OCF doubled to NZ$255.7m as cash conversion surged from 50.7% to 109.1%

Cash conversion (OCF / EBITDA) stepped up from 50.7% to 109.1%, pushing year-end cash to NZ$968.9m and cutting gross borrowings 53.8% to NZ$37.9m.

NPAT grew 7.7% to NZ$167.6m and PBT grew 6.8% to NZ$238.1m, with the effective tax rate broadly steady at 35.4% (prior 35.0%). The result is therefore not a tax story.

Underneath the headline, the segment mix tilted further to China & Other Asia, which now represents 68.25% of revenue (up 5.3pp). Australia and New Zealand revenue fell to NZ$317.3m and segment result dropped from NZ$93.5m to NZ$63.0m. No dividend has been declared.

OCF/EBITDA moving from 50.7% to 109.1% is a structural-looking shift, helped by an NZ$20.8m operating working-capital release: inventories fell 7.1% to NZ$179.6m (inventory days down 5.2 to 39.1) and trade debtors fell 12.1% to NZ$50.7m (receivable days down 2.1 to 11.1). FCF before lease payments came in at NZ$238.7m, or 142.4% of NPAT. This matters because the gap between NPAT growth (7.7%) and OCF growth (129.8%) is too large to repeat once working capital normalises.

Segment concentration is intensifying. China & Other Asia revenue grew 14.1% to NZ$1.1b and contributed NZ$290.1m of segment result, while ANZ revenue contracted and its result fell 32.6% to NZ$63.0m. Mataura Valley Milk revenue dropped to NZ$101.4m, although its loss narrowed. The implication is that earnings durability now depends materially on a single regulated channel.

Capital is accumulating but unallocated. Net cash deepened to NZ$931.1m and equity rose 9.3% to NZ$1.3b, yet ROE drifted slightly lower to 13.3% from 13.5%. With no dividend and capex still only 1.0% of revenue, the balance sheet is becoming progressively under-deployed.

Against the HY24 shape, the second half delivered an outsized cash-flow contribution: NZ$193.6m of H2 OCF versus NZ$62.1m in H1, while H2 NPAT of NZ$82.3m was actually slightly below H1's NZ$85.3m.

That divergence reinforces the read that H2 cash quality reflected balance-sheet movements rather than a step-up in operating earnings. What the release supports is that earnings growth was modestly positive; what it does not support is a base case for OCF holding above NZ$250m once working capital stops releasing.

The NZ$20.8m working-capital release explains roughly NZ$21m of the NZ$144m OCF improvement, with the remainder reflecting EBITDA growth plus other working-capital, tax and provision movements not separately disclosed in the supplied summary. FCF/NPAT at 142.4% is therefore not a clean run-rate; it benefits from one-off destocking and faster receivables collection, both of which are bounded.

The underlying earnings line is more sober. PBT grew 6.8% and NPAT grew 7.7%, a 0.9pp gap that is not large enough to flag tax distortion. ROE slipped from 13.5% to 13.3%, meaning the larger equity base produced marginally less return per dollar even as profits rose. Operating profit was effectively flat at NZ$202.2m versus NZ$201.2m, with EBITDA growth concentrated in items below operating profit. The durable read is single-digit earnings growth with weakening ANZ economics, partially offset by China share gains.

This briefing cannot assess the underlying volume, price and channel-mix drivers behind the China and ANZ segment movements because the supplied materials do not break out those components.