The Bubs Australia Ltd (ASX: BUB) share price is falling on Thursday despite a big announcement.
In morning trade, the infant formula company's shares were down almost 9% to 20.5 cents.
The Bubs share price has retraced some of this decline and currently sits a touch over 4.5% lower at 21.5 cents.
What's going on with the Bubs share price today?
This morning, Bubs announced the results of its hotly anticipated strategic review.
This review was put in place by the company's new management team in response to the failings of its previous (now removed) leadership.
Bubs' Chair, Katrina Rathie, unveiled a five-point plan which aims to "responsibly manage capital and to grow and maximise shareholder value."
This comprises resetting the China business, optimising its portfolio, pushing for further growth in the United States, sweating existing assets, and cutting costs.
In respect to the latter, the company expects to reduce its monthly cash burn by more than half to $2 million a month from the second quarter of FY 2024.
Whereas in China, a reset has now commenced with a multi-channel go-to-market strategy under new leadership and new trade partners. The company intends to focus on where it has a competitive advantage – goat infant milk formula and goat adult milk powder.
Bubs' recently appointed independent non-executive director, Reg Weine, was tasked with leading the review. He commented:
We must immediately arrest the decline in shareholder value and get Bubs back on track. Capitalising on our first mover advantage in the US and resetting China are two significant components of our strategic plan. We have a clear competitive advantage in goat infant and adult nutrition, and we need to focus our efforts on this part of our portfolio. With a greater focus on working capital, and tighter control on costs, we will quickly reduce the monthly cash burn, extend the runway, and deliver sustainable shareholder value.
Outlook
Bubs has also provided guidance for FY 2024 with today's update. It expects the following:
- Net sales revenue of $80 million (up 35% on the previous year)
- Gross profit margin of 40%
- Working capital improvements
Management also advised that it expects to be cash flow positive in FY 2025.
Why is the Bubs share price falling?
While the above reads very positively, it appears to have already been largely priced into the Bubs share price after a huge jump on Wednesday.
Potentially in anticipation of the update today, investors bid Bubs shares almost 20% higher yesterday.
However, despite this, they are still down over 60% since this time last year. Shareholders will no doubt be hoping that these actions put its shares on the right path again.
