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China sales boost Blackmores full-year profit

Emma Rapaport  |  28 Aug 2018Text size  Decrease  Increase  |  
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Shares in Blackmores Limited (ASX: BKL) have leapt more than 9 per cent after the vitamin maker lifted its full-year profit nearly 19 per cent to $70 million on the back of strong demand for its products in Asia.

The company, reporting its first full-year results since chief executive Christine Holgate left to take charge of Australia Post, said revenue for the 12 months to 30 June rose 8.9 cent per cent to a record $601.1 million, boosted by a 22 per cent increase in China and 20 per cent growth in the rest of Asia.

Blackmores shares were up 9 per cent to $158.80 at 1pm Sydney time. The board declared a fully franked final dividend of $1.55, taking total dividends for the year to $3.05 up 15 cents from a year ago.

Blackmores chief executive officer Richard Henfrey said growth was driven by the consumer demand in Asia, with sales in China up 22 per cent to $143 million. The group's joint business plan with Chinese multinational e-commerce giant Alibaba, signed in June, proved a strong source of activity.

“Our business in China continues to be predominantly e-commerce sales and Blackmores has strong relationships with the major Chinese platforms,” Henfrey said.

Blackmores also signed a “strategic co-operation” with Chinese e-commerce platform NetEase Kaola.

However, Henfrey reassured investors that the company's vision for China is not limited to e-commerce sales: "We're actively building our offline business and affirming our credibility as a leading natural health advocate," he said.

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Across the rest of Asia, sales were up 20 per cent to $84 million, including solid performance in Singapore (up 22 per cent), and in South Korea (up 91 per cent).

Sales in Australia and New Zealand remained flat due to a subdued retail environment, contributing $266 million.

Vitamins

While Morningstar equities analyst Chris Kallos welcomed the strong result from Blackmore's China operations, he is concerned about the core Australian sales, describing the segment results as "lacklustre".

"Blackmores Australia had an incredibly strong showing in year to January 2016 on the strength of strong demand from Chinese shoppers buying large volumes of vitamins from places like Chemist Warehouse for shipping and online sale in China – known a 'daigou' shoppers," Kallos says.

"However, levies applied by the Chinese government in 2016/17 discouraged this sort of activity."

"While Blackmores has been able to capitalise on their new-found brand recognition in Asia by expanding their presence, the Australia vitamin market is broadly mature– trending now back to 3 to 4 per cent growth per year."

Blackmores shares surged in January 2016 to $217, a 500+ per cent increase on the previous corresponding period.

Blackmores has also announced it will expand into the weight loss sector through a $9 million deal to buy the brand Improny from pharmaceuticals firm Probiotec (ASX: PBP).

"This acquisition supports our strategic priority to drive innovation and leverage expertise in areas of chronic disease," Henfrey said.

BioCeuticals, a subsidiary of Blackmores which trades in high quality health supplements, lifted sales by 20 per cent, while Global Therapeutics, an acquisition that allowed Blackmores to expand into Chinese herbal medicine, posted flat growth because of stock shortages affecting smaller lines.

Henfrey said Blackmores was focused on delivering growth across all regions and brands, underpinned by continued investment in Australia.

The results mark a recovery after full-year profit tumbled 41 per cent to $59 million in 2016/17 following declining Chinese sales.

In fiscal 2017 Blackmores reported $692.8 million in sales, however this has been reduced to $552.2 million following an accounting change.

In fiscal 2018 Blackmores changed its revenue reporting from invoice sales to net sales.

At 1200 AEST, Blackmores shares were up 9.6 per cent at $159.13.

Performance highlights

  • Net profit up 19pct to $70m
  • Revenue up 8.9pct to $601.1m
  • Final dividend up 15 cents to $1.55, fully franked

 

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Emma Rapaport is a reporter with Morningstar Australia.

© 2018 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'class service' have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782 ("ASXO"). The article is current as at date of publication.

 

 

 

is the editorial manager for Morningstar Australia. Connect with Emma on Twitter @rap_reports. You can email Morningstar's editorial team editorialAU[at]morningstar[dot]com

© 2021 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'regulated financial advice' under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information, refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Morningstar’s full research reports are the source of any Morningstar Ratings and are available from Morningstar or your adviser. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

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