DGL Group projects a challenging FY25 with profits down sharply despite steady revenue, as it undertakes major cost realignment and operational integration to set the stage for future growth.
- FY25 revenue expected slightly above FY24 despite industrial softness
- EBITDA forecast down 15%-20%, underlying net profit after tax down 55%-65%
- Cost pressures from employee, premises, and depreciation expenses
- Closure of lead acid battery recycling plant and consolidation of manufacturing sites
- Major systems integration underway with benefits anticipated in FY26
FY25 Financial Outlook Amid Industry Headwinds
DGL Group Limited (ASX:DGL) has released a cautious business update for the fiscal year 2025, revealing a mixed performance shaped by broader industrial softness in Australia and New Zealand. While revenue is expected to edge slightly higher than the previous year, profitability metrics tell a more sobering story. The company anticipates a 15% to 20% decline in EBITDA and a steep 55% to 65% drop in underlying net profit after tax compared to FY24.
These declines are attributed primarily to rising costs, including higher employee expenses, premises overheads, and depreciation charges. Despite these challenges, DGL reports improved profitability in the second half of FY25, signaling early benefits from ongoing operational adjustments.
Strategic Realignment and Operational Integration
CEO Simon Henry underscores FY25 as a pivotal year in DGL’s transformation journey. The company is aggressively pursuing consolidation of its extensive acquisitions, 30 businesses since its 2021 IPO, while implementing group-wide management, financial, and logistics systems. This integration aims to enhance productivity, reduce costs, and unlock organic growth opportunities.
Significant investments are underway to replace outdated premises with larger, more efficient facilities across key regions including Victoria, New South Wales, Queensland, and New Zealand. These moves, while increasing short-term costs, are designed to deliver economies of scale and improved operational efficiency in the medium term.
Segment Performance and Cost Rationalisation
Within manufacturing, DGL’s chemical formulation operations, particularly in crop protection and automotive sectors, have outperformed expectations. However, the AdBlue business has faced margin compression due to normalized market conditions and heightened competition. In response, production lines have been consolidated to reduce unit costs.
The environmental division continues to struggle, notably with lead acid battery recycling. Rising acquisition costs for used batteries have rendered some operations uneconomical, prompting the closure of the Laverton plant in Victoria. The company will maintain recycling activities at its larger Unanderra facility, which is also the site of a major liquid waste treatment plant nearing completion. This new plant, expected to commence operations in late H1 FY26, will significantly expand DGL’s processing capacity.
Looking Ahead – Investment Today for Tomorrow’s Gains
DGL’s extensive system upgrades, including ERP, finance, logistics, and HR platforms, are on track to consolidate over 30 standalone systems by year-end. While these initiatives require substantial upfront investment and management focus, the anticipated payoff includes cost savings, enhanced customer service, and improved operational agility.
Overall, FY25 represents a year of transition for DGL, balancing short-term profit pressures against strategic investments aimed at securing a stronger, more efficient business foundation. The company’s ability to execute on these plans will be critical to restoring growth momentum and shareholder confidence.
Bottom Line?
DGL’s FY25 challenges set the stage for a critical turnaround phase, with FY26 poised to reveal the true impact of its transformation efforts.
Questions in the middle?
- How will DGL’s cost realignment efforts translate into profitability improvements in FY26?
- What competitive pressures remain in the AdBlue and environmental recycling segments?
- Can the new liquid waste treatment plant at Unanderra drive significant revenue growth?