The Blackmores Limited (ASX: BKL) share price will be on watch this morning after the release of the health supplements company's third quarter results.
Here's how Blackmores performed in the third quarter compared to the prior corresponding period:
- Invoiced sales down 8% to $172.5 million.
- Revenue down 4.3% to $140.7 million.
- China-influenced sales down 6%.
- EBIT dropped 40.5% to $15 million.
- Net profit after tax fell 43.3% to $9.9 million.
- 9% domestic market share.
- Guidance: Modest full-year revenue growth.
The poor quarterly result was driven by a significant decline in sales in the ANZ market.
During the quarter the company saw revenue in Australia and New Zealand come in at $54 million, down a sizeable 26% on the prior corresponding period. This reduced its year to date revenue growth in these markets to just 3%.
And although China segment sales were up 19% on the prior corresponding period, this excludes China-bound sales generated by its ANZ segment.
Management estimates that overall sales to Chinese consumers were down around 6% for the quarter.
The company's interim CEO, Marcus C Blackmore AM, appeared to be disappointed with the company's performance during the quarter but optimistic on the future.
He said: "The third quarter has been challenging for the company. However, we firmly believe that this result does not reflect the long-term growth potential of the business."
What was the market expecting?
The market's expectations were relatively subdued after management warned that it did "not expect the second half profit performance to be ahead of the first half result."
According to a note out of Goldman Sachs, it expected the health supplements company to report sales of $186.1 million and EBIT of $20.7 million. This represented a decline of 1% and 18%, respectively, on the prior corresponding period.
As you can see above, Blackmores has fallen well short of Goldman's estimates during the quarter with a 8% drop in invoiced sales and a 40.5% decline in EBIT.
Unfortunately for its long-suffering shareholders, I suspect that this could put a lot of pressure on the company's shares today.
Should you invest?
I would suggest investors continue to stay well clear of Blackmores for the time being and wait for a significant improvement in its performance before considering an investment.
For now, I would sooner invest in fellow China-focused companies A2 Milk Company Ltd (ASX: A2M) and Bellamy's Australia Ltd (ASX: BAL) instead.
