Freedom Foods sales, earnings buoyed by health foods and drinks
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Rory Macleod expects sales to rise 45 per cent this year, underpinned by demand for plant-based and allergen-free food and beverages. Peter Braig
by Sue Mitchell
Booming demand for allergen-free breakfast cereals, soy and almond milk, and sports supplements is underpinning strong sales growth at Australia's largest health foods manufacturer Freedom Foods.
The company, which makes a range of cereals, snacks, dairy and plant-based drinks under the Freedom, Australia's Own Organic, Goodness Superfoods and Arnolds Farm brands, expects sales to rise 45 per cent this year to about $380 million.
The Sydney-based food and beverage manufacturer firmed up its full-year sales guidance after reporting a slightly weaker than expected 34 per cent fall in December-half net profit to $2.95 million.
Freedom shares, which have risen 28 per cent since October, rose another 3¢ to $5.20 on Tuesday.
The company's market value is now more than $1 billion and it would be worth even more had it not sold its 18 per cent strategic stake in the A2 Milk Company in late 2015 for about 80¢ a share, a fraction of A2's current value of $12 a share.
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While underlying earnings before interest, tax, depreciation and amortisation rose 28 per cent to $16 million, bottom-line profit was crimped by a series of one-off costs, including $4.8 million to close the Taren Point beverage facility in Sydney and shift production to Freedom's UHT beverage facility at Ingleburn, where capacity was upgraded last year.
The result also included a pre-tax gain of $3.3 million on the $75 million sale and lease back of the Ingleburn site last November.
Sales for the six months ending December rose 29 per cent to $159.6 million, with double-digit growth in cereals and snacks, plant-based beverages, dairy products and seafood, augmented by the acquisition last May of Vital Strength nutritional supplements.
Freedom Foods is the largest supplier of almond milk to Australian supermarkets through the Blue Diamond Almond Breeze brand and new chilled almond milk brand AO.
It also makes So Natural and Vitalife soy and dairy drinks and owns Brunswick and Paramount seafoods.
Freedom now expects full-year sales to reach the top of its previous guidance range of $360 million to $380 million – compared with $262 million in 2017.
The company issued no firm profit guidance, but managing director Rory Macleod expects the strong sales growth to flow through to better margins and earnings in the June half.
"The full benefit of this growth and capital expenditure initiatives is expected to further grow sales and earnings into 2019 and beyond," Mr Macleod said.
Freedom launched a new dairy range, Australia's Own Dairy, including an A2 protein milk, and is adding further capacity for new products such as drinking yoghurt and to meet increased demand for UHT products in Australia and overseas.
It is also investing in sales and distribution to develop new channels in food service, south-east Asia, the Middle East and the US, and leveraging its dairy capabilities to build a new nutritionals unit, which will develop branded high-margin nutrition products.
In January Freedom restructured its business operations in North America, establishing a partnership with North American group AFT Holdings to accelerate sales of cereals and snacks, including the Barley+ range, Messy Monkey childrens snacks and MilkLab "coffee milk".
Freedom increased its interim dividend to 2.25¢ from 2¢ previously, payable on April 30.
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