Blackmores Limited (ASX: BKL) shares have fallen after the vitamin business revealed its FY20 result.
Troubled FY20 report from Blackmores
Blackmores reported that its sales revenue fell by 3% to $568.4 million.
Blackmores saw underlying EBIT (click here to learn what EBIT means) drop by 59% to $31.4 million. The underlying EBIT margin more than halved from 13% in FY19 to 5.5% in FY20. There was a 15% increase in operating expenses to $246.1 million as it shifted to a higher operating cost structure to become a vertically integrated business.
Underlying net profit plunged 65% to $18.7 million as a result of lower EBIT. Reported net profit was $18.1 million.
Despite the poor bottom line, international revenue continued to impress with growth of 30% and international EBIT rose 92%. There was double digit growth in Malaysia, Singapore and Indonesia. Blackmores generated $20 million of infant formula sales in Vietnam.
However, Blackmores ANZ revenue fell 15% and EBIT dropped 49%. Regulatory changes in China and consumer buying patterns (impacted by COVID-19) hurt this segment. China sales fell 16% to $103 million.
Blackmores also disclosed that the Braeside acquisition had resulted in cost variances associated with a product mix, capacity under-utilisation and increased raw material costs amounting to a $10 million full year EBIT impact.
COVID-19 costs relating to higher sea and air freight costs, as well as purchase price and material variances totaled $7 million in the second half of FY20.
Dividend
The Blackmores board decided not to pay a final dividend due to the continued uncertainty in the current global environment.
Positive outlook?
Blackmores is still aiming to grow into India, which management think is a very attractive market. The Indian entity has been formed and planning for a test market continues, however COVID-19 has slowed these growth plans.
The Indonesian joint venture continues to perform well and is ahead of expectations according to Blackmores. It’s delivering “strong year on year growth”.
In FY21 the company is anticipating profit growth, largely coming in the second half, though Blackmores isn’t going to give profit guidance.
After such a large profit drop, it would be disappointing not to see a bit of a recovery, even if it were to be materially lower than FY19’s profit. At a share price under $75, Blackmores has fallen a long way, but it isn’t exactly cheap either based on the current earnings. There are plenty of other ASX growth shares that I’d buy first like Pushpay Holdings Ltd (ASX: PPH) or BWX Ltd (ASX: BWX).
