Keeping operations lean to prepare for slower growth and high cocoa prices
- FY23 top and bottom line slightly missed expectations on slower than expected growth and lower than expected gross margin
- 2H23 revenue came in weaker than expected on continued softness in Indonesia consumer sentiment and muted pre-election stimulus in Indonesia
- Gross margins fell by 2% point, which the company attributed to higher promotional spend in light of intensifying competition
- Declared 1.74 UScts final dividend, translating to dividend yield of 5.6% and payout ratio of 57%; Recommendation & TP under review
What’s New
Delfi’s FY23 revenue of US$538m was 3% below our estimates of US$556m. This was largely due to a weak 2H23 as Indonesia consumers continue to face living costs headwinds and the pre-election stimulus was relatively muted. Net profit of US$46m also came in 4% below estimates of US$48m largely on lower gross margin slightly offset by more optimized spending on distribution and administration expenses. Gross margin fell by 2% point y-o-y from 30.5% to 28.5%, which the company attributed to higher promotional spend in light of increased competition. The company declared 1.74 UScts final DPS, bringing full year DPS to 4.32 UScts, representing 5.6% yield. Payout ratio of 57% came in lower than our expectation and FY22’s ratio of 60%.
Our views
While we see headwinds in terms of record high cocoa price and soft consumer sentiment in Indonesia heading into 2024, we also see bright spots in its distribution cost optimization, which fell to a low of 10.4% of 2H23 revenue. The company continues to have a strong balance sheet with net cash of US$26.7m and strong cash flow generation, which should support current level of dividend payout. Recommendation and TP under review.