Provider of quality consumer products to Australians and New Zealanders since the 1900s, Pental Limited (ASX:PTL) is a famous family name in households across the ANZ region. Trusted by families for generations, its brand portfolio continues to be the region’s favourite consumer powerhouse, offering quality products that are subject to constant innovation and improvements.
Of late, Pental has been cognisant of the tough market conditions in Australia. At the last AGM, Ex-Chairman Peter Robinson acknowledged the fact that “Australia is a tough market, there is no doubt about that.”
In today’s article, let us graze over the Australian retail landscape and understand Pental’s robust outlook to combat the prevailing market volatility-
Australia’s Current Retail Environment
The retail business is prone to expect ups and downs, a market dynamicity that retailers are always aware of. However, the last few months have been extremely challenging for Australian retailers, amid rising consumer nervousness to shell out money because of the bushfires and coronavirus, growing concerns about job security, stagnant wage growth and an increase in retailer margin expectations.
Quite evidently, Australian households are trying to save and pay down debt, thanks to the record levels of personal debt, even with low interest rates and a dwindled disposable income.
There is another aspect that needs special attention in today’s contemporary world- online retail Despite the additional challenge of online retail, industry experts conclude that even though some Australian retailers have a compelling online offering, trends estimate that most retail purchases are still bought in-store.
Pental’s Take on Australian Retail
In an address to shareholders from last year’s AGM in November, Mr Robinson stated that the Company has been experiencing some challenges as price promotions become the norm and consumers switch brands in response. There is a challenge for growth in the private label, with consumers remaining highly cost-conscious.
However, PTL doubled down on its brand consolidation strategy with the intent to safeguard its shelf space in the challenging market conditions. For instance, PTL co-branded Martha’s and Lux brand names underneath the Softly umbrella. This strategy intended to build PTL’s solid portfolio in laundry care. Consequently, there was a rise in the Softly brand presence (more economically due to scale).
Moreover, it has supported its brands (such as White King, Janola and Huggies) that families in the country dearly trust. PTL realises that growth of its distribution business is a key plank to success, providing the Company with the much-required cost efficiencies and scale.
In a nutshell, the below factors propel Pental’s robust stance in Australia: -
- Strong investment in field and merchandising support
- Leading innovation pipeline
- Strategic partnerships
- Expanding the reach of brands by pursuing new Australian retailers to reach even more consumers
- Tapping the export market- an important part of PTL’s long-term growth vision
Pental’s Robust Outlook
Now that we understand PTL’s take on the Australian market and the factors that favour this consumer powerhouse, let us understand the Company’s outlook for 2020-
In its 1H 2020 Results presentation, the Company reiterated its mission to be a leading supplier of shelf stable products to its chosen markets, built around a reputation of delivering quality, innovation and sustainability to the satisfaction of customer needs whilst enhancing shareholder value.
Before proceeding, we encourage you to read PTL’s impressive financial performance HERE-Pental’s Robust HY20 Results- Increased Sales, Strong Exports, Retail Expansions!
The Company continues to be active in developing new products to grow market share as well as building strong, ongoing relationships with its customers and suppliers. Even in the challenging retail environment of Australia, Pental is amongst the industry leaders with strong revenue growth (15.1% in Australia, 10.81% in New Zealand), a 5% EBITDA growth – all with effectively no debt.
At the back of this robust performance and solid objectives, PTL’s business outlook includes: -
- Negotiating with a major non-grocery retailer for ranging of White King wherein the supply opportunity looks very positive
- Negotiating with major FMCG branded company to contract manufacture their product range
- Several tenders in place for the contract supply of private label
- The new liquid filling line (a result of Capital investment in PTL’s Shepparton plant) has created the opportunity to develop a range of sustainable eco-friendly products, opening private label opportunities
- Strategy development and negotiation remain in place with various Asian countries to capitalize on the vast volume opportunities
- Focusing on the B2B growth opportunities with the Procell battery brand
- Sales structural changes to ensure new sales channel growth opportunities within the distributor and pharmacy channels
With its ‘house of brands’ highly recognised and trusted in ANZ, customer demographics expansion which is looking promising as well as with healthy partnership strategies, PTL seems to be on track to maintain its market leadership.
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