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In the morning exchanges Blackmores Limited The share price (ASX: BKL) fell as a result of the publication of its half-year results.
At the time of writing, health supplement company shares are down 34.5% to $ 80.91
What happened in the first half?
For the six-month period ended December 31, Blackmores achieved record half-year revenues of $ 319 million and net income after tax of $ 34 million. Revenues increased 11% compared to the previous corresponding period, while net income remained stable.
The company's chief executive, Richard Henfrey, blamed the lack of earnings growth on his investment in advertising and promotion, as well as a slowdown in growth in China.
He said: "Achieving record sales is a very important outcome for our company and highlights the benefits of our continued investment in advertising and promotion over the last few months. However, due to expected investment over the period and slowing growth in China, earnings growth was impacted in the near term. "
Revenues in Australia and New Zealand reached $ 144 million during the six-month period, up $ 23 million or 19% from the same period last year. This is due to both domestic growth and continued sales growth by Australian retailers focused on serving China's export channels.
Excluding Australian retailers selling abroad, domestic sales growth is estimated at about 6% for the six-month period.
The China segment of the company recorded an 11% decline in its half-year sales. However, taking into account China-influenced sales through Australian retailers, the company estimates that sales growth to Chinese consumers will be around 8%.
In the rest of Asia, the company recorded strong sales growth in several markets. In Korea, sales increased by 67%, in Taiwan by 150% and in Hong Kong by 39% compared to the previous corresponding period.
Finally, the company's BioCeuticals business supported this growth, with sales growth of 7% over the six-month period.
However, due to increased investment and weak sales in China, net income per share remained unchanged at 198.9 cents and the interim dividend at US $ 1.50 per share. The latter was in line with the previous period.
Perspective.
Management's outlook for the second half of the year and the year was rather disappointing. The company expects modest growth in its full-year sales after announcing that China's sales in the third quarter have been affected by changing buying patterns consumer products, higher inventories and a softening of consumer sentiment.
In light of this, he does not expect the earnings performance of the second half to be ahead of the first half results.
A small plus point is that a business improvement program has been put in place and aims for savings of $ 60 million over the next three years.
Should you invest?
I thought that the company's performance during the first half of fiscal 2019 was extremely disappointing. Blackmores has taken advantage of the doubts of many investors over the last two or three years, but I imagine that this result could be the straw that breaks the camel's back.
I intend to stay away from his actions until his performance improves and becomes more consistent. Until then, I will look at other companies focused on exporting A2 Milk Company Ltd (ASX: A2M) and Treasury Wine Estates Ltd (ASX: TWE) instead.
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James Mickleboro, a contributor to Motley Fool, holds no position in any of the shares mentioned. Motley Fool Australia owns shares and has recommended Blackmores Limited and Treasury Wine Estates Limited. Motley Fool Australia owns A2 Milk shares. We fools may not all have the same opinion, but we all agree that taking into account a wide range of ideas makes us better investors. Motley Fool has a disclosure policy. This article contains only general investment tips (under AFSL 400691). Authorized by Scott Phillips.
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