Blackmores' H1 sales strong in Asia, but firm issues warning over ingredient shortages

By Cheryl Tay

- Last updated on GMT

Despite improved sales, Blackmores' share price has fallen due to supply issues.
Despite improved sales, Blackmores' share price has fallen due to supply issues.
Double-digit sales growth across Asia has boosted Australian manufacturer Blackmores' financial performance for the half-year ended 31 December 2017, though supply issues are presenting a challenge, the firm has revealed.

In China alone, sales increased by 27% to $74m in the half-year to 31 December, in part due to record sales from online promotional events such as Singles Day (11/11) and 12/12, with profit growing by 4%.

At the same time, the company's sales in other Asian markets rose by 18% to reach $39m. Blackmores said its Korea business has stabilised with strong growth through offline retail and the duty-free channel.

"In Indonesia, we're encouraged by early consumer feedback and sales, healthcare professional support and distribution, and accordingly, we have invested further in this market, in line with our business plan.

"Blackmores launched in Vietnam with five products now registered,"​ the company told investors.

Australia and New Zealand revenues of $121m were slightly down compared to last year, "as the broader consumer market remained subdued and China-influenced sales continue to move to our direct China channels"​.

Overall, net sales totalled $287m, up 9% compared to the previous corresponding period. Net profit after tax stood at $34m, up 20%.

Its practitioner-only business, BioCeuticals, saw sales growth of 11%.

Share price dips and supply challenges

Despite this, however, Blackmores' shares fell by 16% to $134 this morning (22 February), amid ongoing shortages of ingredients such as fish oil and whey protein.

The dip followed an improvement in share prices over the last four to five months. While still lower than the 2016 peak of $200, they had been trading at around $160, nearly double the valuation in August last year.

In its official financial report, chairman Stephen Chapman said: "Continuity of supply has been a challenge in the second quarter, as suppliers have struggled to respond to the Group's increased requirements."

He further warned that this would affect Blackmores' performance in the second half of the financial year, though profits are expected to remain healthy.

Maintaining a positive outlook

Blackmores is continuing to expand its presence in China, with Blackmores Institute having signed what it terms a 'landmark partnership' with Beijing's Tsinghua University, in order to develop a health communication curriculum course for natural medicine.

Chapman said, "This partnership demonstrates the global reputation of the Institute's research and education programme, and the healthcare professionals who support it."

He also said the company was maintaining a positive outlook despite its issues with supply: "The first-half performance gives Blackmores a strong foundation for the full year, with the delivery of an improved sales and profit result whilst investing in growth initiatives."

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