Vitamins and health products group Blackmores gave the game away yesterday after surprising the market weaker sales in China and a downgraded full-year profit guidance.
Blackmores said it would pay an unchanged fully franked dividend of $1.50 a share – thereby indicating a lack of confidence about the rest of the 2018-19 financial year.
The shares were punished yesterday after the company revealed a weak earnings outlook and a surprise slide in China sales.
The shares plunged 32% yesterday after it revealed a surprise 11% fall in its sales to China to $65 million in the six months to December 2018 and surprisingly cut its full-year outlook.
The company said part of the drop was due to Australian retailers changing their strategy to target the Chinese export market, competing with Blackmores’ own sales to the country.
The low yesterday was the lowest price since 2015 at $80.45. the shares ended the day at $$92.86, off nearly 25%.
In the half-year results announced this morning, the company warned: “we do not expect the second half profit performance to be ahead of the first half result”.
“Our outlook is for modest full-year revenue growth”, the company told analysts.
And CEO, Richard Henfrey said “Achieving record sales is a very significant result for our business and highlights the benefits of our continued investment in advertising and promotion in recent months.”
“However, due to this planned investment in the period and a softening of growth in China, there has been a short- term impact on profit growth.”
“Apart from China, all other markets are expected to continue performing well and we expect overall Group sales to improve in the fourth quarter,” directors said.
The question now is how short term this impact will be and its quantum.
The consensus outlook for the full year was for a pre-tax profit of $114.3 million, but analysts will now cut their forecasts.
The first half profit for the half-year ending December 2018 was $34.3 million, which did not grow from the same period in 2017. A 31% increase in selling and marketing expenses and a 12% percent increase in operating expenses cut into pre-tax earnings.
Overall, Blackmores reported revenue up 11% to $319 million for the half.
