The chair Harry Boon wring his hands about the 'competitive retail environment'. He doesn't mean Woolies and Coles demanding price and margin cuts, he means Aldi and Costco disrupting consumer behavior, supply chains and brand positioning. If they can import identical for 1% less, they will do it. Competitor discounting in response has been a serious problem, and the main cause of margin erosion.
They propose a sale and leaseback of the Springvale plant, which would release capital. Sure, but it turns a property asset, probably mediocre performing, into a long term lease liability. I know the financial whizzes love a sale & leaseback and argue strongly for it, but I like prudence and duration. You should too.
Libra tampons No 1 market position looks sound.
Adult incontinence disposables shows good growth - big size nappies and price insensitive consumers.
High raw material costs on a weaker $A affect all producers, both domestic and importers. Equal, equal.
Capex of $25m was below depreciation of $29.2m. I like to see net investment, but this is a mature business.
Where to next? Endless cost cutting is worthy. Modest product innovation is useful. But these won't grow the business in a meaningful way. Can anyone see a M&A opportunity out there?
I am a shareholder because a lower $A will lift AHY's margins and competitive position as inporters struggle to compete. No sign of this yet. In manufacturing, every dollar has to be earned the hard way. Keep going.
Ash
AHY Price at posting:
$1.72 Sentiment: Hold Disclosure: Held
