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Why the Asaleo Care Ltd share price is rocketing today

The share price of Asaleo Care Ltd (ASX: AHY) has surged around 7% by lunchtime today after the company behind personal care and hygiene brands including Sorbent, Libra and Handee announced a bumper set of full year financial results.

Here are the highlights:

  • Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) grew 3.1% to $145.2 million
  • Underlying net profit after tax grew 5.3% to $76.1 million
  • Underlying earnings per share (EPS) jumped 12% to 13.4 cents per share (cps) thanks to the benefits of an on-market buy-back
  • A final unfranked dividend of 6 cps has been declared; total dividends for the full year are 10 cps which implies a yield 5.9%

Outlook for 2016

Management was cautious in its outlook statement noting that the company faced significant headwinds from a weaker Australian and New Zealand dollar which would impact pulp costs. Guidance for mid-single digit underlying EPS was given.

Asaleo is backed by market leading brands with high levels of customer recognition. Like fellow fast moving consumer goods (FMCG) brand owner and manufacturer Ansell Limited (ASX: ANN). Asaleo must also contend with exchange rate movements and commodity input price fluctuations. These can act as substantial headwinds at times but also tailwinds at other times.

While its growth potential certainly isn’t as exciting as some other consumer staple sector peers such as Blackmores Limited (ASX: BKL), with a market cap of around $1 billion and a suite of everyday essential branded FMCG products, Asaleo should offer investors a defensively positioned investment option for their portfolio.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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