Blackmores Full Year Result: A tough year but light at the end of the tunnel for BKL

CommSec

 Blackmores Limited (BKL) reported a fall in full year net profit for 2017 as sales fell by 3.4%. The full year result was hit by the well televised slide in demand from Chinese shoppers here in Australia taking goods back to China. The so called “Daigou market” where Aussie retailers would see strong sales as high demand for Blackmores’ products from friends, family and holiday makers who would then ship the goods directly back to China. Sales in the last quarter of 2017 did improve by 6.1% after revising its business model to meet demand.

 The full year result was also hit by regulatory changes in direct sales to importers and retailers within China. The changes in sales trends meant that Blackmores’ had to change its manufacturing and inventory levels to make sure it protects the business from the possibility of more changes to come. This was a very high margin position of BKL’s sales so it impacted not only product delivery but also overall business viability and future planning. Blackmores said” inventory provisions have been increased from $2 million to $14 million, this includes approximately $10 million in provisions above normal levels, impacting earnings by the same amount”.

 Over the year Blackmores Australia and New Zealand sales fell 23% to $372 million, largely due to the fall in Daigou sales and branded domestic sales were flat.

 Asia direct sales were $216 million, up 36% with Blackmores China direct sales up 71% on the prior year to $132 million. In September 2016, Blackmores launched new brands into in Indonesia and Vietnam which is expected to expand the offering in the next few months. BioCeuticals and Global Therapeutics delivered sales of $102 million, up 42% with a strong innovation pipeline delivered in the year.

 Blackmores’ did not give any firm forecast guidance but stated that the market conditions are evolving in Australia and that the Asian regulation changes do provide challenges but could also provide opportunities. Blackmores’ said “management and the Board expect year-on-year profit growth this financial year”.

 Blackmores announced a second half dividend of $1.40 to be paid on the 26 September 2017.

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