TFS bullish despite lower profit

Nedlands-based sandalwood producer TFS Corporation has pointed to solid growth in cash revenue and underying earnings to support a positive outlook for the business, despite reporting a fall in net profit after tax.

TFS generated a net profit of $90.1 million for the 2016 financial year, down 20.2 per cent from its $113 million result in FY15, on the back of lower foreign currency exchange gains.

The company also reported a 17.3 per cent drop in revenue to $268.8 million, reflecting a fall in non-cash revenue such as revaluation of plantation assets.

Earnings before interest, tax, depreciation and amortisation also fell 13.8 per cent to $163.1 million.

The company declared a final dividend of 3 cents per share, fully franked.

In a statement, TFS said the lower profit result was mainly due to a reduction in non-cash revenue that was driven by a lower unrealised foreign currency gain of $19 million, compared with $55.7 million achieved in the prior year.

Managing director Frank Wilson said the company had achieved its priorities set out for FY16, placing it for a transformational FY17.

“We have achieved our financial targets, entered into major supply agreements, recently completed our biggest harvest of more than 32,000 trees, and successfully refinanced our debt,” he said.

“The 2016 harvest is on track to deliver more than 300 tonnes of heartwood, a 10-fold increase on the 2015 harvest.

“With multiple supply agreements for our Indian sandalwood locked in at attractive prices, this harvest will enable TFS to deliver strong growth in cash earnings in FY17.”

TFS expects to increase cash Ebitda by at least 25 per cent this financial year.

Shares in TFS were 0.8 per cent lower to $1.70 at the close.