AHY Details
 
Challenging market conditions and weak FY 16 financial performance: Asaleo Care Ltd (ASX: AHY) stock fell over 8.4% on April 11, 2017 owing to declining sentiments. The company has posted the FY16 financial results in line with July 2016 revised guidance after witnessing slight improvement in 2H16 performance. The underlying NPAT in FY 16 fell 15.2% to $64.6m due to foreign exchange movements on costs creating a $15 million adverse impact as compared to the prior year, and the challenging trading environment for Personal Care in the first half. The company reported 2.6% year on year (yoy) decline in revenue and 10% yoy de-growth in EBITDA at $130.7m. However, ROE and ROIC stood at 21% and 12%, respectively, despite the impact of the challenging market conditions. AHY now expects the low single digit profit growth in FY17 compared to FY16. The free cash flow guidance for FY17 is of $85m to $95m after optimizing working capital levels and recycling capital into high return investments. AHY is intending to undertake a property sale and leaseback for its Springvale manufacturing site in FY17 and realizing capital from the Springvale site will allow the company to invest in higher returning business segments. On the other hand, the on-market share buy-back of up to 10% of issued capital (up to $100m) is now 95% complete with 57.5 million shares purchased and cancelled to date at a cost of $95 million. The group has been seen to have a disciplined approach in capital management and maximizing shareholder returns as it has distributed 70-80% of statutory NPAT as dividends and operated within a leverage range of 1.5x to 2.5x EBITDA.
 
Recommendation: AHY stock rose over 22.26% in the last three months (as of April 10, 2017), and, we give a “Hold” recommendation at the current price of $ 1.63
 

FY 16 Financial Performance (Source: Company Reports)

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