Dental products manufacturer SDI Limited (ASX: SDI), has announced an uplift in expected profit for FY24, following a range of operational initiatives announced four months ago to reduce operating expenses. 

SDI’s preliminary sales for FY24 (unaudited) revealed a 3.2% increase to $111.4 million, compared to $107.9 million in the previous year, marking a record twelve-month performance.

The strong sales growth was primarily driven by an increase in European sales, despite a continued decline in Amalgam product sales. Notably, product margins improved by 490 basis points, reflecting enhancements in logistic costs, operational efficiencies, regional market performance, product mix, and favourable currency movements.

Operating expenses remained well managed despite ongoing inflationary pressures. This disciplined cost control contributed to a significant boost in net profit. The Company projects its FY24 net profit after tax to be in the range of $9.5 million to $10.0 million, a substantial rise from $7.1 million in FY23. When adjusted for asset impairments, underlying NPAT is expected to be between $10.5 million and $11.0 million, compared to $7.5 million last year.

Earlier in February 2024, SDI had reported an increase in gross profit margins, which climbed 530 basis points to 61.5%. This improvement was attributed to the strong performance of the company’s Aesthetic products and reduced logistics costs where international freight expense rises were well published throughout the pandemic. The product mix, especially the growth in higher-margin Aesthetics, played a significant role in driving the overall gross margin.

Despite a 4.2% increase in total operating expenses in Australian dollars, the impact was mitigated by favourable currency movements. After adjusting for a $0.7 million asset impairment related to buildings and the Brazilian operation, operating expenses in local currencies decreased by 1.6%.

SDI’s balance sheet remains strong, with cash reserves increasing by $1.1 million despite significant investments in property, equipment, and product development while the Company has a further $6.0 million in undrawn finance facilities and $7.1m of cash on hand as of 31 December 2023.  

The dental company continues to emphasise Aesthetic and Whitening products, with new developments like ‘Stela’, an Amalgam replacement, set to compete in wider Aesthetic categories. SDI’s investment in a new six-acre property, intended to consolidate manufacturing and warehousing operations, aims to enhance efficiencies and is expected to generate a pre-tax return on capital exceeding 20%.

Additionally, SDI is investing in production automation and processes to boost operating efficiencies and support future product growth. The Company plans to launch one new product by December 2024 and remains committed to meeting stringent regulatory requirements in Europe, which it views as a competitive advantage.