Bubs (ASX:BUB) share price sinks 7% after posting $74.7 million loss

This infant formula company has posted a huge loss in FY 2021…

| More on:
A man holds his head and look in horror at a betting slip, indicating share price drop on the ASX market

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Bubs Australia Ltd (ASX: BUB) share price is under pressure on Tuesday following the release of its full year results.

In morning trade, the struggling goat milk infant formula company's shares are down 7% to 39 cents.

Bubs share price sinks after posting $74.7 million loss

  • Revenue down 24% year on year to $46.8 million
  • Underlying EBITDA loss of $28.5 million
  • Statutory loss after tax of $74.7 million
  • Cash balance of $27.9 million

What happened in FY 2021 for Bubs?

For the 12 months ended 30 June, Bubs reported a 24% decline in revenue to $46.8 million. This was driven by a 44% decline in Australian sales to $20.4 million and a 17.5% decline in China sales to $10.47 million.

Things were much worse on the bottom line, with the company posting a massive loss after tax of $74.7 million. The latter appears to be weighing heavily on the Bubs share price today. However, it is worth noting that some of this loss reflects a $44.6 million non-cash impairment relating to the Nulac Foods cash generating unit and Deloraine Dairy cash generating unit. This was driven by the conservative outlook the company has adopted over next five years due to the prolonged uncertainties.

On an underlying basis, Bubs reported an operating loss of $28.5 million. This reflects its weaker sales, a $12.6 million inventory write down, and the sale of excess bulk powder at a loss to maximise its cash conversion.

This left Bubs with a cash balance of $27.9 million, which management believes is sufficient to fund its FY 2022 growth plans. Though, that seems unlikely to ease concerns that the company will require yet another capital raising in the near future. This could be another factor weighing on the Bubs share price today.

What did management say?

Bubs' Founder and Chief Executive Officer, Kristy Carr, said: "There is no doubt that the disruptions caused by the COVID-19 pandemic significantly impacted our performance, with international border closures triggering a severe demand shock and sharp decline in revenues in the first quarter, followed by subdued Daigou sales throughout the remaining three quarters. In addition, we experienced disruption and increased costs associated with outbound international supply chain logistics."

"As we pivoted to new ways of doing business, resetting our supply chain, and working closely with our key domestic and international trading partners, our agility and resilience have underpinned our momentum toward a rebuild phase, following the setback in the first quarter. The strategies implemented to redirect product through the eco system led to an uplift in the second half delivering ten percent half-on-half growth, and we can report that our fourth quarter gross revenues were only four percent below the fourth quarter of FY20."

Mrs Carr added: "In response to the COVID driven demand shock, we followed a strategy of resisting pressure to push inventory to distributor channels and instead took the position of discounting sales of bulk powder to clear excess inventory and prioritise cash conservation. This enabled the Company to return to a balanced inventory position, with milk supply rightsized to match stabilised offtake demand forecasts."

What's next for Bubs?

No guidance has been provided for the year ahead. However, Bubs appears optimistic it could be a better year.

Bubs' CEO Kristy Carr commented: "Bubs is well placed with strong foundations, brand share growth, and a robust balance sheet to go forward with a sustainable growth strategy as the Australian lead challenger brand in infant nutrition."

"The company is now well placed to go forward and we expect to see growth momentum across all channels in FY22."

Bubs share price performance

The Bubs share price has unfortunately destroyed significant wealth over the last 12 months.

Following today's decline, the Bubs share price is now down 58% over the period. This compares to a 24% gain by the ASX 200 index over the same period.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended BUBS AUST FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Earnings Results

Man jumps for joy in front of a background of a rising stocks graphic.
Earnings Results

Catapult shines: 20% sales growth propels ASX tech stock to new 52-week high

A strong annual result from this tech player has caught investor attention.

Read more »

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
Earnings Results

Xero share price leaps 8% on staggering earnings upheaval

A major turnaround in profitability is sending investors into a frenzy over Xero shares today.

Read more »

a construction worker sits pensively at his desk with his arm propping up his chin as he looks at his laptop computer while wearing a hard hat and visibility vest in a bunker style construction shed.
Materials Shares

Which ASX 200 stock just plunged 12% despite record full-year earnings?

It looks like an impressive report card but UBS doesn't like the FY25 guidance.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Earnings Results

ASX 200 tech stock lifts off on another record-setting half-year profit

Investors are bidding up the ASX 200 tech company following its half-year results.

Read more »

increasing rural asx share price represented by happy looking sheep
Earnings Results

Why is this ASX All Ords stock staying strong as profits crash 76%

How is this company's share price marching higher after mowing down more than three-quarters of its profits compared to a…

Read more »

Two men sit side by side on a couch with video game controls in their hands and expressive looks on their faces as they react to the action in front of them in a home setting.
Earnings Results

Guess which ASX 200 stock is surging 11% on an 'outstanding' result

This ASX gaming giant just posted a 17% jump in profits, and its shareholders are basking in the glory.

Read more »

Agricultural ASX share price on watch represented by farmer in field looking at tablet computer.
Earnings Results

Graincorp share price lifts off as dividend is maintained and debts plunge

ASX 200 investors are bidding up the Graincorp share price today. But why?

Read more »

Smiling elderly couple looking at their superannuation account, symbolising retirement.
Earnings Results

Why is this ASX 200 stock avoiding the market selloff and pushing higher?

Not all shares are falling with the market on Thursday.

Read more »