A sedate reaction from investors to what wasn’t the best of interim results from Tasmanian-based baby formula and food company Bellamy’s Organic.
The company revealed a 64% slump in first-half net profit, with revenue hit by a number of factors, including delays in registering its products in China.
On a statutory basis, profit was down for the first half to $8.1 million, after one-off costs of $8.4 million.
On a normalised basis, Bellamy’s recorded a December half net profit after tax of $16.5 million, down from $22.4 million last year, and below consensus expectations of $18 million.
In early trade, the shares fell more than 8% to at $7.26 but then bounced to close up 0.2% at $8.09.
Normally such as sharp fall in profit for a popular company would have triggered a much more violent sell-off, but the company had warned investors to expect something like this at the AGM last November and the investor day a little later.
For example, shareholders at the AGM heard this warning:
“As previously stated, we expect FY19 performance to be impacted by slower category growth and a more competitive trading environment…Additionally, there will be a short-term trade-off to sales and profit in 1H19 as we run-down trade inventory to maximise the success of our formula relaunch in 2H19.”
And that’s what they essentially got in the interim result.
“While we faced numerous challenges in the first half of 2019, the business emerges with a winning product that combines the best of organic with the best of science,” Bellamy’s CEO Andrew Cohen said yesterday.
“Together with an already strong brand, this change sets a new platform for long-term growth and higher levels of investment in China,” he said.
Bellamy’s said its lower group revenue result for the half of $130 million (down from $174.9 million in the prior corresponding period) and its earnings before interest, tax, depreciation and amortisation of $26 million (down from $34.9 million in the prior corresponding period) “largely reflects the net impact of lower revenue and an improved gross margin”.
The company said its revenue was hit in the half by a number of factors including delays to registration needed to sell some of its products in China, an “observed slowdown in category performance” and a reduction in trade inventory prior to a rebranding undertaken by the company.
The company said that its expected revenue for the full 2019 fiscal year is expected this to be in the range of $275-$300 million, adding that this estimate allowed “for slower trading prior to the rebrand and during the lunar new year holiday, with an expected return to stronger performance from March”.
