There’s no sympathy given in the markets for companies that produce surprises, especially on the downside.
Take the toiletries and personal products manufacturer Asaleo Care (AHY) which on Friday not only cut its June half year guidance, but also the estimates for the full year to December 31.
Down went the shares, plunging by more than 30% at one stage and after a tumultuous trading session on Friday, they ended off more than 29% at $1.505.
The reason was obvious – downgraded guidance containing an estimated 23% slide slump in first-half profits, and talk of a 15% fall in full year earnings (which though does suggest a better performance in the current half than in the six months to June).
The company earned just over $76 million in 2015, so the 2016 full year figure could end up around $65 million.
The owner of the Sorbent and Libra brands said fierce competition in supermarkets was cutting sales and profit margins.
That has seen a 4.3% drop in first half revenues to $292.7 million in the six months to June 30, and a 23.4% dive in net profit to $24.9 million.
Friday’s sell-off all but wiped out the 34% jump this year up to the close of trading on Thursday.
The close of to $2.14 on Thursday was well above the float price of $1.65 in 2014.
Friday’s close left it just under 10% below that float price. The downgrade was blamed on increased discounting from competitors in the consumer tissue and personal care sectors, with market support spending needed to protect market share, a situation compounded by the weaker dollar forcing up the price of imported pulp.
The company sounds like it’s a victim of the grocery price wars between Coles, Woolworths, Aldi and Metcash/IGA.
And while it is forecasting a fall in pulp costs next year, that won’t help 2016’s results. Full audited half year figures will be out on August 25.
The company must be hoping that the surprise downgrade on Friday has shaken all the bulls out of the stock ahead of the full half year figures.
