Bellamy's announces 37% sales growth, but still waiting for China go-ahead

By Cheryl Tay contact

- Last updated on GMT

Spurred by its dramatic turn in fortunes, the company has revealed a three-year growth strategy that includes a plan to achieve US$359m (A$500m) in revenue by 2021.
Spurred by its dramatic turn in fortunes, the company has revealed a three-year growth strategy that includes a plan to achieve US$359m (A$500m) in revenue by 2021.

Related tags: Infant nutrition, Australia, China, financial report

Infant nutrition firm Bellamy's Organic has announced a 37% year-on-year growth in sales revenue to US$236.1m (A$329m) for the 2018 financial year, up from US$172.3m (A$240m) in 2017.

The company's profit after taxes stood at US$30.9m (A$43m), a radical improvement from the previous year, when it posted a statutory loss of US$717,635 (A$1m).

Bellamy's troubles in 2017 were characterised by boardroom drama​ that saw major shareholder Black Prince Private Foundation demanding the removal of four independent, non-executive directors.

This came after a drop in the firm's share prices and its voluntary suspension from trading shares on the ASX, due mainly to China’s new infant formula regulations.

Shortly after, then-CEO Laura McBain was removed and replaced by current CEO Andrew Cohen, but Bellamy's shares continued to slide​.

Aussie ambition, Chinese apprehension

Now, spurred by its dramatic turn in fortunes, the company has revealed a three-year growth strategy that includes a plan to achieve US$359m (A$500m) in revenue by 2021, and an "aggressive pipeline of new products"​.

However, Cohen said this revenue growth forecast was specifically for its Australian business, thanks to the uncertainty surrounding its application for its Chinese-label formula products with the State Administration for Market Regulation (SAMR), submitted in late December 2017.

SAMR approval would allow Bellamy's Chinese-label products to be sold in China through e-commerce and in retail outlets, creating a new growth platform for the firm.

Additionally, the company acknowledged in its ASX release the presence of a "more competitive trading environment" ​for its Australian-label products, which has led the management to anticipate more moderate revenue growth of up to 10% for the 2019 financial year.

It also cited a "change in the availability and e-commerce pricing of our Australian and New Zealand competitors" ​as another reason for its relatively conservative outlook for 2019, which expects the aforementioned 10% revenue growth to be predominantly achieved in H2 2019, "upon the launch of key revenue initiatives"​.

Bellamy's added that it foresaw "additional revenue opportunity for Chinese-label business when SAMR registration is achieved"​.

More sustainable, but still volatile

In the release, Cohen said, "We have established a more sustainable business model, including stronger revenue management disciplines, material savings in (the) cost of goods and logistics, and greater investment in our brand, product and marketing.

"SAMR registration of our Chinese-label formula is important to concluding the turnaround, and we remain confident in our technical application and prospects for registration. We continue to plan and organise for a winning model in the China offline channel.

"The medium- to long-term outlook remains compelling, supported by category fundamentals, our differentiated position, and future brand and channel opportunities. We have laid the foundations with an ambition to build a $500 million revenue business by FY21."

Meanwhile, Bellamy's stock remains volatile, dropping in the early stages of trade before seeing a shap recovery to 7.5% (83 cents) at US$8.61 (A$11.96).

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