It has been a tough 12 months for Bellamy’s Australia Limited (ASX: BAL) shareholders as the company awaits Chinese selling approval.
Bellamy’s is a Tasmanian based organic baby food and infant formula producer.
The Bellamy Results
Compared to the same corresponding period last year, Bellamy’s reported on Wednesday that its revenue was down 24.9% to $127.7 million, and gross profit was down 13.3% to $54.6m.
Net profit after tax (NPAT) was also down 63.8% to $8.1 million. This has been attributed to the delay in the approval of Bellamy’s SAMR application. SAMR is the accreditation required by Bellamy’s to sell its products in China.
Due to these results and the delay in the SAMR application Bellamy’s has revised its outlook for FY19, with group EBITDA expected to be down 18-22% when compared to FY18 (click here to learn what EBITDA means here).
China Outlook
Bellamy’s 1H19 results presentation was highly focused on China. Considering they have not yet received SAMR approval, this could be a risk for investors. However, Bellamy’s is highly confident of approval. This is demonstrated through their commitment to double their spending on marketing and sales in China for 2019.
The application for SAMR was made by Bellamy’s in December 2017 and was expected to be approved by now. This delay has caused a 34% drop in share price over the past 12 months.
Management Comments
Bellamy’s CEO Andrew Cohen said, “While we faced numerous challenges in the first half of 2019, the business emerges with a winning product that combines the best of organic with the best of science. Together with an already strong brand, this change sets a new platform for long-term growth and higher levels of investment in China.”
Is It Time To Buy Bellamy’s Shares?
Bellamy’s maintains a strong brand in Australia, however, the company’s outlook is relying heavily on the SAMR approval to sell its brand in China. If the SAMR is approved in the near future, the demand for baby formula in China combined with Bellamy’s heavy investment in the country will provide benefit for investors.
That said, buying into the company now may be risky as it is unknown when the SAMR will be approved.
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