Blackmores Limited’s Shares Declined Despite Reporting Strong Sales And Profit Growth In Q1

On 25 October 2018, Australian natural health company – Blackmores Limited (ASX: BKL) held its Annual General Meeting in which the company discussed the results of FY 2018 and also announced about the  strong sales and profit growth in the first quarter of FY 2019. Following this news, the share price of the company decreased by 2.04 percent as on 25 October 2018.

In FY 2018, the revenues of the company increased by 9 percent to $601 million compared to the corresponding previous year. The Group NPAT of the company increased by 19 percent to $70 million in FY 2018 compared to the results of FY 2017. The gross margin of the company increased by 17 percent mainly due to reduction in provisions, lower raw material and consumables and benefits from global pricing strategy. Due to increased staff expenses, increased infrastructure costs and investment in growth platforms, the operating expenses of the company increased by 17 percent to $208.6 million. The Goodwill and intangibles of the company increased by 7 percent due to acquisition of small number of brand and IP rights. Net cash flows from operating activities was $58 million in FY 2018 which is 27% higher than the previous year, due to the impact of higher income tax payments made in FY 2017 relating to the FY 2016 year. The cash conversion ratio of the company was 82 percent which is in-line with management expectations reflecting a strong result considering growth and investment profile. The company is having EPS (Earnings per Share) of 406.4 cents in FY 2018 which is reflecting 19% growth over last year. 

The company reported that sales from Australia, New Zealand and Pure Animal Wellbeing were broadly flat and contributed $266m but sales from China increased by 22 percent contributing $143 million in FY 2018. Other Asian sales increased by 20 percent which includes 77 percent sales growth from company’s new business in Indonesia. BioCeuticals, Global Therapeutics and IsoWhey sales increased by 13 percent to $109 million in FY 2018. The company increased its marketing investment in the month of April and May due to which the company gained high consumer engagement.

In the first quarter of FY 2019, the profit of the company increased by 7 percent to $16.5 million compared to prior corresponding period. In the first quarter, the revenue of the company increased by 15% to $154 million compared to prior corresponding period. Company’s outlook for Asia remains strong. The company is expecting that China sales will continue to grow strongly in the future through both e-commerce and traditional retail. The company is planning to take ownership of Braeside manufacturing site by October 2019.

In the last three months, the share price of the company decreased by 13.31 percent as on 24 October 2018. BKL’s share traded at $123.74 with a market capitalization of circa $2.18 billion as on 25 October 2018 (AEST 1:00 PM). BKL has a dividend yield of about 2.41%.


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