Gale Pacific has reported a stronger-than-expected first half for FY26, delivering EBITDA of $5.7 million and positive operating cash flow despite challenging market conditions. Strategic restructuring and cost efficiencies are driving improved financial health.
- H1 FY26 EBITDA of $5.7 million exceeds $4 million guidance
- Operating cash flow positive at $11.6 million for the half
- Revenue down 9% due to US market softness and slow Australian retail season
- Operating overheads cut by 12%, inventory reduced by $10.6 million
- Progress on US retail partnerships and manufacturing diversification
Strategic Focus Yields Early Results
Gale Pacific Limited (ASX – GAP) has delivered a solid first half performance for FY26, with EBITDA reaching $5.7 million, comfortably ahead of the $4 million guidance issued in November 2025. This marks a slight improvement over the prior year’s first half, signalling that the company’s operational discipline and strategic initiatives are beginning to bear fruit.
Despite a 9% decline in net revenue to $82.1 million, largely driven by subdued trading conditions in the United States and a delayed start to the Australian retail season, Gale Pacific has managed to improve margins and reduce costs. The company’s focus on refining its product mix and enhancing margin initiatives in Australia has resulted in a 3.8% increase in retail margin dollars year-on-year.
Cash Flow and Cost Management
One of the standout features of the half-year results is the strong cash flow generation. Operating cash flow was positive at $11.6 million, a remarkable $14 million improvement compared to the previous year. This was supported by a significant reduction in inventory levels, which fell from $57.8 million to $47.2 million, reflecting tighter working capital management.
Operating overheads were slashed by $3.8 million or 12%, with underlying costs down $2.1 million after adjusting for one-off expenses from the prior year. These savings come amid inflationary pressures, underscoring the company’s commitment to productivity and efficiency improvements.
Progress in the US and Global Expansion
Gale Pacific continues to navigate a challenging US market, where tariff uncertainties and weaker retail demand have weighed on revenue. However, the company has made promising strides, including the potential signing of a new national retail customer and an expanded product range with an existing partner. The US operating model restructure, which included a 24% headcount reduction, is beginning to deliver benefits.
On the global front, the company has launched new digital platforms tailored to different markets, such as coolaroousa.com for the US retail segment and galecommercial.com for commercial customers. A harmonised global consumer site, coolaroo.com, is slated for launch soon, aiming to unify the brand’s digital presence.
Manufacturing Diversification and Outlook
Gale Pacific is actively diversifying its manufacturing footprint beyond China, with new supply chain leadership based in Melbourne accelerating this transition. The company is establishing HDPE knitting and final assembly capabilities outside China while improving productivity in its existing Chinese operations to maintain sustainability.
Looking ahead, CEO Troy Mortleman expressed cautious optimism. While acknowledging ongoing challenges in the US and Australia, he highlighted the company’s improved mix, lower costs, and strong cash conversion as foundations for future growth. The focus remains on disciplined execution of strategy and continued efficiency gains through FY26.
Bottom Line?
Gale Pacific’s disciplined execution and strategic shifts have set a foundation for resilience, but market uncertainties warrant close watch.
Questions in the middle?
- Will Gale Pacific secure the anticipated new US national retail customer in H2 FY26?
- How will ongoing US tariff policies impact Gale’s revenue and margins going forward?
- What progress will be made in diversifying manufacturing outside China and its cost implications?