Breville Group’s half-year results

Breville Group (ASX:BRG) is a high-quality company, profitably held in the Montgomery Small Companies Fund. Breville released its half-year earnings this week – and the numbers point to a robust underlying performance. Nevertheless, investors will debate whether the guidance for the remainder of the fiscal year is deliberately conservative or signalling a more challenging road ahead.

Solid top-line momentum

Impressive revenue growth

Breville’s half-year (1H25) revenue grew 10.1 per cent and came in at nearly $998 million, above market expectations of $906 million. The company posted double-digit sales growth across its three major regions – Americas, Europe, Middle East, Africa (EMEA), and Asia-Pacific (APAC) – demonstrating the brand’s broad-based appeal. APAC proved to be a particularly bright spot, exceeding most forecasts with mid-teens growth.

Underlying profit on the rise

Underlying earnings before interest and taxes (EBIT) grew 10.5 per cent over the prior corresponding period to $144.8 million. The result was slightly ahead of analyst estimates, reinforcing Breville’s track record of delivering operational efficiency. Group EBIT margins remained solid at 14.5 per cent, comparable to 1H24 figures and marginally above internal projections.

Geographic expansion & product mix

Middle East and China entry

One of the standout announcements was Breville’s imminent entry into the Middle East and China. This move signals management’s ambition to bolster the company’s global footprint. While these markets have been on the horizon for a while, the official kickoff in the second half of FY25 marks the beginning of a new source of long-term growth.

In terms of category highlights, coffee leads the way with Breville’s well-regarded espresso and specialty coffee machines continuing to drive sales. Meanwhile, cooking appliances performed well, reflecting strong consumer demand, but food prep growth was somewhat muted, with management noting that underlying consumer interest in food prep products remains positive.

With respect to the company’s subscription-based bean delivery business, Beanz, the company noted, “To date, we have shipped over 1.3 million bags of coffee to over 145,000 customers ... In the first half of 2025, Beanz grew 71 per cent over the first half of 2024.”

Gross margins

While volume growth remained robust, the Global Product segment’s gross margin was slightly lower than the prior period. A stronger U.S. dollar and heightened promotional activity, particularly in EMEA, weighed on margins.

Inventory and tariffs

At the end of December, inventory levels stood at $443 million, up from $380 million a year ago. This was largely attributed to strategic stockpiling in anticipation of potential U.S. tariffs on 120V product lines originating from China. Management underscored that relocating some production outside China remains a key project for mitigating tariff risks. Investors are reminded Trump will be out in four years.

EBIT growth forecast

Breville expects EBIT to grow between five and 10 per cent for the full fiscal year, a wider-than-normal range that, understandably, accounts for uncertainty surrounding U.S. trade policies. Based on what has been announced to date (e.g., additional 10 per cent tariffs on Chinese-made goods imported into the U.S.), the company anticipates delivering earnings towards the top of this range (in line with current consensus forecasts).

Market reaction

Breville’s share price has had a strong run in recent months, pushing its earnings multiple to almost 40 times forward earnings. The company is benefiting from strong global tailwinds (premium coffee and home cooking) and executing its geographic and new product expansion strategy well - controlling the controllables.

Given further tariffs and a possible trade war, investors are understandably cautious and bracing for further volatility, which present additional opportunities for those with a long-term mindset.