DGL Group reported a modest revenue increase in FY25 but faced a sharp decline in profitability, compounded by an auditor’s disclaimer and ERP rollout delays impacting FY26 start.
- FY25 revenue up 3% to $481.5 million
- Underlying EBITDA down 19% to $52.1 million
- Statutory net loss of $27.9 million due to operational challenges
- Auditor issued disclaimer of opinion on FY25 financials
- ERP system implementation delays affecting FY26 early performance
Financial Performance and Auditor Disclaimer
DGL Group’s FY25 financial results reveal a company navigating a complex landscape of operational pressures and strategic transformation. While revenue edged up 3% to $481.5 million, underlying earnings before interest, tax, depreciation and amortisation (EBITDA) fell sharply by 19% to $52.1 million. The statutory net loss widened dramatically to $27.9 million, a 295% decline from the prior year’s profit.
Adding to investor uncertainty, the company’s auditor issued a disclaimer of opinion on the FY25 financial statements, signaling significant concerns about the reliability of the reported figures. This development underscores the challenges DGL faces in restoring confidence and transparency.
Operational Challenges and Market Pressures
The profit slump reflects a confluence of headwinds. Increased price competition in the lead acid battery segment inflicted material operational losses, while demand softened in the mining chemicals sector. Inflationary pressures drove up people and occupancy costs, and the transition to larger warehouse facilities resulted in duplicated lease expenses. Non-cash write-downs on goodwill and redundant equipment further weighed on the bottom line.
Despite these setbacks, segments like crop protection, chemical manufacturing, and logistics showed resilience, supported by capacity expansions and acquisitions. The logistics division notably grew revenue by nearly 28% year-on-year, benefiting from new warehouse and fleet capacity.
Strategic Responses and FY26 Outlook
In response, DGL is aggressively pursuing cost reductions, including closing its lead recycling operations in Laverton, Victoria, which was sold post-year-end. The company is consolidating sites, reducing headcount, and investing heavily in a group-wide ERP system aimed at streamlining operations and cutting administrative overheads by eliminating over 30 legacy systems.
However, the ERP rollout has caused production and order fulfillment delays in early FY26, resulting in a slow start with revenue and EBITDA trailing last year’s levels. Management expects to recover most of the delayed sales by mid-year and anticipates a stronger second half, consistent with historical seasonal trends.
Looking ahead, DGL plans to reinvest cash flow into growth initiatives, particularly expanding manufacturing capacity for crop protection and automotive chemicals, and commissioning a new liquid waste treatment plant in New South Wales. The company remains focused on integrating acquisitions and improving productivity across its divisions.
Regulatory and Market Implications
With the auditor’s disclaimer still unresolved, DGL is working to address audit issues and regain ASX quotation, a critical step for restoring investor trust. While this regulatory hurdle does not affect day-to-day operations, it casts a shadow over the company’s financial transparency and market perception.
Investors will be watching closely how effectively DGL manages its ERP implementation, cost control measures, and market recovery efforts in FY26. The company’s ability to stabilize profitability while navigating these challenges will be key to its medium-term prospects.
Bottom Line?
DGL’s path to recovery hinges on resolving audit concerns and delivering on operational improvements amid a cautious market backdrop.
Questions in the middle?
- How will DGL resolve the auditor’s disclaimer and restore ASX listing status?
- Can the ERP system rollout deliver promised efficiencies without further disrupting operations?
- What is the outlook for lead acid battery recycling and mining chemical demand going forward?