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Welbilt releases first set of results since accepting Ali Group bid

Welbilt

Foodservice equipment manufacturer Welbilt has revealed a positive set of second quarter financial results.

The firm is in the process of being acquired by the Ali Group, after an industrial battle with Middleby Corp to do so, and it looks like the Italian conglomerate is buying out a company in good health.

Welbilt’s net sales increased 92% to $395.6m in the second quarter of 2021, compared to last year’s second quarter.

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Excluding the impact from foreign currency translation, organic net sales increased 86%, with strong growth coming from large chain customers, general market dealers and distributors, and KitchenCare master parts distributors and factory-authorised service dealers. This growth is compared against last year’s historically weak second quarter which was highly impacted by the Covid-19 pandemic.

Earnings from operations were $50.2m compared to $0.7m in the prior year; as a percentage of net sales, earnings from operations were 13% compared to 0.3% in the prior year. While net earnings were $23.7m compared to a net loss of $17.4m in the prior year.

Net selling, general and administrative costs were higher, primarily from increased compensation expense and commissions, reflecting both the higher incentives and the non-recurrence of some of the measures Welbilt took in the second quarter a year ago in response to the impact from the pandemic. The prior year period included temporary salary reductions, furloughs, reductions in incentive compensation and lower commissions due to the large sales decrease in the quarter.

Welbilt also reported it continued to make progress on its ‘transformation program’ during the second quarter. It continued to execute its planned procurement activities related to materials spend and on executing incremental cost savings opportunities through the implementation of ‘value analysis value engineering’ initiatives, although it acknowledged it faced challenges in balancing progress on these activities with the need for resources to address component supply issues.

The company said it also delivered productivity improvements in its manufacturing plants which provided additional savings in the quarter, even as some plants were impacted by parts shortages that impacted production schedules. It has completed the majority of the planned consulting spend related to the transformation program and expects minimal additional spend going forward.

Summarising Welbilt’s second quarter performance, Bill Johnson, president and CEO, stated: “Second quarter third-party net sales and organic net sales grew substantially this quarter compared to last year’s second quarter, which marked the worst quarter we experienced since the beginning of the Covid-19 pandemic.

“We are very pleased with our strong adjusted operating EBITDA and adjusted operating EBITDA margin performance despite the inflationary impacts from our supply chain and logistics providers. We successfully offset these headwinds with the beneficial impact from increased volume, positive net pricing, and improved productivity attributable to the improvements we have made to date as part of our business transformation program and through the cost containment actions we put in place last year that are continuing to benefit us.

“Industry conditions are improving with the rollout of Covid-19 vaccines and the lifting of restrictions in some locations, although improvements are uneven globally. We are building inventory and capacity to respond to our growing order pace and will adjust our costs and investments accordingly. Finally, we are pleased with our second quarter free cash flow generation, which allowed us to both increase cash and reduce total debt in the quarter.”

Johnson added: “In the Americas, sales to strategic QSRs and fast casual operators increased over last year with improved demand for replacement equipment and stronger rollout activity by large chains across many of our brands. General market sales turned positive for the first time since the pandemic began and KitchenCare aftermarket sales increased in the Americas.

“Both EMEA and APAC also saw year-over-year growth from strategic QSRs, general market dealers and KitchenCare aftermarket customers. We believe overall demand, while still negatively impacted by the Covid-19 pandemic, will continue to improve over the next several quarters as public health orders and other restrictions are lifted and the rollout of Covid-19 vaccines accelerates in more regions globally, giving both consumers and operators more confidence and driving a gradual recovery in commercial foodservice end markets.”

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Andrew Seymour

The author Andrew Seymour

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