The Blackmores Limited (ASX: BKL) share price is on the move this morning, following the release of the health supplements company's results for the half year ended 31 December 2019.
Blackmores shares have wavered in early trade and are currently down 0.85% at the time of writing.
ANZ segment sees fall in revenue and earnings
Blackmores reported that revenue in its Australia and New Zealand segment came in at $115 million, which was a 20% drop on the previous corresponding period (pcp). ANZ earnings before interest and tax (EBIT) also declined significantly during the period, coming in at $15 million, down by a hefty 55% on pcp.
Blackmores noted that regulatory changes in China impacted revenue in Australia, and additional material and packaging costs also contributed to the decline in earnings.
China sees a small revenue decline
Blackmores' China segment saw a revenue decline during the half of 6% on pcp. In-country revenue grew slightly, up by 2%. EBIT in the China segment, however, declined by 58% in the period.
The company notes these results were impacted by higher material and packaging costs as well as provisions for risk of stock obsolescence and receivables.
Other Asian market segment grows strongly
Blackmores reported overall revenue in its 'Other Asia' market segment was up by 29%. Strong growth was highlighted in markets such as Malaysia, which saw a 9% increase in in local currency, and Indonesia, which was up 45% in local currency.
EBIT for the Other Asia segment was up 70% during the half, due to increased revenue performance, cost management, as well as strong revenue growth of infant formula and a weaker Australian dollar.
Company strategy moving forward
Blackmores commented that it currently has plans underway to strengthen its Australian business, with a focus on improving gross margins. It has also made a decision to step up investments in China, as well as focus on Indonesia and enter into the Indian market within 12 months.
With regards to Indonesia, it commented that the group's business and joint-venture with Kalbe Farma has been performing well ahead of expectations and has been delivering very strong year-on-year revenue growth. Blackmores views India as a very attractive opportunity with the country's vitamin and dietary supplement market growing strongly, and it expects this trend to continue.
As Blackmores had previously announced, it will not be paying an interim dividend, choosing to instead conserve cash for operations and growth operations.
Commenting on the new strategy, Blackmores CEO Alastair Symington said:
The strategic review process has defined an exciting and clear direction for the Group. We confirm today that the Blackmores Group sales performance in the first-half has been broadly in-line with expectations and our brand health metrics are very strong. However, there is acknowledgement that our costs have increased at a greater pace and our structure has become overly complex, which is the responsibility of the new Executive Team to fix.
Outlook
Blackmores anticipates that its overall revenues in the second half of FY20 will be similar to that achieved in the first half. However, the company did note that the higher costs associated with manufacturing and other factors, including the impact of the coronavirus outbreak, will have a significant impact on its overall FY20 result.
Due to these factors, the company now anticipates that full-year net profit after tax will be in the range of $17 million to $21 million.
