What’s behind SECOS’s (ASX:SES) healthy earnings in 1HFY21

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Summary

  • SECOS Group Ltd (ASX:SES) observed a sturdy first half of FY21, marked by a healthy jump in revenue compared to the prior corresponding period. 
  • Biopolymer sales went up 129 per cent compared to the prior corresponding period. 
  • SECOS said that it had completed first phase expansion in the China plant to meet increased demand, which would enable an extra US$3 million annual compostable bag sales.

SECOS Group Ltd (ASX:SES) on Wednesday announced robust earnings for the first half of FY21. The developer and manufacturer of sustainable packaging materials reported a 30.5 per cent jump in revenue compared to the prior corresponding period. 

Image Source: © Cmmeraydave | Megapixl.com

While net profit after tax (NPAT) stood at A$66K, earnings before interest, tax, depreciation and amortisation (EBITDA) was A$576K. The gross profit margin surged 18.2 per cent compared to 14.2 per cent in the prior corresponding period. 

The company's biopolymer sales soared by a whopping 129 per cent compared to the prior corresponding period. Also, SECOS reported a strong balance sheet, having A$14.3 million cash with no debt.

SECOS said that it completed first phase expansion of the China plant to meet increased demand, which would enable an extra US$3 million worth of pannual compostable bag sales.

Strong growth trajectory

SECOS said that significant work had been done to build margins; reduce costs and enhance market position. SECOS expected gross margin to improve as the company's growth trajectory normalised. All plants are now profitable with cash flow from operations used on working capital requirements. 

Image Source: © Cmmeraydave | Megapixl.com

The new sales opportunities in retail branded compostable bag space plus other opportunities would support growth for FY21 and enhance EBITDA position. The biopolymer sales growth in the area of resin, film and bags would underpin profit and sales growth going forward.

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Stock performance

On Tuesday, 2 March 2021, the shares of SECOS closed at A$0.30, up 0.010 points, or 3.39 per cent, against the previous closing on Monday, 1 March 2021. The stock has given a return of 42 per cent so far to investors.

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