Following an exceptionally strong FY15, H1 16 brought La Doria (LON:LDOEUR) a perfect storm of a weak macroeconomic backdrop in many end-markets, sterling devaluation, a weak tomato campaign and higher fruit and pulse costs. Management has therefore updated its rolling three-year plan for the more challenging environment and revised down estimates. Our DCF-derived fair value moves to €10.91/share (from €15.84) given the downgrades to estimates.
Challenging H1 results and storm clouds ahead
H1 results were characterised by generally lower sales prices across all products with the exception of the fruit line, lower volumes for the sauces and juices segments (stable volumes for other categories) and sterling devaluation. The outlook is challenging, as the macroeconomic environment remains tough, with deflation in a number of markets. This will have an effect on operating leverage, as the reduction in selling prices will not be fully offset by the reduction in production costs. Sterling devaluation will also take its toll as 50% of revenues stem from the UK business, but most costs are euro and US dollar-denominated.
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