To attract a higher margin. That's the sub category of the broader category. The regulatory and geopolitical, we are watching with interest rate, environment, currency with the Aussie currently spot rate a little over 70. We're watching that. A lot of volatility there. We did watch the recent high court decision in the U.S., and we are at our position in the U.S. in relation to tariffs. Finally, competitors tending globally to quality issues in our industry. They're being managed and worked in our quality systems, and we continue to move forward on the basis of the have as Bubs and obviously from our Australian source. To summarize, you know, we feel very happy our brand resonates strongly with our targeted consumers.
We operate in diversified markets. Finally, you know, we have a attractive margin structure, given we have the expo. Going into the U.S. market, value growth in the half, we have worked very with the overall category. We're fortunate to participate in that premium natural category, with total category only up 3%. We are a fairly, we're 8%. In terms of then the retailers that we look to work with, we've done some great work, and we're at Target. We'll increase stores. We'll increase the number of products that we have in stores.
Emma, Walmart, very pleasingly, we're stepping up very significantly in store count and also very pleased to note that we have ranging at Sprouts, which is one of the top premium natural banners, is the club element of that business, and we have secured ranging at Sam's Club. If by February this year, we were a little over 5,500 stores, we're now going into a site, or by the end of the year, we are forecasting to be over 8,500 stores with those addition we're going into a very exciting time where the business will work through as we move forward. During the half, we did undertake an air freight program.
I'm very proud that the team executed that very well, operational, the retailers with these additional ranging outcomes that we've secured. With the new market consumer is we are moving more and more to some of the next generation. We've got exposure to Reddit. AI is becoming a real reality in search, pushes, we feel really good going forward in relation to our prospects in the U.S. Moving through to China, it's encouraging performance in China. Period is being concentrated in the second and third tier cities, where we are seeing a preference for very happy that we're running a very strong business in China. Great team, against some of the middle of imported product because we have a great team, we're doing well.
Interestingly, in a little bit of additional stock sitting in the trade, we've run that down, our sell out half, we're very pleased with the channel performance. The online-to-offline is going great guns for us. We've secured an additional 77% of CBEC, which is the imported product. We've maintained our number one position on Tmall, we have just now and then coming into the second half, we believe we're well set for sustained growth in China, which I own CBEC. Those both showing strong growth. That's it. Australia, we're very focused on investing to reestablish. We've maintained our number one go position. W e need to do better in Australia. We're working on that. Advertising promotion set at about 8% of net sales.
In the second half, that's been upgraded to 12, a little bit of price activity, which has been well received by our consumers and retailers. Self-availability as we've worked through the stock rationing, we feel really well set to see. I would note also that we did discontinue our food portfolio in the half, and as we go forward, we believe we'll be cycling into stronger performance in our core home market of Australia. Our final segment is our rest of world segment. Again, rationing. Additionally, we did have some regulatory challenges, particularly in the Vietnam requirements. We've been very diligent to work that through with our distributor partner, Ms. Chow, relationship.
That business has a great capability in healthcare professionals, where we've been reaching the, you know, the parents that will be our great customers for Bubs. During some of the we are active on some of the very modern platforms. Up there on the right is actually a picture of them on TikTok. We do a number of in-store activations, so that other picture is an in-store activation. Japan continues to be a strong market for Bubs, Malaysia is an emerging buyer. It's been resilient against some of the challenges, we feel positive moving forward with our positions at GRIT. As we tab, I'll hand over to Naomi Verloop, our CFO, and she'll take us through.
Everyone, I'm really pleased to be here today. If we could just tab across to the income. Looking at the P&L, the great takeaway here is our underlying EBITDA result, which AUD 0.7 million on the prior corresponding period. The EBITDA reported number. The revenue increase in the USA was the major driver. Overall, revenues were up by 14% versus the prior corresponding period. Held up surprisingly well, despite the impacts of air freight and tariff, and the product mix in terms of more sales being sold through into the USA allowed us the additional tariffs and air freight we incurred. Operating expenses came in million versus AUD 25.2, and this was primarily due to the completion of being the year at AUD 4.4 million on an underlying basis, which was a great result for Bubs.
The key takeaway on the balance sheet is that it has increased from AUD 20.1 million to AUD 28.1 million. That will carry on for the next half. We expect that number to be, you know, approximately AUD 8 million to the end of this financial year. You can see trade and other receivable AUD 0.7 million. That is in line with the increase in revenues, trade and other payables, and that is largely due to extra payments to suppliers for raw materials, Australian farms. You'll also see there that our right-of-use assets have increased up to the lease at our Deloraine Dairy facility, which is our manufacturing and office. Move across now to cash flow. Way here on the cash flow is obviously the net cash used in operating activities, so versus an outflow of AUD 0.5 million at the half last year.
This was all process which we are still currently in the middle of. As I mentioned earlier, we will, one of the key takeaways subsequent to December of 2025 is NAB to extend the limit on our, on our working capital facility. That has and will be very helpful as we go through this inventory rebuild process. Across now to margin. We can see that margin, at least from the 50%, but well above the guidance we were giving of the 40%-45% and air freight, which has been significant, despite those sales, to deliver more of our revenues in the USA market, which are at a higher margin. As we cycle through to the next half rate and tariffs, we still expect margins to come in at the 40 to 40 get to the end of the year.
Moving across to net working capital. Net working capital has gone up. We are landing in at AUD 33.0 versus AUD 23.2. This all relates to the inventory build. You can see, however, that the average net working capital as a percentage of sales has dropped down at H2 FY25, and then at H1, it was AUD 30.7. In terms of delivering additional revenues against our working capital, it just shows on an average basis versus our net working capital. Inventory came in at the chart just below. We were at AUD 30.3 at the same point last year, so you can see inventory as a percentage of sales is down to 26%. We expect that to pare back when we get to the end of the year. Moving now to the FY26.
You can see we landed last year on an underlying number of AUD 0.6 million on an underlying basis by the end of this year and AUD 8.5 million. The main impacts there are the air freight and penalty tariff, which were AUD 8 million. We also had a one-off payment from Alice and Willis in relation million. We do not expect any further funds to be received in relation to this FY26 outlook that we provided. We do anticipate revenues to come in AUD 25 million. It reflects 22%-27% growth on the prior corresponding period, in that 40%-45% range on gross profit. That will be lower. Alluded to at the beginning of the call, there's lots of moving pieces there.
We have additional air freight coming in, product, and we are living in a very dynamic and changing world with Donald Trump dealing with at the moment. In terms of reported EBITDA, we're going to land in at between AUD 9 million and AUD 11 million. That concludes the finance.
Thanks, Naomi. If we could just tab through to summary page. We will be showing you very regularly as we move forward. As I said at deployment, we have active initiatives underway. We are standing up a transformation office as we speak at our strategy update later in March, which we will confirm shortly. Members in from offshore, as well as some of the new roles that we have here in Melbourne at that point in time. Fair to say, we feel very comfortable. It's very crisp and clear. It's very performance improvement initiatives. I'll save further discussion on that for our strategy update. Of the initiatives that we have underway, some of these are very substantial, gone for a number of years, and some we have already concluded.
I'll just highlight research in China and the US to confirm our consumer title. It's very clear who those consumers are, and it's very clear they align to the premium natural. I've upweighted our digital marketing activities to continue our presence on platforms like Meta, new platforms like TikTok, and particularly Reddit, which is driving a lot of the AI search that we're seeing. Explorers, they tend to be very savvy with the use of digital technology, and so that we're seeing. Annie, our new global CMO, will share more of that when she. Across to portfolio optimization, we've really had stunning results from the very premium supermarket banner in China called Olé. We really had as well in our home market with Coles, Woolies, and Chemist Warehouse.
We're at great ranging. Now it's about the marketing to step it up and really get the sell-through . Q uite a bit on our product development roadmap. In March, we have some exciting VR, so there'll be some little adjacencies that we'll be looking at that can help us grow our business further. In supply chain, very clear dollar in the bank example, where our warehouse, where we've got additional capacity and we're packing containers now, and we've got AUD 1,000 per annum of cash savings. The next one down there in supply chain that's working, sourcing of ingredients, the whey proteins that we use, as well as the whole milk. Additional as from Australia can be challenging. It's a long, thin supply chain.
We have tariffs at the board. Good thing as well to be participating in the economy in the U.S., we're doing a classical bind, and as we grow and outgrow essentially our capacity here in Australia, you know, we have as four pumps. If we move across to enablers, just to round out, you know, we're very team. We have a great team assembled, very excited to work with such a great group of people. Looking at our procurement area through an AI lens, they're a U.S.-based start-up firm. Additionally, though, we're very focused on some of the core processes that run safe every day, delivering high quality, meeting our promises to our retailers, and obviously, driving our asset.
Integrated business planning is another area of focus, particularly the balancing of supply and demand. Convert that back into capacities in terms of shipping, in terms of procurement. I'll leave it there. I'm happy to take questions. I'm very excited to showcase the great team that we have. Maybe hand back for some questions. Thank you.
If you wish to ask a question on the one on your telephone and wait for your name to be announced. That is star one if you wish to ask a question. Your line is open.
Hi, guys. thanks for taking the question, and well done on it, good in particular. You've got a slightly, greater second-half bias than usual. Is that because you're expecting the second half to add revenue to what's already a strong U.S. growth?
In the second half, we are expecting a better performance in China due to those selling, sellout rates. We should see an uptick in China, in particular, USA as well. We'll grow further. We're expecting a better half for the USA as well.
Have we started to see that?
Range review start. I'll hand over to Joe to answer that question.
Phil, we have seen things pick up. The way the US business works, which I know you understand, is there's an annual review outcome. That massive intake, particularly in the Walmart and Target, is currently underway. Whereas it's sitting in the warehouse, it's staged, and it's ready to go. The purchase orders are rolling in, and it's really up to how the consumer offtake goes, and then we'll replenish back to those stores. It's quite a big step up, so only quite a challenging task to execute. It will derive a step up in our sales. Absolutely.
Your next question comes online with Jonathan Snape from Bell Potter. Your line is open.
Great. just a quick one. On the cost, we see one component of that is probably gonna be around a little longer than the other. Are you able to kind of split elements, this air freight as opposed to tariffs?
P&L slide. There's AUD 1.8 million in air freight. That is tariff over and above the 10% that we incur on non-AU fresh milks that come from the Netherlands or New Zealand or another part of the world. They are actually tariffed at a higher rate.
Flow into your second half thinking, is the mix kind of the same, or does it start to move more towards tariffs, given doc that was kind of already there b efore you have the tariff?
We're expecting a larger revenue number to come through in the second half. We've got this ranging happening done on that. That means extra product, and we are gonna need to still source from overseas to meet. Also, we'll also incur additional air freight, which will be at a higher level than this first half.
Honor. I mean, it seems like when I look at all your peers, even some of the bigger ones, the China label, English label over the last six months, if not last 12 months, and traditionally in their environment, not just from CBEC and O2O, but also from Daigou. Are you seeing anything in the Daigou channel. Interested in your thoughts there?
We're not seeing a lot in Daigou shift to English label, and our team does a great job marketing on platform pleasing as well. We're in that general trade, but with the CBEC product. I f that continues, then it should be something that we benefit from, I would agree. I can't see that we've seen a lot of it at this capability of the team, how they miss our products. T hat could be another headwind.
I guess some of these product scares, most of the, I guess, the recalls have happened from Europe. The, I guess, benefits start to come maybe from some of that cross-shifting down into regions where you haven't had major product recalls, like down here.
Look, it's mixed. T he thing as a industry the families that are in power ports go first. Second, just for our industry, you know, these quality, you do highlight the recall from Europe. There is also a separate one in the U.S. It's essentially a quality-related issue. There is a consternation amongst, so we're working very hard with our customer service and marketing teams to reassure people that the Bubs products remain on our quality. I would say that in pockets we do see that also say that in the U.S., you know, some of the ranging outcomes that we've achieved that are so stellar and some of the people that are participating currently.
With that said, it's a mixed bag, and it is, we really feel for these parents who are navigating these difficult times in our industry, and we prefer.
Great. Thank you.
As a reminder, if you do wish to ask a question on things to be announced, that is star one if you wish to ask a question just on the phone. I'd like to hand back. Apologies, you have a question.
Thank you. Good morning. I just want to ask on the production side, how are you placed? Just give us a bit more insight into how you're ramping up for the in-inventory building. I'm just wondering about your capability going forward to meet demand.
Works, there's the physical logistics, which has a fairly long, thin supply chain from Australia to, you know, so that's one element. In the production side, we essentially have a two-stage production in Dandenong, and that facility runs at about 40%-60% of nameplate capacity, basis six days a week, and that facility is being operating very well over the past half, and that capacity there. We work with a network of partners in terms of then we have a network of supply partners across Victoria, and again, they're doing great work. One is in the goat milk solids, and so some of that comes off farm here in Victoria, and then we mentioned primarily the Netherlands and New Zealand. You put all that together, the outlook is positive.
When each of those steps to secure the goat solids, push it through the dryers, and then into the blending and canning to the U.S. It's a long, thin supply chain, as I said at the start. Look, we're very confident that we will be up in the U.S., and we'll be able to secure the sales that present in these additional range we have in the U.S.
Great. O bviously, to meet that demand. Just secondly, on the kind of goat milk, sort of perception in China, there seems to have sort of been a little bit of up and down in terms of the, at one point, you know, goat milk was very strong, in terms of some of the other, you sort of converting the consumers over, even in the U.S., to the goat milk product.
At all is one number, and it tends to be a higher percentage in the subcategory. The premium subcategory as high up U.S. is almost solely in that premium natural subcategory. The total addressable market Bubs in the U.S. at the moment, it's about 3% of total market, which is about category. A percentage point there in, 'cause we're about 1/3 of the market, as you call out, has dropped back a little bit. It's a different sort of proposition in China. It's been of decades and beyond, I would suggest. W e watch that carefully in China, but certain participation in infant formula would be very beneficial. We also have an adult goat product, CapriLac, into something we're excited about.
In Australia, goat runs at about 6%-8% of category. Those numbers from a total addressable market, and if we can collectively grow the goat participation, that's a really good metric to look at, and we look at it carefully.
On FX and any sort of implications there in terms of the sort of nudge up in the, to the Aussie dollar.
The company, so we don't try and play the currency market, but in terms of our risk management strategy, I'll just hand over.
AUD versus USD, we sort of came in around the end of January and up into early around that 0.7 level now. We actually hedge all of our transactional exposure. We'll be going through our budget process for FY27, and, you know, we'll have to obvious what that rate is looking like, so that will have a subsequent effect on the revenues that we report coming in the financials on a constant currency basis. We'll be able to see the true underlying performance.
Right. If I interpreted that, there's some crimping of a margin from the higher US dollar.
Only on a reported basis, not within the result reported in the U.S.A. Only on business. N ot transactional. 'Cause that'll be hedged through. You'll be hedging through at higher rates, so there will be an impact, but if it moves higher than 0.7, you're protected again. 0.7, you'll have the opposite effect.
That implies what you do over there or f rom my point of view?
We are repatriating. There's two separate effects impact. There's the transactional effects. There's recorded effects, which are two.
All right. Terrific. All right, well, that's helpful. Thank you for that.
No worries.
Press star followed by one on your telephone and wait for your name to be announced. That is star one. Currently, there are no further questions on the phone line. I'd like to hand back.
Attendance this morning, and we look forward to having follow-up discussions and see you.