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Advance NanoTek share price on watch after mixed full year result and outlook

The Advance NanoTek Ltd (ASX: ANO) share price could come under pressure on Thursday following the after-hours release of its FY 2020 results.

How did Advance NanoTek perform in FY 2020?

For the 12 months ended 30 June 2020, the sunscreen-focused advanced materials company delivered revenue from ordinary activities of $17.97 million. This was a 46% increase on the prior corresponding period and in line with its May guidance for revenue of $18 million.

One metric that did fall short of its guidance was its profit before tax. Advance NanoTek reported a 121% increase in profit before tax to $7.46 million. This compares to the guidance of $8.4 million for FY 2020 it gave on 11 May. No explanation was given in relation to why the company hit its sales target but fell short of its profit before tax guidance.

On the bottom line, the company reported a net profit after tax of $5.3 million, which was down 44.7% on the prior corresponding period. Though, it is worth noting that FY 2019’s profit after tax was positively impacted by its decision to write back a tax benefit of $6.25 million.

FY 2021 outlook.

The increasing demand for hand sanitiser globally during the pandemic looks set to impact its sales in FY 2021. Management notes that this increase is limiting the production capacity of manufacturers for products such as sunscreens.

The company is also anticipating a gap in sales over the next three months as distributors sell down inventory. While management expects the first half to be an improvement on the first half of FY 2019, it looks likely to be down on the corresponding period in FY 2020.

Despite this, Advance NanoTek has been ramping up production and building up its inventory. Management commented: “The Board is very satisfied with this new strategy because ANO has significantly shortened delivery times-frames to five days and reduced the cashflow burden on our distributors of having to hold significant inventory in their warehouses.”

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Advance NanoTek Limited. 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 Scott Phillips.

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