Breville posts ‘balanced result’ after strong product launches and loss of Kuerig commission

  • Revenue increased 11.3 per cent to $541.6 million and NPAT down 1.9 per cent to $48.8 million
  • Loss of the Kuerig commission cost Breville $13.7 million
  • Breville purchased culinary division of USA-based business PolyScience which makes commercial sous-vide and vacuum sealers
  • Strong debut performance in the UK market from Sage and plans the expand into Brazil

Breville’s revenue increased 11.3 per cent to $541.6 million in the year ended June 30, driven by strong product launches across all markets, however overall profit was negatively impacted by the drop in revenue from its Keurig commission.

The termination of Breville’s high margin Keurig distribution business in Canada in June 2013 impacted results with the Group’s net profit after tax (NPAT) of $48.8 million down 1.9 per cent from $49.7 million and EBIT decreased by 1.6 per cent to $70.4 million (FY13 $71.6 million).

Breville Chairman Steven Fisher said, “The Group, in face of several key challenges, has delivered a result largely filling the gap created by the majority of the Keurig distribution arrangement. This is a balanced result which demonstrates the value of diversifying into new categories and geographies under our consumer focused ‘Food Thinking’ strategy.”

In Australia and New Zealand the company reported that it had grown market share under cautious consumer spending conditions.

“Despite difficult trading conditions during the year, our ANZ business strengthened its market share in the kitchen domestic appliance market and significantly outperformed its major competitors,” Fisher said.

In ANZ revenues increased by 8.6 per cent to $261.6 million, driven by strong consumer acceptance of new products launched across the Breville, Kambrook and Philips brands (personal and garment care) and co-branded Nespresso range that launched in June 2013.

EBIT for ANZ was down 9.1 per cent from $27.3 million to $24.9 million, which the company attributed to a highly competitive market place and a stronger US dollar which increased pressure on the landed cost of products. The company hopes to remedy this with selective price increases implemented part way through the second half of FY14 and a cost efficiency program.

In North America, revenue increased by 4.1 per cent to $200.2 million despite a decline in Keurig commission from $15.4 million to $1.7 million.

Full year EBIT decreased by 20.5 per cent from $37.9 million to $30.1 million mostly due to the fall in the high margin income from Keurig and lower revenue from juicing. Juicing, the company said, saw a decline in the second half of the year after two years of “exceptional growth” with consumers shifting to blending.

Shortly after the end of the financial year the group acquired the culinary division of the USA-based business PolyScience, a market leader in the sous-vide category in commercial and professional markets. The product range includes sous-vide, vacuum sealers and other complementary products such as a ‘Smoking Gun’ — which provides an alternative to traditional smoking methods. Breville said in an investor presentation that it plans to make the PolyScience products more affordable and accessible to passionate home cooks.

Soft North American trading was offset by a strong performance in the Rest of World market segment, comprised of the UK, Europe (excluding the UK), Africa, Middle East, Asia and South America.

Total revenue from this segment increased by 56.1 per cent to $79.8 million and EBIT increased by 28.8 per cent to $20.2 million, with strong orders from European strategic partners and growth in the Middle East and Asia.

The UK arm of the business, Sage by Heston Blumenthal, delivered positive earnings’ result in its first full year of operation, following its launch in May 2013.

In the outlook for the year ahead, Breville will continue to focus on its ‘Food Thinking’ strategy and commitment to investment in product development and marketing innovative products.

There are also plans to launch in Brazil with global homewares manufacturer Tramontina.

The board and management expect that broader business conditions will continue to be challenging and increasingly competitive in 2015 financial year.

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