Blackmores Limited’s Share Slips on Account of Bleak 2HFY19 Outlook

Blackmores Limited (ASX: BKL) manufactures and markets vitamin, herbal, mineral supplements and natural skin and hair treatment products in Australia and New Zealand. These products are supplied to the over the counter retail market and to health care professionals. The Company also has a line of natural beauty, and aromatherapy products and its products are distributed in South East Asia.

The company has released its half year results for FY 2019. The company has reported first-half revenue of $319 million, up 11% when compared to the corresponding prior period. The firm has posted a profit of $34 million, which was in accordance with the previous corresponding period.  

The revenue for the Australia and New Zealand geographical segments came in at $144 million. This was up $23 million (or 19%) on the corresponding prior period. This growth was on the back of domestic growth and continued increased levels of sales through Australian retailers who are focussed on servicing China export channels.

The company’s animal health business, PAW, has witnessed strong revenue growth of 21% on a year-on-year basis and is now sold in seven countries. The management also continues to see growth from the company’s Infant Formula portfolio. Moreover, the online store at achieved a record turnover for November as consumers embraced natural health as part of Click Frenzy and Black Friday sales.

The company’s China segment sales plunged by 11% for the half year when compared to the corresponding prior period, although when China-influenced sales through Australian retailers are considered, the management estimate growth in sales to Chinese consumers to be around 8%. The company has appointed Ms Sophia Tseng as Country Manager for China. Sophia will commence later this month.

The company’s position statement remains robust at the end of the first half, with cash generated from operations of $34m representing a 22% increase compared to the corresponding prior period. The cash conversion ratio also improved to 60%, up from 52% in the previous corresponding period.

Company’s Net debt was $71m representing increases in the period indicating towards the fund required for the acquisition of Impromy and need of higher working capital. The gearing ratio was 25% in the period and remains at conservative levels.

The Board of directors has declared an interim dividend of 150 cents per share fully franked with a record date of 5 March 2019 and Payment date of 20 March 2019.

The company has a modest outlook as regards the revenue growth for the full year. However, the company’s China sales in the third quarter are being affected by continuing changes to the way consumers purchase its products as well as higher inventory in the trade and a general softening of consumer sentiment. Hence, the management does not anticipate the 2H profit performance to be ahead of the first half result.

Now, let us have a quick look at Blackmores Limited’s stock performance and the return it has posted over the last few months. The stock is currently trading at a price of $94.910, trading down by 23.187% during the day’s trade with a market capitalisation of ~$ 2.14 Bn. The counter opened the day at $ 88.000, reached the day’s high of $ 99.020 and touched the day’s low of $ 80.450 with a daily volume of 975,847. The stock has provided a Year Till Date return of -1.36% & also posted returns of -14.61%, -6.60% & -2.78% over the past six months, three & one-months period respectively. It had a 52-week high price of $166.760 and touched 52 weeks low of $80.450, with an average volume of 39,441 approximately.


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