Breville revenues hit by declining US juicer sales; New CEO announcement expected soon

It’s been a challenging first half for the Breville Group globally when compared to previous stronger periods, with revenues impacted by falling juicer sales in the US and a new CEO expected to be named shortly.

First half revenue was $293.9 million, down 5.6 per cent from $311.3 million in the corresponding period. EBIT was down 4.5 per cent to $43.6 million and NPAT was 4.9 per cent lower at $29.7 million for the six months ended 31 December 2014.

The company also noted in its half year results published today that the CEO appointment was progressing well and a formal announcement is expected shortly.

Breville Group chairman Steven Fisher said, “As expected, the group has delivered a result which is below that of a very strong prior comparative period. During the half year, the Group has continued to work on a number of both strategic cost reduction and revenue driving initiatives, the benefits of which are expected to flow through in the 2015 financial year and beyond.”

Looking just at the performance of Australia and New Zealand, revenue was $142.9 million, 1.2 per cent lower than $144.6 million in the comparable period. EBIT increased by 1.4 per cent to $16.3 million following selective price increases, a positive sales mix shift to increased Breville brand sales and cost efficiency savings. Breville said this positive EBIT growth more than offset the negative impact of the USD which continued to strengthen during the period, placing increased pressure on margins.

Overall Breville was pleased with the ANZ performance within what it said was a difficult retail environment impacted by negative consumer confidence and a difficult discretionary retail trading setting.

“We are pleased with the first half performance of the ANZ segment. The success of our products has continued and the Group maintained its superior market share in the kitchen domestic appliance market within both Australia and New Zealand markets,” interim CEO Mervyn Cohen said.

In North America revenue was $116 million, down 10.8 per cent from $130 million, affected by poor sales in the juicing category.  The decline in juicers was in line with the company’s expectations and Breville expects the US juicing market to stabilise over the second half of 2015 financial year.

Drawing some positives from the North American market, excluding the juicing category, revenues showed good low double digit revenue growth, the company said. This growth was fuelled by new products launched in the second half of FY14 including the Oracle espresso machine and Quick Touch microwave. Revenues also benefited from a range of PolyScience products, including sous vide, vacuum sealers which are now owned by Breville.

“We look forward to the stabilisation of the North American juicing category which, along with ongoing growth in other categories, is expected to return the North America segment revenues and earnings to positive growth,” Fisher said.

In the rest of the world segment, revenue was $35.1 million, down 4.3 per cent from $36.6 million, and EBIT decreased by 7.3 per cent to $8.8 million.

The company explained:

“The rest of the world distribution business does not follow the traditional replenishment model and tends, at times, to perform in a lumpy manner from half to half, normally balancing out over a 12 month period. The revenues of the current period have been particularly impacted by the purchasing of our European partners of Breville designed, but not branded, products which were very strong in the prior corresponding period.”

In the UK, Sage was Breville’s star performer, achieving double digit revenue growth and representing one third of the rest of the world segment revenue.

“We are encouraged by the performance of our UK business which exceeded our expectations in the current half,” Cohen said.

Looking forward the group expects challenging global conditions to continue in the second half, however is expecting to deliver a mid-to-high single digit EBIT growth in the second half, compared to $24.9 million recorded in 2H FY14.

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