If there was ever a given in the market today, it was that Bubs Australia was going to deliver a big revenue jump. And, thanks mainly to its quickness in taking up an offer to fill the supply gap in US supermarkets, the infant formula company didn’t let us down.
June 30 earnings were also boosted by strong growth in China but the tasty top up came from the US government’s Operation Fly Formula to fill the gap caused by problems at Abbott Labs’ big US plant.
Both – but especially the US deal – saw Bubs gross revenue leap 123% to $104.2 million, up from $46.8 million the previous year. EBITDA totalled $4.8 million for the year to June. Net revenue of $89.3 million was up 127% from the previous financial year.
China revenue was up 166%, representing 55% of group revenue for the June year, a record Australian infant formula market share of 4.7% and underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) of $4.8 million
The Bubs share price also could be under some pressure as the company is still loss-making, though the loss after tax fell to $11.4 million in FY22, down from $74.7 million in FY21.
But with Abbott re-opening its factory and signs the supply shortfall is being filled, some investors wonder if Bubs’ 2021-22 performance, especially in the second half, will be repeated this this year, especially the surge in the final months to the end of June.
Thanks to the US deal, gross revenue in the June half of 2021-22 was 40% more than all of the 2020-21 year.
Clearly this supported stronger performance for Bubs and its shares in the period, but investors want to know what’s the next move?
While management flagged earnings growth for FY23, without offering specifics, in an era of rising interest rates, future earnings have to go on rising as well.
But with the larger rival, a2 Milk making it clear its Chinese sales are back on track and Bubs making similar noises in its report on Tuesday, you would have though investors would have been a little more confident.
Bubs shares were down in early trading and stayed down for the day to close 5% lower at 57.5 cents.
