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Trilogy shares down 13% after company forecasts drop

Trilogy shares down 13% after company forecasts drop in 1H ebitda but annual growth of 10%

By Sophie Boot

Sept. 28 (BusinessDesk) - Trilogy International, the scented candle and beauty products maker, says it's now selling a bottle of its flagship rosehip oil every 20 seconds and is optimistic about annual growth, despite a declining market for skincare in Australasia.

In notes from the company's annual meeting published on the NZX, Trilogy said it anticipates revenue for the six months to Sept. 30 to exceed $50 million - compared to $47.8 million in last year's first half - and earnings before interest, tax, depreciation and amortisation (ebitda) to exceed $6 million. Its 2016 first half ebitda was $7.2 million. Still, it expects annual revenue and ebitda growth to exceed 10 percent, depending on the performance of its developing market in China, as its revenue and ebitda growth typically is stronger in the second half.

Trilogy said increased costs of rosehip oil, its investment in relaunching its Ecoya brand, and margin compression from a weaker New Zealand dollar had impacted on its first-half profitability, though that has been offset by upside from its acquisition of Lanocorp.

For the year to March 31, the company posted a 19 percent gain in ebitda earnings to $19.4 million, while net profit rose 35 percent to $12.7 million, though that included a one-time gain from changing to CS & Co as distributor. Sales climbed 25 percent to $103.7 million, with CS & Co accounting for the biggest portion of the increase.

Ebitda in the company's natural products segment, mainly its Trilogy and Goodness skincare brands, rose just 2 percent to $11.8 million in the year, despite sales rising 13 percent to $38.8 million. Ebitda in home fragrance, which includes its Ecoya range, dropped to $1.8 million from $2.5 million a year earlier, though sales rose 7 percent to $21.4 million in the year.

In speech notes from the NZX, chief executive Angela Buglass said the company had seen a slowing in growth for the natural skincare category, with Australia up 2.8 percent in the year compared to 25 percent in the prior year, while New Zealand was down 9.8 percent from being up 12.5 percent in 2016. Buglass said the company was pleased to have maintained its market share despite the dynamics, with Trilogy at 30 percent in New Zealand and 13 percent in Australia.

Trilogy is working on developing its cross-border e-commerce channels into China, and "despite a volatile regulatory environment, the consumer demand for Trilogy is strong and growing via our Weibo and Wechat social media channels", with the company "far closer to the daigou market, stock and pricing on the e-commerce platforms than we have ever been", Buglass said. Because the company can trade via cross-border channels, it avoids requirements for animal testing.

The Ecoya brand was relaunched in the first half, with a new website to be launched in October which will use Shopify and AfterPay which it hopes will improve online buying. Buglass said the brand had experienced some raw material challenges in the first half, but the company expects those to "right themselves" in the second half.

The shares dropped 12.5 percent to $2.10, and have fallen 20.5 percent this year.



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