Key points
- Bubs has delivered strong growth during the second quarter
- Demand in daigou channel improving
- Solid growth in Australian channels
The Bubs Australia Ltd (ASX: BUB) share price has started the week with a bang following the release of its second quarter update.
At the time of writing, the infant formula company's shares are up 14% to 51 cents.
Bubs share price jumps on improved performance
- Quarterly gross revenue up 8% quarter on quarter and 56% over the COVID-impacted prior corresponding period to $19.9 million
- Half year revenue of $38.5 million, which is up 73% over the prior corresponding period
- Infant formula revenue up 83% across all markets
- Corporate daigou channel revenue up 196% and China CBEC sales up 48%
- Generated positive cash flow for second quarter in a row, improving cash balance by $2.3 million to $30.6 million
What happened during the second quarter?
The Bub share price is storming higher today after revealing a major improvement in its performance during the second quarter. This saw revenue grow 56% over the COVID-impacted prior corresponding period to $19.9 million.
Management advised that this was driven by demand for its infant formula, particularly in China. Its corporate daigou channel delivered growth of 196% after demand exceeded pre-pandemic levels. This was supported by the Chinese cross border ecommerce channel, which reported a 48% lift in sales.
Bubs also revealed that sales have been strong in Australian supermarkets and chemists. And while it claims to be the fastest growing infant formula brand across these channels, it is worth remembering that it is growing from a very small base compared to its larger rivals. The company's current market share stands at 3.9%.
All in all, this improved performance led to Bubs generating positive cash flow during the quarter, lifting its cash balance by $2.3 million to $30.6 million. Though, this was also due to its cash receipts being $4 million larger than its revenues during the period.
Management commentary
Bubs Founder and CEO Kristy Carr, commented: "Bubs has consolidated the solid gains of its COVID turnaround in the first quarter into a pattern of growth momentum across all key markets and product groups. Bubs Infant Formula remains our hero product line and lead margin driver, up 83% on prior year, accounting for nearly two thirds of revenues.
"On the home front, sales revenue of branded products increased 17 percent quarter-on-quarter. Despite the subdued market, Bubs Infant Formula grew in both absolute terms and in market share with scan sales growth of 31 percent in Coles, Woolworths and Chemist Warehouse consolidating its strong market share position to remain the fastest growing infant formula manufacturer, achieving nearly 4 percent market share of the total infant formula category."
Outlook
Bubs' Executive Chair, Dennis Lin, said: "Against the backdrop of myriad challenges, the team continue to execute strategy with precision through operational excellence, and the results speak for themselves as we lead the return to growth for our category."
"As our momentum gains further pace, we will continue to look for ways to grow through market and products expansion as we aspire to become the leading global family nutrition brand from Australia," Mr Lin concluded.
