Andrew Mitchell

While the domestic economy continues to face a myriad of growth hurdles near term, Australian businesses with established channels into higher growth offshore markets (particularly the US and Asia) have been amply rewarded for their investment in overseas expansion.

An Australian dollar now plumbing multi-month lows (sitting at c. US71c at the time of writing) provides an additional near-term attraction given the currency translation benefit of the AUD/USD retreating a further -4.8% over the first half of the financial year.

Notable performances from more offshore-facing businesses across our own portfolios included the impressive entry into the United States from modern day lay-by provider Afterpay Touch (APT), the business having now welcomed over 1 million US customers onto the platform (across 2,800+ retailers) just 10 months after launching in the country.

Fast fashion jewellery retailer Lovisa (LOV) pleasingly recorded strong sales growth across a number of new territories in Europe and the USA (the business adding 12 additional stores in the UK, 5 stores in France, 3 stores in Spain and 7 in the US), while infection prevention medical device company Nanosonics (NAN) announced a further +9% increase in the global installed base of their infection prevention device ‘trophon’, including Europe, Asia, Australia and North America.

Elsewhere, aerial satellite imagery provider Nearmap (NEA) saw its market capitalisation break through $1 billion after announcing record growth in annualised contract value from its US operations (its seventh consecutive half of incremental growth out of the US), while plumbing supplies retailer Reliance Worldwide (RWC) again delivered over 20% sales growth across its marquee ‘Sharkbite’ push-to-connect fittings and accessories across its American territories (the business now ranging across US hardware mega-chains Home Depot and Lowe’s).

While business conditions appear reasonably buoyant around the US, New Zealand and pockets of Europe, it is worth noting some tempering in enthusiasm from companies exporting domestic goods into China. Economic data through the region has continued to indicate a fairly material slowing in recent months, while anecdotally a number of China-facing businesses have highlighted increasing levels of domestic competition.

Vitamins distributor Blackmores (BKL) provided the most notable example this month, the company experiencing a -27% share price decline after disclosing a heightened competitive environment for their products in China (the issue further exacerbated by some company-specific inventory management issues).

Blood products manufacturer CSL Limited (CSL) noted a degree of pricing pressures creeping into their albumin product sales into the region, whilst industrial gloves retailer Ansell (ANN) commented that Chinese demand had slowed “rapidly”.

As Australia’s largest trading partner, any sustained loss in economic momentum out of China will create obvious challenges for a variety of businesses and sectors locally, albeit calls suggesting the near-term end of the Chinese growth story remain premature in our view.

Indeed, while some businesses have faced challenges in the region in recent months, others continue to navigate the economic conditions well – portfolio holding A2 Milk (A2M) being one obvious example. We highlight the February result and our outlook for the company in this wire

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This was an extract from Ophir's monthly letter to investors



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Greg Beeforth

Good list ... Altium (ALU) has also been kicking goals globally for a while now