Blackmores Limited reports 19% profit growth and an acquisition

Blackmores Limited (ASX:BKL) has reported profit growth and an acquisition.

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Blackmores Limited (ASX: BKL) has reported its quarterly result for March 2018. Blackmores is Australia's leading vitamin business.

The headline figures from its update is that Blackmore's profit after tax for the first nine months of FY18 is up 19.3% to $52 million and revenue is up 8.5% to $434 million. For the March quarter alone, revenue was up 7.3% and profit after tax was up 16.2% compared to March 2017.

The vitamin company said that sales in China were $102 million for the nine months, an increase of 21% over the prior corresponding period. Sales were below expectations in the third quarter due to supply challenges and customer trading term re-negotiations.

Blackmores also announced an acquisition. It said that it had acquired 100% of Catalent Australia, which is a tablet and soft-gel capsule manufacturing facility in Victoria for $43.2 million. The transaction will completed by 31 October 2019 and will be debt funded.

Management said this acquisition was very strategic and will give the company increased control and agility to respond to changing market conditions while also helping the company future proof the Asian business because product registration will be increasingly important in the region.

Blackmores also said that the facility will give the company increased research and development capabilities.

The company announced Jackie McArthur as a new Non-Executive Director, she has a lot of Asian business experience and should be able to help Blackmores expand further in the region.

Outlook

Blackmores expects that the fourth quarter will deliver continued growth as supply constraints ease and growth in China continues. The Blackmores Board expects the current growth trajectory will continue and that it will 'deliver good profit growth for the full year.'

Foolish takeaway

The market doesn't seem overly enthusiastic about this result, the share price is only up 1%. Considering the share price has dropped from above $170 a few months ago to today's $125, Blackmores will have to deliver good growth in the final quarter to move the share price up significantly in 2018.

Blackmores is a pretty good business but it's still priced for a lot of future growth, I'm going to be avoiding it for the time being, I'd only be interested for a value buy if it fell below $100 again.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores Limited. 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 Scott Phillips.

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