BWX Ltd (ASX: BWX) may be holding its annual general meeting today, but it appears that the personal care products company's management hasn't been able to use the event to convince shareholders that things are improving.
Investors have continued to hit the sell button in a hurry on Wednesday, leading to its shares falling over 5% to a 52-week low of $2.52.
This latest decline means that BWX's shares have now fallen a massive 26% since this time last week.
Why are BWX's shares sinking lower today?
BWX's shares have been under significant pressure since the release of a trading update on Monday which revealed that normalised earnings before interest and tax is expected to be flat in FY 2019.
While this is clearly very disappointing, perhaps most worrying for investors is the fact management expects a significant skew in earnings to the second half. It has forecast just 30% of its earnings being generated in the first half.
While it may not prove to be the case with BWX, I have lost count of how many times I have seen companies promise a stronger second half to make up for a soft first half. Quite often the stronger second half fails to materialise and the company's shares crumble.
Because of this, I can't say I'm surprised that its shares have come under significant selling pressure this week.
Why the skew?
Management added a bit of colour to the skew at its annual general meeting today.
The blame has been placed largely on the failed takeover process draining on management time and resources at a critical period when several platform improvement projects were in execution phase.
One of these was the enterprise resource planning (ERP) platform using Microsoft Dynamics365.
According to the release, the "ERP is the central planning and organisational system that connects all business processes. It is critical across the business, for procurement, production, warehousing, shipping and selling our brands."
This initiative aimed to move the entire business to a single global ERP instead of the three it was previously using. It was expected to go live mid to late August, but was ultimately delayed until early October.
This resulted in "a 6-8-week impact on sales (primarily Sukin and Nourished Life) and materially higher Opex to ship lower volumes." This led to the delay of the Sukin rollout in Kmart and the delayed execution of the in-store element of the Sukin "Nothing but Special" advertising campaign.
Other delays were made to its acquisition integration program, the Nourished life warehouse relocation, the USA warehouse consolidation, hiring of talent in APAC and USA, and the Mineral Fusion re-branding.
But with all projects back on track and essentially complete now, management is confident that the benefits will be reflected in an improved second half performance.
This is also expected to be supported by key consumer facing data points. Management confirmed that its "categories are growing in all active markets – and the natural segment is outpacing category growth."
Should you invest?
While I think that management makes a fair point on the disruption, I'm not overly convinced that this was the sole reason for the poor performance.
Especially given the significant slowdown in Sukin sales in FY 2018. Sukin sales in the second half of the last financial year were down 5.1% on the prior corresponding period to $29.4 million.
This decline was blamed on supply chain management, postponement of new international market entries, and reduced promotional investment.
Because of this, I would suggest investors wait to see if this big improvement occurs in the second half before considering an investment.
In the meantime, I would sooner buy fellow beaten down shares A2 Milk Company Ltd (ASX: A2M) Bellamy's Australia Ltd (ASX: BAL).
