New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Sanford (SAN) 1H22 Result Initial Impressions</h2>
Improving market conditions have seen pricing and demand lifting across most categories driving strong performance gains in Sanford’s (SAN) FY22 interim result, with revenue up +16% and underlying EBIT +80% against the prior period, albeit supply chain and labour related challenges during the period saw underperformance against our estimate, with underlying EBIT at $19.2m vs our $22.1m forecast.
Guidance for the full year result was not provided by the company. Prior to this result, full year FY22 consensus forecasts were NZ$518m revenue and NZ$35m EBIT (our estimate currently NZ$40m).
Key Takeaways
<ul>
<li>Foodservice: Whilst volumes were largely flat for the group, revenue increased +16% on the prior period, reflecting the highly anticipated foodservice demand recovery which is now slightly above pre-pandemic levels.</li>
<li>Margins: With foodservice typically having higher margins, EBIT/kg improved to NZ$0.39 from NZ$0.19 in the prior period (+105%), this translated to a +80% uplift in underlying EBIT from $10.7m to $19.2m.</li>
<li>Supply Chain: SAN flagged in its February 2022 update (1Q22) that supply-side pressures including labour and shipping were ongoing. Processing bottlenecks caused by domestic labour shortages delayed mussel recovery (division revenue -8.4% below our estimate).</li>
<li>Debt: Marginal reduction in net debt to NZ$176m from NZ$179m due to strong operating cash flows.</li>
<li>Dividend: No interim dividend, but SAN has signalled commitment to a modest final dividend.</li>
</ul>
Financials
<ul>
<li>Revenue underperformed our forecasts at NZ$148.8m vs our NZ$157.5m (-5.5%) largely due to wildcatch and mussels divisional performance.</li>
<li>Underlying EBIT also underperformed against our forecast at NZ$19.2m vs our NZ$22.1m (-13.1%) where improved margins were offset by rising costs.</li>
<li>CAPEX for the first half was NZ$24m with company previously guiding to NZ$50m for the full year (no update with this result).</li>
</ul>
1H22 result summary (NZ$m)
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/275/302/original/image_90281378161652923486676.png?1652923486" class="editor-image img-responsive" data-smartkarma-image-id="275302"></figure>
Source: SAN, Forsyth Barr analysis

Sanford (SAN) 1H22 Result Initial Impressions
Improving market conditions have seen pricing and demand lifting across most categories driving strong performance gains in Sanford’s (SAN) FY22 interim result, with revenue up +16% and underlying EBIT +80% against the prior period, albeit supply chain and labour related challenges during the period saw underperformance against our estimate, with underlying EBIT at $19.2m vs our $22.1m forecast.
Guidance for the full year result was not provided by the company. Prior to this result, full year FY22 consensus forecasts were NZ$518m revenue and NZ$35m EBIT (our estimate currently NZ$40m).
Key Takeaways

Foodservice: Whilst volumes were largely flat for the group, revenue increased +16% on the prior period, reflecting the highly anticipated foodservice demand recovery which is now slightly above pre-pandemic levels.
Margins: With foodservice typically having higher margins, EBIT/kg improved to NZ$0.39 from NZ$0.19 in the prior period (+105%), this translated to a +80% uplift in underlying EBIT from $10.7m to $19.2m.
Supply Chain: SAN flagged in its February 2022 update (1Q22) that supply-side pressures including labour and shipping were ongoing. Processing bottlenecks caused by domestic labour shortages delayed mussel recovery (division revenue -8.4% below our estimate).
Debt: Marginal reduction in net debt to NZ$176m from NZ$179m due to strong operating cash flows.
Dividend: No interim dividend, but SAN has signalled commitment to a modest final dividend.

Financials

Revenue underperformed our forecasts at NZ$148.8m vs our NZ$157.5m (-5.5%) largely due to wildcatch and mussels divisional performance.
Underlying EBIT also underperformed against our forecast at NZ$19.2m vs our NZ$22.1m (-13.1%) where improved margins were offset by rising costs.
CAPEX for the first half was NZ$24m with company previously guiding to NZ$50m for the full year (no update with this result).

1H22 result summary (NZ$m)

Source: SAN, Forsyth Barr analysis

Sanford (SAN): 1H22 Result Initial Impressions

Sanford Limited

Sanford (SAN): 1H22 Result Initial Impressions