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Cautious Outlook Bites Blackmores, Bellamy's

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Thumbs down from the market yesterday to half year updates yesterday from two former market darlings - Blackmores and Bellamy’s.

Investors hummed and harred about Bellamy’s Australia first half report and its near tripling of its first-half net profit to $22.4 million in the six months to June (from $7.2 million a year ago) and concluded it wasn’t as good as it looked and sold off the shares.

The shares rose to a day’s high of $16.05, then sank to end the day down 5.9% at $14.90.

First half sales jumped almost 48% in the six months to December 31 to $174.9 million, driven by an increase in volumes and a small contribution from the acquisition of the Camperdown Powder manufacturing business in Melbourne.

To some investors the results confirmed that turnaround at Bellamy’s is on track, to others there were question marks.

For example, while Camperdown made a small contribution, it is expected to post a loss of $1 million to $2 million in the year to June.

The Camperdown purchase is part of Bellamy’s to make sure it can continue selling its products into China.

CEO Andrew Cohen said Bellamy’s has registered its application for the special licence which is required to sell Chinese labelled products from stores in China.

"The authority may take six months or more to consider the application," he said.

He said the company decided to suspend its major upgrade to Camperdown by 12 months and the cost has increased from $7.5 million to $12 million to $15 million as Bellamy’s seeks higher automation and higher spec equipment.

"We have submitted our CFDA application and deferred the major facility upgrade at Camperdown to allow for this submission and initial production," he said.

That was a big oops for investors who were not aware of what seems to be a delay and higher costs, hence the sell off.

No interim dividend was declared.

Blackmores shares slumped yesterday despite the vitamin maker boosting first-half profit by 20%.

Investors preferred to focus on the company’s warning of a soft second half due to supply issues and a weaker Australian market.

Blackmores shares were down 17 per cent to $132.52. They ended down 14.7% at $136.

Revenue rose 9% to $287.4 million, while revenue in Australia and New Zealand was slightly lower at $121 million as the broader local consumer market remained soft. But China revenues grew 27% (which is the real story with this company and Bellamy’s) with revenue of $73.9 million compared to $58.1 million a year ago as online promotion events delivered record sales.

“The first half performance gives Blackmores a strong foundation for the full year,” new CEO Richard Henfrey said yesterday.

“We have delivered an improved sales and profit result whilst investing in growth initiatives.

“We’re particularly encouraged by the progress of our businesses in China and Indonesia.

“Supply issues affecting the Group and the soft Australian retail market will impact us in the second half, though we remain confident we will continue to deliver good profit growth for the full year.”

The company also flagged a $2.8 million increase in its provision for doubtful debts in China.

Blackmores other businesses in Asia, including Malaysia, Singapore, Hong Kong and Korea, also saw strong sales growth in the first half with the division's revenue up to $39.4 million, from $33.4 million in the previous corresponding year.

The BioCeuticals division saw sales growth of 11% in the half.

The company declared a fully franked dividend of $1.50 cents a share, up 15% from the $1.30 a share a year ago.

View More Articles By Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.



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