Stocks’ Details

Greencross Limited

Weak Trading Update: Greencross Limited (ASX: GXL) stock plunged 22% on May 09, 2018 after the company downgraded its full-year 2018 earnings forecast due to the soft sales growth from its veterinary business in Australia. GXL now expects EBITDA to be between $97 million and $100 million. The company also expects to incur between $16 million and $20 million of primarily non-cash impairments in FY18, which will impact its full year statutory result. Earlier the company was expecting the full-year EBITDA of $108 million. Further, the veterinary division is now expected to deliver a $2.7 million shortfall in EBITDA in FY 18 compared with previous expectations. The veterinary business has failed to deliver the previously budgeted rise in second half activity primarily due to disappointing visit numbers in both the standalone GP clinics and in-store clinics. The 4.9% LFL sales in the veterinary division shows the mixed performance across the operations as the in-store clinics posted double digit LFL sales growth and the specialist and emergency centres delivered LFL sales growth in high single digits. However, LFL sales in the standalone GP clinics have fallen by 2.8% due to 4.0% decline in visit numbers. Moreover, GXL expects that an additional $4.0 million of labour costs will now be expensed in FY18, including labour costs related to staff employed to work on discontinued projects. Additionally, GXL has announced an immediate review of the company’s operating cost base with targeted reductions of between $10 million and $13 million in annual operating expenses. This review is expected to be completed and implemented by 1^st July 2018. Furthermore, GXL has identified several key areas to improve performance to resume earnings growth in FY19. Meanwhile, GXL stock has fallen 13.27% in three months as on May 08, 2018 and we give a “Hold” recommendation on the stock at the current price of $ 4.18 while keeping an eye on future developments.
 

Items impacting underlying earnings (Source: Company Reports)
 

Incitec Pivot Limited

Sharp Fall in the Profit in 1H 2018: Incitec Pivot Ltd (ASX: IPL) stock plummeted 5.3% on May 09, 2018 after the company posted a steep fall in its first half 2018 profits to $7.6 million. NPAT excluding individually Material Items (ex IMIs) fell 3.3% to $147.1m compared to 1HY17. However, for 1H 2018, group revenue grew by 9.6% to $1,683.2m as compared to $1,535.7m in 1HY17. EBIT ex IMIs of $240.3m fell by 1.0% or ($2.5m) as compared to $242.8m in 1H17. The company’s fertilisers' earnings were impacted due to the dry weather conditions across eastern Australia. Fertilisers earnings in the second half 2018 will depend upon the movements in commodity prices, in particular urea, growing conditions (weather) and the A$/US$ exchange rate. With planned manufacturing outages now complete, the second half sales volumes are expected to be in line with pcp. Moreover, the unplanned downtime at Cheyenne in April 2018, and the impact of the extended turnaround at St Helens are expected to have a negative impact on second half 2018 earnings of approximately (US$7m), due to lower volumes and increased manufacturing costs. Further, the Waggaman plant had experienced extraordinary operational performance during the half with no planned downtime for FY18. However, it would be unusual for such a strong performance to be repeated in the second half 2018. Higher demand from Coal customers in 1H18 is expected to continue into the second half, due to the mining activity in the Bowen Basin. In addition, due to the extended turnaround outage and the impact of flooding in north-west Queensland late in 1H18, the FY18 estimated production of ammonium phosphates has been revised to approximately 880k mt (pcp: 940k mt). Meanwhile, IPL stock has risen 3.88% in three months as on May 08, 2018. Looking at the softness, we give an “Expensive” recommendation on the stock at the current price of $ 3.55.
 

1H 18 Financial Performance (Source: Company Reports)
 
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