Asaleo's underlying revenue for baby care products including nappies declined 11% "due to deeper and more frequent discounting activity required in New Zealand to protect market share," the company said.
Asaleo Care, the Australian stock exchange-listed maker of household brands such as Libra, Sorbent, Purex and Treasures, posted a 22% drop in annual profit with revenue declining as it faced more competition in the New Zealand nappy market.
Profit fell to $A59 million in 2016, from $A75.6 million a year earlier, on a 2.6% drop in revenue to $A605.9 million, the nappy, toilet paper and tampon maker said.
Just over half of Asaleo's earnings come from its personal care category which encompasses the Libra, Tena and Treasures brands while the remainder comes from its tissue segment which includes Sorbent, Purex, Handee and Deeko.
The company has 383 employees in New Zealand with manufacturing facilities in Kawerau and Te Rapa, and distribution centres in Auckland and Christchurch. Revenue from the New Zealand operations shrank 5.7% to $A146.1 million in the year.
The company is forecasting low single-digit growth in underlying net profit and underlying earnings before interest, tax, depreciation and amortisation in 2017, along with low-to-mid single digit growth in underlying earnings per share. In 2016, underlying net profit was $A64.6 million, while underlying ebitda was $A130.7 million.
Underlying revenue from personal care dropped 5.3% to $A182.7 million in the year, with underlying ebitda down 7.1% to $A66.9 million. In May 2016, Asaleo cut prices for its incontinence and feminine products by about 20% at major customers Coles and Woolworths. The introduction of that pricing model resulted in one-off implementation costs in the first half but has stabilised its sales and second-half earnings for those products were in line with the first half, it said.
Its underlying revenue for baby care products including nappies declined 11% "due to deeper and more frequent discounting activity required in New Zealand to protect market share." The company experienced intense competition in New Zealand from its largest competitor, which hit volumes and prices, it said.
In its tissue segment, underlying revenue fell 1.4% to $A423.2 million and underlying ebitda fell 12% to $A63.8 million, with "increased competitive intensity" in the consumer tissue market.
Asaleo's assets include the tissue business of Carter Holt Harvey, acquired in 2004, and other Australasian paper assets that date back to early last century. The business was 100% owned by Sweden's Svenska Cellulosa Aktiebolaget (SCA) in 2004 before SCA sold 49.5% in 2012 to private equity firm Pacific Equity Partnership. Its 2014 IPO raised $A656 million at $A1.65 a share.
The stock last traded at $A1.51, up 4.9% today but down 6.2% in the last year.
The company will pay a dividend of 6Ac a share, for a total dividend of 10Ac for the year. That takes its dividend ratio to 94% of net profit, ahead of its target payout band of between 70% and 80%.
(BusinessDesk)
