The new CEO of natural health company Blackmores, Richard Henfrey, has declared the company “pretty fighting fit” after it reported full year results for fiscal 2017 which included a 42 per cent fall in bottomline profit
On Tuesday the company posted a net profit after tax of $58 million but Mr Henfrey said overall he was pretty pleased with the results which included a 71 per cent surge to $132 million in direct sales to China and strong growth in other Asian markets.
“We’ve come through the year in a much healthier and stronger position than we were in at the beginning of the year,” he said.
“We had an exceptional year in fiscal 2016, Marcus Blackmore called it our gift year. And we certainly flagged early that we weren’t going to be able to match the level of profits that we had in fiscal 2016,” he said.
“If you look at our return on net assets at 20 per cent, return on shareholders’ funds (at) 33 per cent, 25 per cent growth on the fiscal 2015 profit, we’re feeling pretty fighting fit,” he said.
The market gave Blackmores a positive bill of health as well, with its shares jumping $6.82 to close at $97.99, the stock’s highest closing price in almost two months.
Blackmores was forced to make significant operational adjustments over the last 16 months or so in response to a major change in buying behaviour by Chinese entrepreneurs and tourists who were buying Blackmores products in . These people had been buying in , and then selling the goods to Chinese buyers at a healthy profit.
But this market segment was significantly affected by speculation about potential Chinese regulatory changes in April 2016.
“The decline in sales to Chinese consumers through n retail was significant and came without warning,” Blackmores said.
Blackmores described fiscal 2017 as a “rebalancing year” after two years of exceptional growth. Its full year results included the 42 per cent fall in net profit after tax to $58 million, and a three per cent fall in sales to $693 million.
The company declared a final dividend of $1.40, fully franked, to be paid on 26 September. The full year payout will be $2.70, a 34 per cent decline on last year.
Direct sales to China for fiscal 2017 rose 71 per cent to $132 million. When sales via n retailers were included, Blackmores estimated that China accounted for about $250 million of total sales.
Morningstar analyst Chris Kallos also gave the company a tick.
“Overall I think the number’s strong, and I think it’s all moving in the right direction,” he said.
“This has been an adjustment year after a very strong banner year last year, driven by that explosive surge in sales in the domestic market from inbound Chinese tourists. So in that context, I think the improvement during the year has been very strong.”
Mr Kallos said that over time, pent up demand would lift direct sales of Blackmores products in China.
“They’re emerging from what they call a rebalancing year, with their whole Asian growth story intact,” he said.
Outgoing chief executive Christine Holgate said: “After a turbulent start to the year, we are pleased with our recent performance.”
Ms Holgate said the company had responded quickly to the changed market conditions in China.
“The demand for Blackmores products in China remained strong throughout the year although the route to serve it has changed significantly,’ she said.
In other market news on Tuesday shares in Bubs , the infant formula and organic baby food products business, dropped seven cents to 61.5 cents after it released its preliminary results for fiscal 2017.
The company said it recorded sales growth “quarter on quarter” throughout the year, and full year revenue of $4.53 million. However, the company recorded a statutory loss before tax of $5.04 million.
Bubs chief executive Nicholas Simms said the results “reflect a business in transition”.