Bellamy's Organic earnings results

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27 February 2019

Results ($m)

Half Year 2019

Half Year 2018

Change

Net Profit after Tax (NPAT) 

 8.1

22.4

-63.7%

Bloomberg Consensus 

 18.0

 

 

Revenue 

 129.6

 174.9

 -25.9%

EBITDA 

14.0

34.9

-59.9%

Australian Sales 

100.5

116.1

-13.4%

Overseas Sales 

53.9

27.2

-49.6%

Interim Dividend ($)

 Nil

Nil

 

Bellamy’s Organic (BAL) reports profit slump as the wait for accreditation continues

 

Results

  • Bellamy’s Organic has reported first-half net profit after tax of $8.1 million, a decline of almost 64% adjusted for a one-off $12.0m inventory provision for the recently launched rebrand and product upgrade. EBITDA was $14.0 million. Group revenue in 1H19 was $129.6m, a decline of 25.9% compared to $174.9m the previous corresponding period.

Drivers

  • BAL’s operations are comprise of 3 key segments. Australia Sales - revenues derived from sales to retailers and other resellers within Australia. Overseas Sales – revenue derived from sales to distributors and online customers overseas. And, Australia Manufacturing, which produces formula and other powders.
  • Afterpay has been benefiting from a general move away from credit cards, particularly with millennials who now account for 71% of transactions with the company. 
  • BAL’s fall in earnings over the period was driven by reduced Australian-label sales and no China-label sales. Domestic sales revenue fell by 13% over the measured period, reflecting both a decision to reduce trade inventory in advance of a rebranding initiative, combined with a slowdown in overall sales.
  • Overseas sales fell by almost 50%, driven by no Chinese sales for the period. This outcome was driven by a continued delay in Chinese State Administration of Markets and Regulation (SAMR) registration, which impacted revenues by $18.1m versus the prior corresponding period as Chinese-label sales ground to a halt in 1H19.  

Dividend

  • No dividend was declared.  

Outlook

  • Central to the outlook is BAL’s confidence in relation to SAMR registration being granted, with the application having been submitted in December 2017. BAL is confident approval will be granted, although to date no further news on its timing of approval
  • BAL’s other key focus is the launch of its rebranded range, which will be supported by the largest marketing investment in the company’s history, doubling marketing spend in 2H19 compared to1H19, with the key launch events commencing in March. 
  • Full-year FY19 guidance has been revised to group revenue of $275-300m allowing for slower trading prior to rebrand and during the lunar new year holiday, and stronger traction from March. EBITDA margin seen at 18-22%. This change incorporates the final 1H19 result and reflects a stronger investment plan in China over the coming period

Share price

  • BAL shares fell sharply initially on the back of its half year results, with the shares down by as much as 10% with investors unsettled by the continuing uncertainty in relation to Chinese accreditation issues.  

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