DGL (ASX:DGL) share price rockets 10% on surging profits

The chemical manufacturer and waste recycler reported its FY21 results this morning.

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The DGL Group Ltd (ASX: DGL) share price is rocketing higher, up more than 10% at time of writing after earlier posting gains of more than 14%.

DGL Group began trading on the ASX on 24 May, following a successful IPO.

Below we take a look at the chemical manufacturer and waste recycler's financial results for the year ending 30 June (FY21).

DGL share price surges on FY21 results

Some top results likely boosting the DGL share price this morning include:

  • Pro-forma sales revenue of $196 million, an increase of 9% from FY20 and 3% higher than prospectus forecast
  • Pro-forma earnings before interest, taxes, depreciation and amortisation (EBITDA) increased 47% year-on-year to $28.1 million, 8% higher than prospectus forecast
  • Pro-forma net profit after tax (NPAT) of $11.3 million increased 135% on the prior year and came in 19% more than prospectus forecast
  • Net cash of $43.8 million on the balance sheet

What happened during the reporting period for DGL Group?

Undoubtedly the biggest happening for DGL during the financial year was its successful initial public offering. The IPO saw the company raise $100 million before it began trading on the ASX on 24 May.

FY21 also saw DGL acquire the Chem Pack manufacturing business in January to expand its Chemical Manufacturing division's capabilities. The company reported Chem Pack has now been successfully integrated into its wider business.

DGL said revenue increased across all 3 of its divisions year-on-year.

The Chemical Manufacturing division revenue increased 3% to $97.3 million. It attributed the growth to an increase in demand for chemicals from a strongly performing agriculture sector along with growth from its acquisition of the Chem Pack business. While this came in below the prospectus forecast of $104 million revenue for the division, DGL said that forecast assumed a full year contribution from Chem Pack.

The Warehousing and Distribution division saw revenue increase by 48% to $40.9 million, well above the prospectus forecast of $31.8 million. Revenue increased largely due to a higher utilisation of its warehousing facilities in Australia and New Zealand.

There was also a 2% increase in revenue from the Environmental Solutions division, to $63.4 million, compared to a prospectus forecast of $59.2 million. The company recommenced operations of its refurbished Victorian lead smelter "ahead of schedule and on budget". This saw more lead bullion output than it had forecast.

What did management say?

Commenting on the results, DGL's founder and CEO Simon Henry said:

This year has been a transformative year for DGL, listing on the ASX and welcoming new shareholders to our business, while raising $100 million to fund growth initiatives into the future.

I am very pleased we have been able to deliver on our initial promises, as set out in the prospectus, both at an operational level and financial level. Pro-forma net profit after tax was 19.4% higher than we had originally estimated in our prospectus…

We will continue to use funds from the IPO, as well as the strong cash generation of our business, to pursue growth opportunities…The diverse industries we service — agriculture, mining, construction and infrastructure – have positive long-term outlooks. We are an essential business serving these critical sectors.

What's next for DGL?

Looking ahead, DGL said it expects to beat prospectus forecasts for FY22. The pro-forma NPAT forecast for FY22 is $10.4 million while the pro-forma EBITDA forecast is $29 million.

Henry noted that these don't "include the revenue and profit contribution from recently acquired businesses, Labels Connect and Opal Australasia, and favourable trading conditions experienced to date".

The company said it has not been materially impacted by COVID-19 lockdowns to date.

The DGL share price is up 136% since the company began trading on the ASX on 24 May.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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