Breville 1H25 Earnings Call Highlights

Breville Group (ASX: BRG) shares struggled to gain traction on Tuesday, despite the company reporting 1H25 earnings that exceeded both revenue and net profit expectations.

1H25 Earnings Summary

• Group revenue up 10.1% to $997.5 million (0.7% ahead of consensus)

• Underlying EBITDA up 11.5% to $177.6 million (1.3% beat)

• NPAT up 16.1% to $97.5 million (0.9% beat)

• Interim dividend up 12.5% to 18 cents per share (2.1% miss)

• Guided to FY25 EBIT growth of 5-10% (consensus is expecting 10%)

• Coffee segment continues to lead, ovens performing well

• Enters 2H25 with good inventory position, US trade policy is still evolving

Earnings Call Highlights

The below topics have been answered by CFO Martin Nicholas and CEO Jim Clayton.

1H25 earnings: “In the first half, 2025, we delivered double-digit revenue growth of 10.1% against a backdrop of resilient consumer demand, with sales for the half of nearly $1 billion led by the Global Products segment, growing 13% in constant currency terms.”

US trade tariff policy impact: “We made the tactical call to pull approximately $60 million of second half 2025 inventory into the US a bit earlier than normal as a hedge against potential US tariffs... We continue to adapt and adjust as facts on the ground change.”

China market performance and profitability: “Breville Sage will be moving to a direct model in China in the second half of 2025... it’s been on the to-do list for quite some time and we're happy to be putting it in the given column.”

Middle East market opportunity and profitability: “Last month, we switched to a direct model in the Middle East... Breville Sage is the leader direct has a particularly effective distribution partner. So we’re pulling them into our regional go-to-market.”

Beanz business: “To date, we have shipped over 1.3 million bags of coffee to over 145,000 customers ... In the first half of 2025, Beanz grew 71% over the first half of 2024.”

Gross margins performance and outlook: “We held our gross margin percentage steady at 36.7% and delivered 10.3% gross profit growth for an extra $34.3 million... Gross margin was slightly dampened by elevated shipping costs into EMEA and the strong US dollar.”

Consumer behaviour and patterns: “Despite inflationary pressures, freight and a strong US dollar, our gross margin percent held steady... consumer demand proved resilient in the half, resilient to cost of living pressures whether consumers were consistently more active during peak promotional periods.”

Debt position: “Net debt was comfortably below the prior period... Reduced finance costs arising from our strong cash flow in FY 2024... Our focus on geographic expansion and capital management provides funding flexibility for further investment.”

Analyst Q&A Highlights

What’s the timeline for profitability in China and the Middle East, and is this contributing to your softer profit growth outlook in the second half due to market investments?

• “No, that’s not the driver of that range... The driver is a huge uncertainty over US trade tariff policy that may be announced ... If things stay as they are, then we’d be guiding towards the top end of the range.”

• “China and the Middle East are relatively small in the short term.”

• “China may take a little bit to find its footing, but a couple of years, something like that.”

Can you share the gross transaction value from your beans business, and how should we think about its future potential and reporting?

• “I haven’t disclosed this on purpose because I don’t want you to factor it into your model.”

• “At the moment, the gross margin on the Beanz is relatively small.”

• “When this evolves into Phase 2, which will be years from now, then that will scale up and start to be material.”

Can you clarify your inventory strategy for 2025 and the impact of changing manufacturing geographies?

• "We made a tactical move to bring inventory in before tariffs, but now we are back to normal purchasing.”

• “The PP&E investment for tooling will continue into FY26.”

• “Manufacturing will be in Mexico and Southeast Asia for 120V production ... It’s SKU by SKU, so some will be produced in China and others in the alternate locations.”

Outlook on the contribution of China to the business: "So, it's bigger than a breadbox. So, yes, it is significant and material ... We're doing it. And then the actuals will be the actuals. And then we'll know what our run rate is and what our slope is."

Potential risks to second-half performance due to external factors like US tariffs

• "We're hedged against that to the extent we pulled the inventory forward ... We have the inventory that we need to deliver revenue in the second half already in the barn."

• "If you're asking me to predict the behavior of Donald Trump and what he might do on any given day, I don't have it."

Approach to new markets like China and the Middle East: "China is mostly a digital market ... we did that in Korea. The team has learned from that. And within that construct, China will be very similar to the Korean experience."

Impact of increased competition on market penetration and growth:

• "More marketing dollars in the category is a net positive for everyone. A lot of the front of the funnel activity... everybody benefited including them."

• "New entrants have taken some market share, but they haven't taken it from us. More noise, more marketing dollars is growing the market and we're holding our share or growing our share within that bigger market."

This article was generated with the support of AI and reviewed by an editor.