Not unexpectedly shares in dairy products group, Bellamy’s Australia took a whacking yesterday after the annual meeting heard a warning for weaker revenues and earnings in the first half of 2018-19 and possibly for the full year.
The shares ended down more than 6% at $7.98 after hitting a low of $7.66. Such violent slides (and big rises) have become a feature of this company’s share price performance in the last three years.
CEO Andrew Cohen told shareholders to expect first-half sales to decline in a range of 10% to 15% from the first half of 2017-18.
Mr. Cohen blamed the expected fall on costs of $10 million to $15 million in clearing older inventory prior to overhauling its product line ahead of the launch of a new brand and range of products in 2019..
Mr. Cohen added that full-year Australian label revenue growth for the Tasmanian company would be weaker than previously advised – at the lower end of the previously stated zero to 10% range.
“As flagged in August, we do see a more challenging FY19 trading environment and have observed slower China cross-border growth across the category, as well as increased competition in terms of both availability and trade pricing for both local and global competitors.
“We view these changes as short-term challenges that need to be cycled in FY19,” he told the meeting.
“Our guidance range is unchanged, but in the context of recent category performance, we anticipate full year Australian label revenue growth at the low end of the stated 0-10% range.
“We note that 1H19 sales are likely to be 10-15% below 1H18 due primarily to an expected $10-15M run-down of trade inventory prior to the rollout of the brand upgrade. Stronger performance is expected in 2H19 as we return to normal trading and implement key revenue initiatives including the brand upgrade launch.”
He said this includes s a continued review of the $6 million write-off provision set aside in 2017-18 for the launch to accelerate the transition and ensure a clean changeover.
Bellamy’s shareholders at the meeting also heard a warning that delays in securing a permit to sell directly in Chinese shops would slow revenue growth for as long as two years.
“China is an enormous and complex infant nutrition market and our top priority for the future,” Chairman John Ho said in his address.
Both the chair and CEO both emphasised that Bellamy’s is targeting more than $500 million in revenue by 2021, with a specific focus in China and broader Asia.
