The operating environment remains challenging for La Doria (MI:LDO), with sales price deflation, raw material cost inflation and Brexit continuing to feature. FY16 results were in line with expectations, and management still believes a recovery will begin in H217, when the new tomato campaign will start to come through. We roll forward our DCF to commence in 2017 and our fair value increases to €12.59 per share, from €10.99.
FY16 results
In Q4, La Doria witnessed a continuation of the trends seen in the rest of 2016, specifically a deflationary trading environment and weakening of sterling. In addition, cost inflation was a feature. As outlined in September 2016, FY15 was an exceptionally strong year, management witnessed a weakening of performance from FY16 vs FY15, and it expects a further weakening in 2017 before the recovery starts to come through. This should commence in H217 following a better 2017 tomato campaign over the summer (a drop in southern Italian tomato production in 2016 bodes well for 2017 pricing), and should come through fully in the 2018 numbers. We note FY16 performance was still good, with EBITDA margin of 8.6%.
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