A solid, positive reaction from the market to news Bellamy’s Australia has returned to profit in the year to June.
The shares were up just on 2% to $11.35 in early trading after revenue jumped 37% to $329 million while earnings climbed 65% to a profit of $43.2 million profit from 2016-17’s $809,000 loss.
There were again hints of higher costs and concerns about slower than expected sales in China, but in afternoon trading the shares surged, rising to $11.96 to be up 7.5% on the day.
That’s despite there’s no dividend.
Normalised earnings before interest, tax, depreciation and amortisation (EBITDA) was $71 million, taking into account a $6 million inventory provision set aside for a planned brand refresh and Chinese regulatory transition.
The company topped its previous guidance of revenue growth between 30% and 35% and delivered an EBITDA margin, excluding the Camperdown canning facility in Melbourne, of 23% (which met guidance of between 20% and 23%).
The result came after Bellamy’s twice lifted its guidance during the year to June thanks to better than expected sales in China during the first half to December.
The company now says its business has stabilised with a focus on a growth strategy that recognises the significant opportunity for organic infant nutrition in China and in Asia.
“The business has transformed over the period, in terms of process and disciplines, but more importantly in terms of culture and capability,” CEO Andrew Cohen said yesterday.
“Today, Bellamy’s stands for a highly agile, passionate and commercial culture, underpinned by significantly stronger talent and capability.
“This is true at all levels, including the Board, management, in Australia, and most importantly for China.”
The company forecast more moderate growth in 2019, with a slowing of China cross-border growth for infant formula.
Delays are also expected on the registration of a Chinese label product to be sold exclusively in offline channels in China.
Bellamy’s says it is still waiting for important regulatory approval from China’s State Administration for Market Regulation (formerly known as CFDA) for its recently purchased Camperdown canning facility in suburban Melbourne.
“While this channel contributed less than 6% of Bellamy’s sales in FY18, we believe it represents an important future platform for growth and continue to plan for a winning distribution model pending approval,” says Cohen.
Bellamy’s expects up to 10% revenue growth for 2019 Australian-label business.
