The Blackmores Limited
(ASX: BKL) share price is down 22% after the health supplement business reported its half year result.
Blackmores describes itself as Australia’s leading natural health company. Maurice Blackmore founded the company in the 1930s. Blackmores has a number of different brands, not just the well-recognised Blackmores brand. It operates BioCeuticals, the Blackmores Institute, Fusion Health & Oriental Botanicals, Impromy, IsoWhey and Pure Animal Wellbeing (PAW).
Why Blackmores Shares Are Down 30%
Blackmores reported record revenue of $319 million, which was up 11%. However, it generated a net profit after tax (NPAT) of $34.3 million which was only 0.4% higher. Bell Potter said that analysts were expecting a net profit result of $37 million.
Revenue in Australia and New Zealand may have grown by 19% to $23 million, which includes products bought for potential shipping to Asia, but domestic sales growth was estimated to be only 6%.
However, reported China segment sales fell by 11%. Sales in Korea grew 67%, in Taiwan sales grew 150% and Hong Kong sales went up 39%. ‘Other Asia’ EBIT increased by 268% (click here to learn what EBIT means). Bioceuticals sales growth was 7%.
Blackmores also announced that it was targeting cost savings of $60 million over the next three years to boost profit margins.
Blackmores Dividend and Balance Sheet
Blackmores declared a dividend of 150 cents per share, which is the same dividend payment as the one Blackmores paid a year ago.
Blackmores had net debt of $71 million at the end of December 2018. The increase of the debt was due to the acquisition of Impromy and higher working capital.
Is The Blackmores Share Price A Buy?
Blackmores said it expects modest full year revenue growth. But, China sales in the third quarter are being impacted by continuing changes to the consumers are purchasing products, as well as higher inventory and a general softening of consumer sentiment. Apart from China, all of Blackmores’ markets are performing well according to management.
Blackmores has been a good investment for people who have been long term shareholders, but recent investors aren’t having a good time. The long term growth of Blackmores in most markets is quite attractive, however it’s not the type of business I’m looking for in my portfolio.
I’d rather buy one of the proven ASX shares in the free report below.
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