Release Date: September 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- DGL Group Ltd (ASX:DGL, Financial) achieved a compound annual growth rate of 32% in revenue from FY21 to FY24, reaching $465 million.
- The company expanded its capacity for storing, manufacturing, and transporting chemicals, contributing to meaningful volume growth.
- DGL Group Ltd's gross margin increased by 16% year-on-year, driven by raw material procurement benefits and improved product mix.
- The company has made significant investments in organic growth projects, internal system enhancements, and a shared services platform, expected to benefit future earnings.
- DGL Group Ltd has a strong balance sheet with significant tangible assets of $340 million, providing a solid platform for future growth.
Negative Points
- Net profit after tax decreased due to increased finance charges, depreciation, and reinvestment into shared services.
- Operating cash flows decreased from $59.3 million in FY23 to $37.3 million in FY24, impacted by higher financing costs.
- The environmental division faced challenges due to supply constraints in the Used Lead Acid Battery market, reducing utilization and gross margin.
- DGL Group Ltd experienced cost inflation in wages and insurance, contributing to increased operating expenses.
- The company is facing increased domestic competition in some industries, particularly in the environmental services sector.
Q & A Highlights
Q: There's been a $30 million increase in employee costs versus FY23. How much of that relates to the head office relocation versus within the actual operating business?
A: Frank Izzo, CFO: The overall headcount increase through shared services and acquired businesses is the predominant chunk of those costs, along with significant wage inflationary pressures.
Q: In which areas are you facing increased competition?
A: Alex Wing, COO: Predominantly in our environmental services industries, especially in the ULAB space, with increased competition in the domestic market for procuring batteries.
Q: Why was revenue flat after so many acquisitions?
A: Frank Izzo, CFO: Despite volume growth and an expanded customer base, revenue was flat due to exposure to commodity price fluctuations, particularly in cropping chemicals and technical grade urea.
Q: Is the margin expansion in FY24 sustainable?
A: Frank Izzo, CFO: We believe it is sustainable due to economies of scale and customer/product mix wins, although we remain exposed to market movements in commodity pricing.
Q: With companies such as Woodside and Fortescue investing in ammonia fuels, has DGL started to look at this?
A: Simon Henry, CEO: We are monitoring developments but will only embrace new clean technology when it is proven to be commercially viable.
Q: Why was there no audit opinion attached to the financial statements?
A: Frank Izzo, CFO: Challenges during the year, including the shared services transition and my late appointment, delayed the audit opinion, but it will be available shortly.
Q: How do you plan to defend your market share and margins?
A: Alex Wing, COO: By being a reliable provider, agile, nimble, and well-capitalized to deliver the services and materials our customers require.
Q: Is the Mt. Isa Plant a niche opportunity in regional areas that DGL can scale?
A: Simon Henry, CEO: The plant will be commissioned soon, and if profitable, we may expand further. However, we face challenges with councils and market conditions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
