DGL Group (ASX: DGL) has announced its H1 FY26 results, which reveal a decline in revenue and earnings, impacted by operational delays and asset impairments.
However, the company has stated that is also progressing site consolidation and new capacity projects.
DGL Group reported that sales revenue fell 5.8% to $225.2 million for H1 FY26, primarily driven by reduced used lead-acid battery recycling activity following the sale of the Laverton ULAB plant and an ongoing scarcity of used batteries.
Underlying EBITDA also decreased by 5.0% to $24.7 million, impacted by the normalisation of AdBlue prices, headwinds in mining demand, and production delays linked to the company's ERP rollout.
Statutory NPAT resulted in a loss of $12.8 million for the period, reflecting non-cash impairments including $16.9 million in Environmental division assets and the impairment of held-for-sale chlorine plants.
Cash Flow and Debt Management
Operating cash flow saw a significant decline of 42%, falling to $10.5 million.
Operating cash conversion subsequently decreased to 72% from 95% in the prior corresponding period, mainly due to an increase in working capital and lower gross profit.
Despite these challenges, DGL Group managed to reduce its net debt by $16.4 million to $78.2 million compared to 30 June 2025.
This reduction was supported by operating cash flow and proceeds from asset sales.
Gross margin, however, edged up to 43.5% for the half-year, even with the revenue and EBITDA declines.
Operational and Project Progress
The company is actively progressing its growth and efficiency actions.
This includes the consolidation of smaller sites into larger ones and the sale of sites no longer fit for purpose, including Laverton, Seven Hills, and Tomago locations.
Key new capacity projects are also advancing, with the commissioning of a new NSW liquid waste treatment plant expected by the end of H2 FY26.
Additionally, the installation of a plastic packaging recycling facility in Unanderra, NSW, and a new industrial battery breaker in NSW are both in progress in FY26.
Furthermore, the implementation of group-wide ERP and logistics systems is ongoing, with the payroll and HR systems substantially complete.
Other initiatives include bulk on-site chemical storage expansion, production and logistics facilities upgrades, new larger warehouse facilities in NSW, SA & WA, and planned automation in manufacturing.
Outlook and Risks
DGL Group's H1 FY26 performance was impacted by revenue and earnings declines, alongside weaker operating cash flow.
While net debt has been reduced and strategic projects are progressing, risks remain around operational constraints like driver shortages, project delays due to licensing, and cash conversion.
The company's ability to successfully commission new facilities and navigate these challenges will be key to its H2 FY26 performance.
