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How Bubs Australia Ltd is posting more growth

Bubs Australia Ltd (ASX: BUB) has posted its quarterly results, showing that gross sales increased along with China’s appetite for the company’s products.

Bubs Australia, formerly known as Hillcrest Litigation Services Limited, sells organic foods and infant formula made from goats’ milk and its share price has boomed over the past year, gaining about 300 per cent.

The company stated that gross sales for the second quarter (Q2) of financial year (FY) 2018 came to about $1.99 million, representing an increase of around 15 per cent on the previous quarter’s figure of $1.72 million.

Bubs also stated that “Q2 Gross Profit improved 114 per cent year to date, per comparable period last year”, but did not provide an exact figure.

While Bubs was able to demonstrate sales growth, the 15 per cent increase shows a slowdown in the company’s quarterly rate of growth.

For the first quarter of FY 2018 Bubs was able to post sales growth of 22 per cent on the previous quarter, meaning the company’s quarterly growth rate has slowed by about 7 per cent.

Bubs stated that quarterly growth was driven by increased infant formula sales in both domestic markets and “selected China cross-border e-commerce channels”.

Like other companies with a hand in infant formula, such as Bellamy’s Australia Ltd (ASX: BAL) and A2 Milk Company Ltd (ASX: A2M), the Chinese market continues to represent great potential.

Bubs distinguishes itself from its competitors by placing a focus on goats’ milk.

Bubs says it’s poised to become “Australia’s only vertically integrated producer of goat milk formula” following its acquisition of NuLac Foods, a deal which was completed in December.

The company stated that the acquisition guarantees it a “sustainable supply of Australasia sourced goat milk and control over the key base ingredient” for its products.

Bubs also stated that it maintains a “strong balance sheet” with $8.7 million in cash reserves as at 31 December 2017 with “no debt outside of existing trade partners’ payment terms”.

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Motley Fool contributor Steve Holland has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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