Shares in vitamin maker Blackmores fell 7% at one stage yesterday after the company reported a 14.3% fall in net profit for the first nine months of 2018-19, a not unexpected outcome given the weak half-year performance, early departure of the CEO and continuing problems with softening demand from its largest market, China.
Net profit attributable for the nine months to March 31 fell to $44.2 million, against $51.6 million in the same period a year ago.
First-half profit was flat at $34.3 million, meaning third-quarter net earnings slumped 42% from $17.4 million to around $10 million.
Revenue rose 6% to $460.1 million in the quarter.
Directors said the implementation of the new China e-commerce law during the March quarter resulted in lower sales by so-called “daigou” to Chinese consumers through Australian retailers.
Blackmores relies partly on online sales and informal exports from Chinese visitors shipping goods home from abroad, known as daigou. Other companies sell direct into China
The company said it would step up support of daigou to reflect the way Chinese consumers accessed Blackmores products.
The company issued a surprise profit warning in late February, on the heels of which chief executive Richard Henfrey stepped down.
“The third quarter has been challenging for the company. However, we firmly believe that this result does not reflect the long-term growth potential of the business,” said interim CEO Marcus Blackmore said in yesterday’s announcement (he stepped back into the role when Mr. Henfrey left).
“We are committed to a major streamlining of the business – to simplify and improve our processes and structure.”
“Targeting $60 million in savings over three years through a business improvement program allows us to continue investing in key strategic initiatives, build our capability and deliver overall margin improvement,” he added.
Directors said gross margins improved 2.1% during the quarter (on the third quarter of last year). “This was largely due to a deliberate move to clear existing inventory in China channels by temporarily reducing the volume of China-bound stock through Australian retail channels. There was also a non-repeat of promotional activity from the third quarter (Q3) last year.”
Revenue in Australia and New Zealand for the quarter was $54 million, down 26% (on from the March quarter of last year). Year-to-date revenue is up 3% on last year.
The shares ended down 1.5% at $88.30.
