The BWX Ltd (ASX: BWX) share price has made its long-awaited return to trade this morning.
Unfortunately, it hasn't been a happy one for the embattled personal care products company's shares.
In morning trade, the BWX share price is down a massive 48% to a record low of 32.5 cents.
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Why is the BWX share price crashing?
Investors have been hitting the sell button today in response to the company's disastrous business update.
That update revealed that BWX recorded a statutory loss of $335.6 million in FY 2022, fell short of guidance for the year, and downgraded its FY 2023 guidance. The latter is particularly disappointing given that it raised funds on the back of this guidance at the end of June.
But perhaps worst of all was the company admitting that it had been using a deceptive sales practice known as channel stuffing. This involves unnecessarily selling large volumes of products to distributors just before the end of the financial year to inflate sales and earnings figures for the period.
And while the company has overhauled in management team and board room in response to this debacle, that hasn't stopped the BWX share price from being sold off.
A mountain of debt
Investors may also have concerns over the company's balance sheet. Management expects its net debt to peak at $95 million, which is now more than its market capitalisation following today's decline.
In addition, it still has a put option liability of at least $59 million (but potentially as much as $89 million) relating to its acquisition of Zoe Foster Blake's s Go-To Skincare business.
This doesn't bode well for its debt covenants. In fact, the company expects to breach them at the end of January if they are not waived.
In its accounts, the company commented:
The Group had waivers in place in respect of certain of its required banking covenants which would otherwise have been breached as at 30 June 2022. Additional waivers were provided subsequent to that date, the latest of which expires on 31 January 2023 and the Group's forecasts indicate that subsequent breaches are likely and therefore a further waiver or renegotiation of banking covenants will be required.
All in all, these are tough times for the BWX share price and its shareholders.
