DGL Reports 5.8% Revenue Decline and $12.8m Statutory Loss in H1 FY26

Audit Qualification Clouds Financials

DGL Group’s half-year results for the six months ending December 2025 were overshadowed by a modified audit opinion related to inventory valuation, following a disclaimer of opinion on the FY25 annual accounts. This qualification introduces a layer of uncertainty around the reported figures, notably impacting investor confidence. The company’s statutory net loss widened sharply to $12.8 million, compared with a $2.2 million loss in the prior corresponding period, largely due to $16.9 million in non-cash write-downs including impairments in its Environmental division and held-for-sale chlorine plants.

Revenue and Earnings Under Pressure Amid Operational Challenges

Revenue slipped 5.8% to $225.2 million, reflecting the sale of the loss-making Laverton used lead-acid battery (ULAB) recycling plant in Victoria and ongoing scarcity of used lead-acid batteries, a key input. Underlying EBITDA also fell 5% to $24.7 million. The company flagged production delays tied to the rollout of a new ERP system early in FY26, which disrupted manufacturing output and weighed on earnings. Despite these setbacks, gross margin improved slightly to 43.5%, driven by strong demand in the crop protection sector and manufacturing efficiency gains.

Divisional performance was mixed: manufacturing saw robust export demand for agricultural chemicals and increased AdBlue sales across Australia and New Zealand, though price normalisation pressured margins. Logistics benefited from competitor exits, boosting warehouse demand and margins, but driver shortages continued to inflate costs. Environmental services faced headwinds from battery supply issues and delayed commissioning of a new liquid waste treatment plant in NSW, now expected online by end FY26.

Strategic Investments and Cost Management in Focus

DGL is pressing ahead with strategic initiatives to bolster its core chemical logistics and manufacturing operations. The group is consolidating smaller sites into larger, more efficient facilities and divesting non-core assets, including the sale of the Laverton ULAB plant and other sites such as Seven Hills and Tomago. Proceeds from these sales have helped reduce net debt by $16.4 million to $78.2 million, improving the balance sheet and lowering gearing to 27%.

Significant investments continue in new infrastructure, including a plastic packaging recycling facility at Unanderra and an industrial battery breaker in NSW. The company is also expanding bulk on-site chemical storage and upgrading production and logistics facilities to meet evolving regulatory demands. However, these projects have incurred one-off costs and delays, notably the liquid waste treatment plant’s commissioning setback due to protracted licensing.

Cost control remains a priority, with headcount reductions and improved productivity helping to trim operating expenses by 2.5% to $76.2 million. Legal and professional fees rose due to audit-related costs and ASX suspension matters. Operating cash flow dropped 42% to $10.5 million, reflecting lower gross profit and increased working capital needs.

Outlook Tempered by Market Volatility and Supply Chain Risks

Looking ahead, DGL’s CEO Simon Henry highlighted ongoing uncertainty from global transport disruptions, commodity price volatility, and fragile economic conditions. Fertiliser price spikes and supply issues cloud the outlook for agricultural chemical demand, while the war in the Middle East adds further commodity turbulence. Nevertheless, early H2 FY26 volumes in crop protection and pest control remain strong, and demand for specialised warehousing and transport services is rising amid competitor exits and improved driver availability.

The company anticipates increased contributions from its warehouse and manufacturing capacity expansions and is focused on leveraging its integrated Trans-Tasman footprint to drive organic growth. Cost management and operational integration efforts will continue to be critical to improving financial performance in the second half.

This update follows DGL’s recent loss amid market challenges where the company detailed similar headwinds and strategic progress, underscoring the ongoing balancing act between investment and operational execution in a volatile sector.