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Yowie Down 37% for the Year: What you Need to Know

Yowie Down 37% for the Year: What you Need to Know
Yowie is a renowned Australian confectionary brand that has its presence in the USA, Canada and Mexico.
Mar 01, 2016 By Simon Herrmann Tags: YOW

Yowie Group Limited (ASX:YOW) is a renowned Australian confectionary brand that has its presence in the USA, Canada and Mexico. Recently the company reported 1094% revenue growth in the first half of FY16 period. The stock has gained 16% in the last year, however it is down more than 37% in 2016.

Loss Widened in 1H16

The confectionary company announced in September 2015 that its products will be rolled out in more than 4300 Walmart stores in the USA. Subsequent to the alliance with Walmart, the company recorded strong sales growth of 1094% to US$5.7 million.

The company also recorded positive cash flow from operations of US$2.06 billion, attributed to the product rollout in the US markets and a successful stock management during the period.

However, the net loss after tax widened 189% over the previous corresponding period to $2.6 million. The bottom line result was weakened by foreign exchange losses and non-cash items for share-based-payment expenses coupled with depreciation and amortisation of its assets.

The company has also reclassified its intercompany loans to be included in its net investment in the foreign operations segment. Through this change, the company aims to remove any unrealised foreign exchange gains or losses arising from the intercompany loan balance. From the forthcoming period, these unrealised gains and losses will only have an effect on the company’s foreign exchange translation reserve within the ‘other comprehensive income’ segment.

Manufacturing Facility Relocated

The company further expanded its contracted manufacturing capacity in the USA by entering into a long term manufacturing agreement with New York based Madeleine Chocolate Company (M.C.C). Yowie plans to use its own capsule design while manufacturing at the Madelaine facility and discontinue the use of the Whetstone capsules design after 31 December 2015. This initiative is aimed at delivering lower input costs, automated processing and an improved ease of opening the product capsule.(capsule can be interpreted as a cover or wrapper on candies).

The group has also taken legal action to support its rights to remove its raw materials and wrapping materials from the Whetstone facility. An impairment charge of US$53,613 was recorded to impair costs associated with the initial set-up, instillation and commissioning of wrapping machine.

Yowie announced today that it has relocated its wrapper machinery from the Whetstone Manufacturing facility into M.C.C. The group’s Executive Chairman commented on the legal action taken against Mr. Hank Whetsone, the owner of the previous facility: “In a separate notice Mr. Whetstone has been instructed by lawyers acting on behalf of the company to cease using the Yowie brand, product or Yowie related raw materials in advertising for his manufacturing facility and services.”

The Chairman further added that the installation and commissioning of the unused spare wrapper at M.C.C is anticipated to commence on 10 March 2016.

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Simon Herrmann Author: Simon Herrmann Mar 01, 2016

Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.

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