BLACKMORES BLINDSIDED BY CHINESE MARKET DISRUPTION
Written on the 29 August 2017 by Paris Faint
BLACKMORES' (ASX: BKL) profit has taken a 42 per cent hit after significant disruption to its Chinese supply chain "came without warning" in early FY17.
Speculation about regulatory changes in China impacted the buying patterns of Chinese entrepreneurs and tourists who were previously purchasing through Australian retailers.
As a result, Blackmores' full year sales dropped three per cent to $693 million and total net profit after tax reached just $58 million, down 42 per cent on the prior year.
The company was also affected by an unforgiving Australian retail environment, which diminished profits further and dragged EBITDA down 37.8 per cent to $94.6 million.
Outgoing CEO Christine Holgate, who was succeeded in mid-August by Richard Henfrey, said the company began turning its woes around by the end of the financial year.
"After a turbulent start to the year, we are pleased with our recent performance," said Holgate.
"The demand for Blackmores products in China remained strong throughout the year although the route to serve it has changed significantly.
"Blackmores responded quickly to the changes in the market by both building a new China export team and strengthening our in-country China business and tightly managing our inventory."
In the year ahead Blackmores will continue to build on its bioceuticals brand and invest in new technology which will support growth.
Current CEO Richard Henfrey expects the company's Asian assets will flourish in the year ahead. These include Indonesia, where Blackmores recently launched a range of products, and Vietnam.
"Our underlying performance has improved as the year progressed," says Henfrey.
"We have invested in a world-class distribution centre in western Sydney and in new technology platforms that will support the growth we anticipate, including addition volumes from our emerging business in Asia."
Blackmores has declared a final fully franked dividend of 140 cents per share which takes total dividends to 270 cents, down 34 per cent from last year.
Business News Australia
Author: Paris Faint