The domestic market remains tough and is characterised by deflation. Centrale Del Latte Di Torino (MI:CLT) flat H1 revenues led to lower profitability as a result of increased brand support costs. In light of the currently challenging backdrop, management now expects flat continuing revenues for 2016. We cut our forecasts to reflect this and our fair value is reduced to €2.83/share, with no upside to the current market.
Flat H116 revenues lead to lower profitability
Total H116 revenue was flat on the previous year, but this was mainly driven by lower pricing in bulk milk and cream. Net of this, sales were up 0.8%, which demonstrates that the group’s brands are growing. That said, profitability was lower as there were increased costs associated with brand support and sales functions. In addition, there were increased maintenance costs and costs associated with the merger with Centrale del Latte di Firenze, Pistoia e Livorno (CLF).
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