One of the major surprise with this company : the organic growth.
For H1 22, revenue had an organic growth of 29 % yoy.
This is much more than my initial expectations after reading their prospectus.
I still try to understand the main sources of such a growth.
Looking at company's presentations :
- continuing trend in onshoring (customers are buying more local production and also tend to have a higher level of stock),
- customers forward ordering and implementing long term supply planning.
They also probably had a good growth with the agriculture sector (main sector for them, representing 34 % of revenues) given the good results of agriculture related companies.
Lastly, they had a strong growth for their environment solution division : + 67 % yoy, while none of their H1 22 acquisitions were related to this division. Interesting also because this division has the highest margin (15.6 % during H1) and highest return on assets.
This growth for the environment division is also much higher than the prospectus forecast when the company was expecting a revenue growth of 13 % for this division in FY 22. Good also after 2 disappointing years in FY 20 (- 3 %) and FY 21 (+ 2 %) for the environment division.
Main reason I could find : DGL has successfully commissioned the VIC lead smelter in June 21 and the smelter's performance has exceeded management expectations.
Overall, the company looks much more solid than the initial impression given by their prospectus in May 21.
2 examples :
- at that time, they were expecting a two year CAGR (for FY 20-22) of 7.9 % per year.
Obviously, they are much above this level with + 29 % during H1 22 (even if this level does not seem sustainable),
- in their prospectus, they were also indicating that "DGL does not have formal long term written contracts in place with a number of its customers (including for key existing relationships)".
During H1 22, DGL was indicating that customers are now implementing long term supply planning.
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