Global appliance retailer and manufacturer Breville has overcome supply chain and logistics disruptions to report strong earnings and revenue growth for the six months to December, with shareholders being duly rewarded.
The company, which makes an extensive range of coffee machines, juicers and sandwich presses and toaster style ovens which have done well in the last two years of Covid-driven lockdowns, revealed a 23% lift in revenue for the half to $878 million.
Net profit after tax jumped 25% to $77 million, and the Breville says it will pay a 15 cents per share interim dividend, up from 13 cents a share in the December half of 2020.
To make sure it has enough stock for the big end of year selling season, especially in the huge US market, Breville says it will run up inventory and orders in coming months – and also boost prices to recover costs lifted by inflation.
“Sustained consumer demand across geographies and categories underpinned our first half of 2021-22 performance,” CEO Jim Clayton explained in the earnings release.
“Gross margins were managed well in a turbulent environment with selective price rises, restrained promotional spend, and mix largely offsetting the ongoing inflationary pressures in ocean freight and product costs in the Global Product segment. In the Distribution segment inflationary pressure in shipping costs saw some erosion in gross margins.”
“The business continued its move from strength to strength delivering 23.6 per cent sales growth, despite a strong prior period and global logistical constraints (most acute in the US); double digit earnings before interest and tax growth with continued investment in mid-term growth drivers; and, an improved inventory position, which we plan to further reinforce in the second half to support growth in the first half of 2022-23”.
Like many other retailers, wholesalers, distributors and other companies in other sectors, Breville has not been immune to the costs and frustrations of supply chain delays across its international operations.
The company said these issues had been most pronounced in its US operations, where inventory has been stuck at ports and unable to be delivered to customers.
To combat this, Breville intends to significantly increase its inventory for the first half of the 2023 financial year (which is the high selling Thanksgiving/Christmas/online selling seasons)
“Supply chain permitting, we will begin building inventory for peak season 2022-23 to try to get ahead of ongoing logistical challenges,” the company told the market in something of a heads up.
The holding cost, or obsolescence risk, of inventory for Breville is negligible with long life cycles, no price degradation, and no seasonality,” the company explained. That means it is not expecting working capital pressures, something analysts usually fret over.
Breville says it expects earnings before interest and tax for the full year to be in line with analysts’ forecasts of $156 million.
The shares were up 2.2% at $29.09.
