The epidemic of coronavirus has brought major economic disruption and considerable human suffering. The output contraction in China are now being experienced across the globe. This shows that China has a rising and key role to play in every market.
All sectors are adversely affected but the airlines and travel related stocks are shaken the most by this pandemic. Australia along with many other countries was the first to impose a travel ban leading to a complete lockdown by the governments in the current scenario.
Although manufacturing and supply of essential commodities such as food, medical services and so are permitted to operate as normal, they face their level of difficultly amid such situations. Since shoppers of Grocery items continue to pack their carts in reaction to the COVID 19 fear, leading the retail chains like Woolworths to restrict the purchases by a single customer. Home delivery slots of supermarkets are quickly selling heading to closure of distribution windows for a week or so.
Amidst this turmoil there is one such stock, falling under essential commodities, which is not feeling the heat of market disruption.
Today in this article we will talk about The Food Revolution Group Limited, and why it is providing a safe haven in these tough conditions.
The Food Revolution Group Limited (ASX: FOD)
About the Company
Food Revolution Group Limited (ASX: FOD) is an Australian-based food processing company that uses a mixture of conventional juice treating equipment and custom-developed equipment and methods to produce a variety of high-quality fibers, juices, fruit waters and infused fruits that are sold as exclusive products or ingredients to customers overseas and domestically.
FOD’s Facilities Will Remain Open and Fully Operational
All the company’s operations including all product line will remain open and completely operational. The company’s beverage, juice, sanitiser and functional foods are in high demand and will be continued to be manufactured by the company.
The company also announced expansion plans and new product lines including, three new juice products, hand sanitisers and ethanol-based all-purpose disinfectants.
As per the chairman of the company, the current increased demand for the company’s products coupled with the startup of the new factory have strengthened financial and operational positions. Having the distribution network in China, FOD has long-term plans for these products.
The Company has Reaffirmed its FY20 Guidance
Amid this volatile environment, the company is experiencing strong demand across its product range including its core juice and beverage products as well as its new line of hand sanitisers. The company has reaffirmed its full year revenue guidance of $40 million FY20. The sales for 2H2020 are expected to be a minimum of $22.0 million, representing an increase of 23% on its 1H 2020 sales of $17.96 million.
Orders received for hand sanitiser products have reached $3.8 million for March 2020 due to outbreak of COVID 19 and are expected to increase by June 2020. FOD also would start the production of ethanol-based disinfectant within 2 weeks. The company commenced producing hand sanitiser last month due to increased global demand for the product caused by the outbreak of Coronavirus.
Supermarket numbers have stayed up throughout the industry ever since the beginning of COVID-19 further profiting the company’s core “Better for you” range of Original Juice Company range. Also, the company has gotten interest from a major supermarket group to launch three new juice products in May. These will be below its Original Black Label and Original Juice Company brands in 1.5-liter sizes.
It has also received orders for two containers of its juice products from a large multinational retailer in a trial, while its distributor in China has also ordered a container.
FOD Makes First Deliver of hand Sanitiser
High priority clients including hospitals, schools and pharmacies are the first customers for the delivery of hand sanitiser by the Company. Careline, on behalf of FOD, has received hand sanitiser orders from main supermarkets for over $2.4 million. To begin with, initial order of $2 million was received by just two customers leading to a rapid growth.
The Company, having the capacity to produce disinfectant in large quantities, will also start production of an all-purpose disinfectant – an ethanol-based product which is a powerful disinfectant on surfaces such as bathrooms and workspaces. It expects significant demand for the same in near future.
FOD expands Original Juice Company range with Coles
The Company has expanded its juice range in Australia with nine new Original Juice Company (OJC) products accepted for sale by Coles Supermarkets. The company’s expansion of the OJC range is after its purchase of the iconic Australian brand from Heinz/Golden Circle in September 2019. It forms part of FOD’s key actions to expand the OJC brand range which includes:
- Expansion of existing 100% fresh juice Black Label range into low sugar Orange juice;
- The Company’s existing Juice Lab to become an OJC brand sub-segment (Pressed);
- Bush Tucker juice products to become an OJC brand sub-segment.
The company will begin the sales of 9-brand new refrigerated juice products to the OJC range – consisting of new vegetable/fruit juices, Bush Tucker range, and juice-based Quenchers. It will also introduce two label iced teas with Coles. The company is attempting to develop a well-formed Australian brand name that has a dedicated consumer base.
Let’s look at the financial performance of the Company
For the first half of 2020 ended on December 31, 2019, the Company signed Brand Sale Agreement with Golden Circle which included the acquisition of iconic Australian juice brand, Original Juice Co, along with the brand assets such as the Original Juice Black Label (OBL) brand. This $1million investment gave the company trademarked rights to sell OBL domestically as well as in export markets in Asia and New Zealand.
The company reported net revenue of $18 million for the period, which is a 19.31% growth on the first half year FY19 revenue. The branded juice sales, which represent 56% of total revenue, increased by $4.8 million or 46% on a YOY basis.
However, warehousing and other sales decreased by 34% on a YOY basis due to less bulk storage requirements, particularly after the purchase of the Black Label product range and the packaging for those products.
The gross profit reached $4.42 million which equates to 25% of Net Sales. The loss before tax was $1,782,906 loss for the half-year and EBITDA of $200,505 profit.
Financial Summary (Source: Company’s Report)
The stock of FOD closed the day’s trading at $0.072 per share on 26 March 2020, an increase of 4.348% compared to its previous closing price. The company has a market capitalisation of $50 million, and the total outstanding shares of the company stood at 724.67 million. FOD’s 52-week low and high is $0.055 and 0.125, respectively.
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