ING
Consumer Staples Sector - An Overview

Consumer staples are categorised as essential products such as food, beverages, hygiene products and eatables. Demand and supply play a significant role in the economy. Consumer staples industry has a direct relationship with the demand and supply factor. Products under this sector are of non – cyclic nature, signifying that they are always in demand irrespective of the performance of the economy. Due to their characteristics of “always in demand”, investors are more likely to invest in the stocks of companies operating in the consumer staples sector.

On 6 September 2019, the S&P/ASX 200 Consumer Staples (Sector) closed at 12,743.9, up 109.9 points or 0.86%, against S&P/ASX 200 settled at 6,647.3, up 34.1 points or 0.51%.

Below discussed are four stocks from the consumer staples sector, Bellamy’s Australia Limited, Blackmores Limited, Costa Group Holdings Limited and Inghams Group Limited, which have posted negative returns for the last six months.

Six-Month Return of BAL, BKL, CGC and ING (Source: ASX, as on 6 September 2019)

Bellamy’s Australia Limited

Bellamy’s Australia Limited (ASX: BAL) is a manufacturer of premium, certified organic formula and food for kids and toddlers. The company is engaged in offering 40 products, made in Australia. Its operations are spread across Australia, Hong Kong, China and South East Asia. The company’s products are also available through online platforms.

On 3 September 2019, the company announced a change in the substantial holding of JPMorgan Chase & Co. and its affiliates from a voting power of 6.71% to 7.76%. The substantial holder increased its holdings in the company from 7,601,891 ordinary securities to 8,791,816 ordinary securities.

FY2019 Highlights
  • Net revenue of the company stood at $266 million, down 19% year-on-year, impacted by factors including rebrand transition, $18 million loss in China label sales, and CBEC regulation, reducing birth rate and increased competition.
  • Gross margin increased by 5%, driven by price and input costs.
  • BAL reported a one-off $12 million legacy label inventory provision before the rebrand.
  • Group cash balance increased by $25 million to $112 million.
  • Continued to maintain zero debt.

FY19 Revenue (Source: Company’s Report)

Outlook

For FY2020, Group EBITDA margin is expected to be consistent with FY2019. The company is anticipating an increase of 10-15% year-on-year in the FY2020 group revenue, with accelerated growth expected in 2H FY2020, owing to the launch of new products.

FY20 Outlook (Source: Company’s Report)

Stock Performance

On 6 September 2019, the stock of BAL settled at $8.770, up 2.334% from its previous close. The company has ~113.37 million outstanding shares and a market cap of $971.57 million. The stock has delivered negative returns of 13.87% in the last six months.

Blackmores Limited

Based in New South Wales, Blackmores Limited (ASX: BKL) is a manufacturer and distributor of vitamins and dietary supplements, serving clients domestically and internationally. The company has been recognised as the most trusted brand of Australia for the eleventh year in a row. Its products are being used in over one in five households across the country.

On 5 September 2019, the company announced $69.27 as the price for the shares to be allocated under the Dividend Reinvestment Plan (DRP) for the 2019 final dividend, which is scheduled for payment on 12 September 2019. Additionally, the shares are due for allocation on the same day.

FY2019 Highlights

On 15 August 2019, BKL announced full-year financial results for FY2019.

  • The company’s revenue increased by 1% to $610 million on the prior year.
  • Reported NPAT dipped by 24% year-on-year to $53 million.
  • NPAT went down by 19% to $55 million.
  • In other Asia markets, sales and EBIT increased by 30% and 218%, respectively.
  • Strong financial health and balance sheet maintained.
  • Intangibles and goodwill improved related to Impromy

FY19 Highlights (Source: Company’s Report)

The company also announced a 70 cent per share (CPS), fully franked, final dividend, bringing the total dividend for the year to 220 cps. The dividend reinvestment plan was maintained with a 2.5% discount.

Outlook

Challenging trading conditions in the company’s channels to China are likely to remain during 1H FY2020. Owing to continued channel disruption from regulatory changes by CBEC, performance of the company during 1H FY2020 is expected to be lower than the 1H FY2019 performance. However, operational efficiencies from initiatives towards business improvement are likely to aid the company during 2H FY2020.

Stock Performance

On 6 September 2019, the stock of BAL closed the day’s trading at $8.770, up 2.334% from its previous close. The company has ~113.37 million outstanding shares and a market cap of $971.57 million. The stock has delivered a negative return of 17.83% in the last six months.

Costa Group Holdings Limited

Costa Group Holdings Limited (ASX: CGC) is among the leading packers, growers and marketers of fresh fruits and vegetables in Australia. The company supplies its products to domestic and international markets (Australia, Asia, North America and Europe). CGC, which has around 3,500 hectares of farmed land in its homeland, employs 6,000 + employees during peak seasons periods.

Change in Directors’ Holdings

CGC has announced changes in the interest of its directors. The number of ordinary shares held before the change by Harry Debney was 1,126,229 in the name of Harry George Debney, 23,041 ordinary shares in the name of Harry George Debney and Jane Elizabeth Debney (for Debney Super Fund). The director also held 17,982 performance rights and 1,596,009 options to acquire ordinary shares in the company. However, after the change, he holds 1,144,211 ordinary shares in the name of Harry George Debney, 23,041 ordinary shares in the name of Harry George Debney and Jane Elizabeth Debney (for Debney Super Fund), and 1,109,658 options to acquire ordinary shares in the company.

At the end of August 2019, Neil Chatfield acquired 40,000 ordinary shares, totalling 300,000 ordinary shares after the change. Meanwhile, the number of securities held Peter Margin increased from 42,893 to 52,893.

Financial Summary for FY2019

On 23 August 2019, the company updated the market with results for 1H 2019.

  • Revenue of the company grew by 11.8% to $573 million compared to the previous corresponding period.
  • EBITDA before SGARA, leasing and material items (EBITDA -SL) dipped by 8.4% to $84.4 million due to lower earnings by the produce segment.
  • NPAT before SGARA and leasing (NPAT-SL) declined by $7.2 million to $40.9 million.
  • SGARA movement increased to $14.8 million due to large citrus hanging crop balance at June, which was offset by harvest of berries across all regions over 1H.
  • The company has declared a fully franked dividend of 3.5 cents per share.

Produce Segment’s Revenue (Source: Company’s Report)

Stock Performance

On 6 September 2019, the stock of CGC settled at $3.550, up 0.852% from its previous close. The company has ~320.63 million outstanding shares and a market cap of $1.13 billion. The stock has delivered a negative return of 31.52% in the last six months.

Inghams Group Limited

Inghams Group Limited (ASX: ING) is the largest integrated poultry producer in the Australian and New Zealand markets. The company serves quick-service restaurants as well as retail and food service industries. ING has seven processing plants, nine distribution centres, and 11 feedmills, breeder and broiler farms, 11 hatcheries, among other facilities. It was listed on the Australian Stock Exchange in November 2016.

Updates

On 4 September 2019, the company announced change in directors’ interest (indirect) for Robert Gordon and Helen Nash, who acquired 15,772 and 15,367 ordinary shares at a consideration of $3.17 per share and $3.25 per share, respectively.

According to another company update on 3 September 2019, Bio Security New Zealand has become aware of a possible detection of a chicken virus “Infectious Bursal Disease Virus Type 1”in a layer egg farm in Otago in the South Island of New Zealand. There is no recommendation that the virus has infected any chicken meat farm in New Zealand. All of the company’s farms are in the North Island, which is separate from the affected South Island layer egg farms. Additionally, the company has in place bio security measures at its farms to lower any risk from diseases.n 2 September 2019, the company announced a change in the substantial holding of Credit Suisse Holdings (Australia) Limited. The voting power of the substantial holder changed to 6.41% from 5.29% with person’s votes increasing to 23,838,249 from 1,670,214, respectively.

Financial Summary for FY2019

On 27 August 2019, the company announced financial year highlights for FY2019.

  • Underlying EBITDA increased by 2.9% to $208.6 million from the prior year.
  • Core poultry volume grew by 4.3%.
  • Underlying NPAT declined by 4.5% to $103.2 million.
  • The company declared a final dividend of 10.5 cps, bringing total dividend for FY2019 to 19.5 cps.
  • The company has a strong cash position with cash in hand of $134.5 million.
Stock Performance

On 6 September 2019, ING’s stock closed trading at $3.260, up 4.823% from its previous close. The company has ~371.68 million outstanding shares and a market cap of $1.16 billion. The stock has delivered a negative return of 25.42% in the last six months.


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