In morning trade the Asaleo Care Ltd (ASX: AHY) share price has drifted lower following an update on the sale of its Australian Consumer Tissue business.
At the time of writing the personal care products company's shares are down 1% to 88.5 cents.
What did Asaleo Care announce?
This morning the company announced that it has completed the $180 million sale of its Australian Consumer Tissue business to Solaris Paper. The sale includes leading brands such as Sorbent, Handee Ultra, and Deeko.
Asaleo Care has, however, retained its Consumer Tissue business in New Zealand and the Pacific Islands, along with its Australasian Personal Care and B2B operations.
Asaleo Care's CEO and Managing Director, Sid Takla, was pleased with the divestment.
He said: "The sale proceeds will significantly strengthen our balance sheet, reduce net debt and improve our leverage ratio. The sale enables us to concentrate on our core, higher margin, less capital-intensive businesses in Personal Care and Business-to-Business and continue to innovate and invest in our brands for long term growth."
Should you invest?
Whilst I think that this divestment was a good move by management, I feel it may still be a touch soon to purchase its shares.
When it released its full year results in February, management warned that underlying EBITDA from continuing operations would be 6% to 11.5% lower in FY 2019. The reduction has been driven by its "commitment to invest significantly to support the long term growth of our brands."
So, with its shares changing hands at 14x estimated forward earnings, I don't think there is a sufficient risk/reward on offer just yet.
But I'll be monitoring the company's performance closely this year. And if I see signs that the company will return to growth in FY 2020, then I could be tempted into making an investment.
For now, though, I would sooner buy the sellers of its products such as Coles Group Ltd (ASX: COL) and Wesfarmers Ltd (ASX: WES).
