The Motley Fool

Bubs share price sinks lower on Q1 update

The Bubs Australia Ltd (ASX: BUB) share price has come under pressure on Thursday following the release of its first quarter update.

At the time of writing the infant formula and baby food company’s shares are down 6% to $1.11.

What happened in the first quarter?

Whilst Bubs had a very strong first quarter in comparison to the prior corresponding period, its sales performance has weakened quarter on quarter.

During the first quarter Bubs delivered revenue of $14.21 million. This was a record for the first quarter and 58% higher than the same time last year. But it was 23% lower than the $18.46 million generated in the fourth quarter.

The main driver of its revenue growth during the quarter was its China business. China direct export sales increased 113% thanks to its Beingmate and Alibaba partnerships. These sales now account for 22% of gross sales.

This was supported by a 34% increase in Australia sales and a significant lift in International markets sales.

In respect to product categories, it was both infant formula and adult milk powder products doing the heavy lifting. Sales of Bubs Infant Nutrition products increased 66%, whereas Adult milk powder sales doubled.

Cash flows.

Due to the lower quarter on quarter sales and a jump in product manufacturing and operating costs, Bubs reported an operating net cash outflow of $4.15 million.

This ultimately led to the company finishing the period with a cash balance of ~$18 million, down from $23.3 million three months earlier.

Bubs CEO, Kristy Carr, was pleased with the quarter and appears confident on its prospects.

She said: “We are pleased to deliver continuing sales momentum with our first quarter sales delivering the highest on record. The quarter finished at $14.21million in gross revenues, which is up 58 percent on the prior comparable period. This demonstrates the validity of our continuing focus on our four-pillar growth strategy, combined with continuing investments in supply chain and manufacturing capabilities.”

“Our China route-to-market platform capability has advanced significantly through our new strategic and venture partners Beingmate, Alibaba and Kidswant, with the first quarter essentially given over to onboarding new partners while ensuring our other routes to market remained relevant and closely managed. Sales through these direct channels were initiated late in the previous quarter and are expected to underpin future growth in B2B export sales to China,” she added.

Elsewhere in the industry, the A2 Milk Company Ltd (ASX: A2M) share price has edged higher this morning after the release of an investor presentation.

NEW. The Must Buy Growth Stocks of 2020….

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield...

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

CLICK HERE FOR YOUR FREE REPORT!

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended BUBS AUST FPO. 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.

FREE REPORT: Five Cheap and Good Stocks to Buy now…

Our Motley Fool experts have FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.7% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

CLICK HERE FOR YOUR FREE REPORT!