In tough economic times, even iconic Australian brands will struggle to grow.
Despite a challenging environment, Australian health product developer Blackmores (ASX: BKL) is pleased with its latest results despite profit being less than therapeutic for investors. Sales for the nine months ended March 2013, were $241 million, up 29% compared to the previous corresponding period, but the company cited tough economic conditions as the catalyst for profit being down 7%.
The company has seen large amounts of growth in Asian, New Zealand and Australian markets but it was the tough economic times which affected suppliers' orders of health-related products. Chief Executive Officer Christine Holgate said "undoubtedly the Australian retail sector is in a challenging period and our third-quarter results were impacted by larger retail accounts reducing stock levels".
Locally, products are sold on the shelves of retail stores, chemists and supermarket giants. Coles, owned by Wesfarmers Limited (ASX: WES), and Woolworths Limited (ASX: WOW) are also providers of Blackmore's products, but the group has said that profit was pushed down because of pressure by heavy price promotions and higher than normal stock write-offs due to structural changes. No doubt the fierce rivalry in the Australian supermarket industry will take many companies down with it.
Looking ahead, nothing major has changed within the company and it still is a solid stock for a portfolio although in tough economic conditions it is unlikely to make a massive move anytime soon. However, in foreign markets, the Asia division achieved a record sales quarter, up 25%, with year-to-date sales up 15% which the company attributes to its Thailand and Malaysia markets specifically.
Foolish takeaway
Blackmores is a 'fair dinkum' Australian company with over 80 years' experience giving health conscious people access to herbal, mineral, nutritional and vitamin rich supplements. Although, it fell over 5% Thursday, the fully franked dividend with a yield of 4.2%, excellent stable historical results year-in-year-out and strong long-term growth prospects make it an enticing addition to long-term investing portfolios.
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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Owen Raszkiewicz does not own shares in any of the mentioned companies.
