Vitamins group, Blackmores saw its shares slump more than 15% at one stage on a sharp fall in profit, weaker sales in China and a big cut to its dividend.
The company revealed to the ASX yesterday that it had slashed annual dividend to $2.20 a share from 2017-19’s $3.05 a share after a slump in earnings for the year to June.
The final dividend was whacked to 70 cents a share from $1.55 a share as the company saw sales to the Chinese market slump 15% in the year to June.
Blackmores shares ended the day down nearly 15% at $70.90 – partly a result of the widespread slide in shares after Wall Street’s biggest fall of the year so far, but also to worries about the health of Chinese domestic demand where retail sales growth is slowing.
Thanks to those sliding sales in China Blackmores reported a 24% fall in its full-year net profit to $53 million.
Blackmores said changes in e-commerce laws in China, which came into force from January, hit its sales in that market.
“We continue to see an ongoing evolution in the way Chinese consumers access our products, with a shift away from Australian retailers to more direct purchasing from e-commerce platforms in China,” Blackmores said in the 2018-19 earnings statement.
“Sales in the China segment, comprising key export accounts and in-country sales were $122 million (down 15% compared to the prior year),” it said.
Total revenue rose a mere 1% to $610 million, well short of expectations, even after downgrades during the year.
The company said that excluding one-off costs associated with work to streamline the business, underlying net profit after tax was still lower than a year ago at $55 million.
During the year, Blackmores said it achieved domestic sales growth in all markets (except New Zealand, which was down 1% on the prior year).
Sales in Australia and New Zealand of $267 million were slightly ahead of the prior year (with a modest gain in Australia and a slight decline in New Zealand).
Across Asia, the company said it “saw strong growth in both well-established and new markets due to increased distribution and new product launches. This includes Vietnam up 157% and Korea up 28%. Indonesia sales were up 90% and pleasingly, the business turned profitable for the first time during the second half.”
“China sales were impacted during the year by changes to e-commerce laws, which took effect from January 2019.
“We continue to see an ongoing evolution in the way Chinese consumers access our products, with a shift away from Australian retailers to more direct purchasing from e-commerce platforms in China.
“Sales in the China segment, comprising key export accounts and in-country sales were $122 million (down 15% compared to the prior year).
However in-country within China business continues to grow strongly with sales up 22% during the year.