TasFoods Limited - Q2 2024 Business Activity Report and Cash Flow
TFL (TFL) Share Update July 2024 Thursday 25th
TasFoods Reports Mixed Q2 2024 Results Amid Economic Challenges
TasFoods Limited (ASX:TFL) has released its Business Activity Report and Appendix 4C Quarterly Cash Flow for the quarter ended 30 June 2024, revealing a mixed performance amid ongoing economic challenges.
Instant Summary:
- Gross margin for the Group remained flat compared to the prior comparable period (PCP).
- Poultry division's gross margin also remained flat on the PCP.
- Pyengana Dairy cheese revenue increased by 2% on the PCP.
- Isle & Sky pet treats range continues to grow with increased domestic distribution.
- Corporate office costs reduced by $0.9m on the PCP.
- Total revenue for Poultry decreased by 3% compared to the PCP.
- Closing cash on hand balance of $0.5m, excluding $1.54m of undrawn working capital facilities.
Operational Update
TasFoods continues to focus on its poultry business, aligning its sales mix with consumer consumption patterns. Poultry remains the highest consumed protein by volume in the Australian market. However, the company faced a 3% revenue decrease in its Poultry division due to increased competition from imported mainland poultry, leading to lower wholesale prices in Tasmania.
Despite these challenges, the Isle & Sky pet treats range continues to perform well, resonating with consumers seeking premium, all-natural pet treats. The company is confident in the growing demand within this segment as the 'humanisation' of pets trend continues.
Financial Update
For Q2 2024, TasFoods recorded a total revenue decrease of 1.6% to $11.3m, reflecting the current economic climate and tightening household spending. The Poultry business saw a 7% increase in direct labor costs compared to the PCP, which has been partially passed on to customers. However, full cost recovery remains challenging given the sensitivity of household budgets.
The company ended the quarter with a closing cash balance of $0.5m, excluding $1.54m of undrawn working capital facilities. Cash receipts from customers of continued operations were $11.8m, a 6% decrease on the PCP. Net operating cash flows from continued operations improved by $0.8m compared to the PCP.
Outlook
The detection of avian influenza across mainland states has not directly impacted TasFoods' operations. The company continues to supply local and mainland markets while following strict biosecurity measures. TasFoods remains focused on offering value options at an affordable price amid reduced household budgets and a tightening labor market.
Management is actively reviewing and implementing operational and strategic initiatives to establish a more resilient business model. The company is confident these initiatives will allow its Poultry and Cheese business units to adapt to market conditions and deliver sustainable financial performance moving forward.
The flat gross margins and slight revenue decrease reflect the challenging economic environment. The increased competition in the Poultry division and higher labor costs are notable concerns. However, the growth in the Isle & Sky pet treats range and the reduction in corporate office costs are positive signs. Investors may have mixed reactions to these results, with some focusing on the challenges and others on the growth opportunities.
Investor Reaction:
Analysts have noted the mixed performance, highlighting the challenges in the Poultry division and the positive growth in the pet treats segment. Investor reactions are expected to be varied, with some expressing concern over the economic challenges and others optimistic about the company's strategic initiatives.
Conclusion:
Investors should monitor TasFoods' strategic initiatives and their impact on the company's performance. The growth in the pet treats segment and the focus on operational efficiency are positive signs. However, the economic challenges and increased competition in the Poultry division remain key concerns. Staying informed on TasFoods' progress will be crucial for making informed investment decisions.