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Private label household goods manufacturer McBride (MCB) has grown revenues by 10.5% in the first half of the year, but profits were held back by “significantly higher” input costs after its shares plunged yesterday amid a profits warning.
During the six months to 31 December 2018 half year sales from continuing business rose 10.5% at £369.2m, primarily as a result of higher sales in the household regions of east and UK and aided by the additional first quarter revenues from Danlind.
On an underlying basis, half year sales were higher by 6%.
During the year it sold its European PC Liquids business following the disposal of its skincare business in the Czech Republic the previous year – both of which are treated as discontinued operations in the accounts.
Half year underlying household sales were 5.9% higher and the aerosols and Asia (AA) segment, which is the balance of the personal care and aerosols segment following the sale of European PC Liquids was higher by 7.2%.
In Household the increase was primarily as a result of the previously-disclosed contract wins in East that resulted from competitor weakness, and UK growth following a number of contract wins.
The AA segment reported higher Aerosol revenues as customers began to stock build ahead of the planned closure of the UK Aerosols manufacturing plant in the second half year. Underlying revenues were up 7.4% against the prior half year.
During the year the group initiated a plan to recover the impact of the significantly higher input costs experienced over the previous 18 months from its customer base through price increases, with a 0.6 percentage point increase in revenues attributed to the effect of these pricing agreements.
Across the half year raw material prices increased by approximately 3.2% when compared to the prior year, of which some 0.3% of this due to foreign exchange.
The pricing outlook for many of our key raw materials has improved in the past quarter and McBride expects to see material pricing slightly lower during the second half year when compared to the first six months.
Half year adjusted operating profit of £16.8m were flat against last half year, with adjusted operating profit margin decreasing to 4.6% from 5%.
McBride said distribution price pressure continued in the first half year due to transport capacity issues and an increasingly tight driver labour market. Additionally, supply difficulties at a number of our manufacturing locations in recent months have required additional ‘inefficient’ spend to meet customer orders, which is now expected to continue into the second half, meaning distribution costs jumped 16.3% in the period.
McBride shares were hit yesterday after it announced it expects to see continued to see pressure on its cost base.
Although the group continues to anticipate further good sales growth in the second half year, the Board now expects full year adjusted profits before tax to be approximately 10% to 15% lower than the prior financial year.
CEO Rik De Vos commented: “The group made significant strategic progress in the period, delivering strong growth in revenues whilst completing the European PC Liquids sale and the integration of Danlind onto the McBride IT systems. In order to seek to mitigate the effect of rising costs, the business has been implementing price increases and continues with further supply chain efficiency measures and overhead rationalisation actions to counter continuing cost inflation.
“Given McBride’s market leadership, sound financial position and continued growth prospects, the Group remains well placed in the current difficult trading environment to make further progress against its strategic ambitions.”
McBride shares have recovered 1.4% this morning to 88p after the savaging they took on yesterday’s profits warning, losing a third of their value.
Morning update
German consumer group Henkel (HEN) has announced it achieved “good” organic sales growth in its past financial year, with “strong” earnings, profitability and cash flow.
Sales in 2018 decreased slightly by 0.6% to €19.9bn as the group experienced a €1.1bn hit related to the strength of the euro compared to other international currencies.
Adjusted for foreign exchange effects, sales grew by 4.8%, with acquisitions and divestments accounting for 2.4 % and organic sales growth of 2.4%.
Its ‘adhesive technologies’ business unit delivered strong organic sales growth of 4%, while organically sales in beauty care were down 0.7% and the laundry & home care business grew 1.9%.
Emerging markets posted an organic sales increase of 6.3%, while mature markets were down 0.4% with growth in every regions except North America.
Henkel posted a 1% increase in operating profits to €3.5m and an EBIT margin improvement of 30 basis points to 17.6%.
The group said that in 2019 it expects organic sales growth of 2%-4% reflecting the increase growth investments from 2019 onwards.
For the adjusted EBIT margin, Henkel expects a range of 16%-17% and and an adjusted earnings per shares fall in the mid-single percentage range from prior year at constant exchange rates.
Henkel CEO Hans Van Bylen commented: “In 2018, we continued to deliver profitable growth for Henkel. We achieved good organic growth with new highs in earnings and profitability.
“At the same time, we faced substantial negative currency effects as well as increasing direct material prices. The overall good business performance was once again driven by our successful brands and innovative technologies with leading positions in highly attractive markets and categories.
“Our mid- to long-term financial ambition underlines our commitment to delivering sustainable profitable growth and attractive returns.”
On the markets this morning, the FTSE 100 is down 0.7% to 7,179.2pts.
Early risers include Premier Foods (PFD), up 2.1% to 38.5p, Majestic Wine (WINE) and Morrisons (MRW), up 1% to 229.4p.
Fallers so far include Just Eat (JE), down 3.4% to 709.2p, Imperial Brands (IMB), down 3.2% to 2,627p and Ocado (OCDO), down 0.9% to 924p.
Sainsbury’s (SBRY) has fallen a further 0.7% to 232.9p this morning.
Yesterday in the City
On a grim day for Sainsbury’s (SBRY) boss Mike Coupe the supermarket plunged 18.6% yesterday all the way back to 234.5p after the Competition & Markets Authority looked to have scuppered it multi-billion pound merger with Asda.
Sainsbury’s tanked to a lower level than they were trading at before last year’s announcement of the blockbuster merger with Asda after the CMA announced this morning the merger would lead to higher prices at stores across the UK and risked a substantial lessening of competition in the sector.
Morrisons (MRW) shares also slumped 5.3% to 227.3p as the CMA’s strong objections to the Sainsbury’s/Asda merger hit hopes that Morrisons could be a takeover target amid a wave of consolidation in the sector.
Tesco remained unaffected, up 0.4% to 227.4p as the CMA’s actions look to have solidified its number one position in UK grocery for the long term.
The overall FTSE 100 rose 0.7% to 7,228.6pts yesterday despite the Sainsbury’s share price plunge.
FTSE 100 consumer risers included Imperial Brands (IMB), up 3.1% to 2713.5p and British American Tobacco (BATS), up 1.5% to 2,850.5p.
Strong risers yesterday included Glanbia (GLB), up 11.2% to €18.03, Dairy Crest (DCG), up 3.3% to 524p, Nichols (NICL), up 3.2% to 1,527.5p, Premier Foods (PFD), up 2.6% to 37.7p and Bakkavor (BAKK), up 2.5% to 164p.
McBride (MCB) slumped 33.2% to 86.8p after issuing a profits warning yesterday, while other fallers included Reckitt Benckiser (RB), down 2% to 6,025p, Cranswick (CWK), down 2.2% to 2,492p, Applegreen (APGN), down 1.5% to 519p and Greggs (GRG), down 1.4% to 1,756p.
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