BWX Nosedives Over 40% After Revising Its Profit Guidance

BWX Nosedives Over 40% After Revising Its Profit Guidance

Australian branded product company, BWX Limited (ASX: BWX) has revised its expected normalized EBITDA guidance for FY19 from earlier disclosed $40.3 million to now $27m-$32m. The company also informed that in the first half of FY19, the company is expected an EBITDA to be around $7.0 million. After announcing this revision in the guidance, the share price of BWX Limited nosedived 40.77 percent on 20 December 2018 (AEST 12:50 PM). 

In the earlier released FY2019 outlook, the company was expecting its normalized earnings before interest and tax (EBITDA) for the FY19 to be broadly in line with normalized FY 2018 EBITDA of A$40.3 million. Further, the company was also expecting a significant skew in earnings to 2H19, which is expected to account for approximately 70% of FY19 EBITDA.

As per the company’s announcement, one of the main reason behind this guidance revision is softness in domestic export trading sales to China. As per BWX’s CEO and Managing Director Mr. Myles Anceschi, the China volumes were weaker than expected.

In order to refine its go-to-market strategy to improve pricing controls, and ownership, the company has signed an exclusive distribution agreement which will be effective from December 2018, that will yield more focused efforts on growing this high-growth export channel with an established partner. The company also disclosed that its in-platform cross-border e-commerce volumes (for example tmall.com, JD.com) are performing in line with expectations.

The other reason behind revising the guidance is the temporary loss of sales momentum in core US brands (Andalou Naturals and Mineral Fusion) at the time of management transition. During the time of management transition, the company appointed Senior VP of Sales and Senior VP of Marketing. Further, the company also experienced some softness in the US retail sales in the most recent 12 weeks.

Mr. Myles Anceschi also informed that the company’s ERP system is now working well and Sukin domestic consumer sales data is supportive of a strong second half. The company has experienced substantial improvement in group EBITDA in November month, and it is expecting more improvement in December. BWX believes that planned H2 initiatives in all strategic pillars will deliver to plan.

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In FY 2018, the company delivered strong result with revenues of $148.711 million which were 104.6% higher than the FY 2017 figure. The company reported underlying EBITDA result of $40.263 million which was 52.4% higher than FY 2017. The company earned a net profit after tax $19.216 million which yielded 42.9 percent growth (year on year).

During FY18, the company witnessed significant progress in both integrating and leveraging acquired businesses. The consolidation of the company’s US businesses as a single BWX Brands USA operating entity was completed during the third quarter of 2018, with the new scale and combined capabilities, positioning the company to take advantage of the growing natural market in North America.

In the last six months, the share price of BWX decreased by 49.65 percent as on 19 December 2018. BWX’s shares traded at $1.700 with a market capitalization of circa $356.6 million as on 20 December 2018 (AEST 12:50 PM).


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