THG says high whey prices hitting its margin

By Paul Sandle

LONDON (Reuters) -British e-commerce company THG suffered another setback on Tuesday when it said its adjusted core earnings margin for 2021 would fall short of expectations due to adverse currency movements and remain under pressure because of high prices for commodities such as whey.

Shares in the company, which have not recovered since they slumped in October after a poorly received presentation, fell 9%.

THG, which has beauty and nutrition units as well as e-commerce services, said early 2022 was expected to be a more challenging comparable period due to global lockdowns in 2021 and record commodity prices, particularly whey, a core ingredient in its food supplement products.

Chief Executive Matthew Moulding said that despite challenging conditions, THG had scaled revenue and expanded its business model, particularly its THG Ingenuity platform, well ahead of expectations given at its IPO in 2020.

“The new year has started well, and we remain confident in delivering our strategic growth plans during 2022 and beyond,” he said.

He told analysts that there had been a rapid acceleration in the pricing of whey protein, with sweet whey protein doubling over the last year.

“We will sit and wait (to forward buy) because we do believe that the current pricing of raw materials are far too elevated and will reduce during the year,” he said.

THG said its 2021 core earnings margin would be 7.4% to 7.7%, compared to market expectations of about 7.9%, reflecting adverse currency movements.

It said it expected its margins to improve throughout 2022 as investments in automation offset inflationary pressures and the mix of revenues generated from its Ingenuity Commerce platform increased.

THG has traded at around 200 pence in recent months, far from its January 2021 high of 838 pence. The shares were trading at 168 pence by 1015 GMT on Tuesday.

THG reported a 29.7% rise in fourth-quarter revenue to 711.7 million pounds, taking 2021 revenue to 2.2 billion pounds.

It said it expected revenue to grow by 22% to 25% this year.

($1 = 0.7330 pounds)

(Editing by James Davey, Kirsten Donovan)