Blackmores share price in focus after sharp profit decline in FY 2020

The Blackmores Limited (ASX:BKL) share price will be in focus today after it posted a sharp decline in profit in FY 2020…

| More on:
blackmores share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Blackmores Limited (ASX: BKL) share price will be in focus on Tuesday after revealing a sharp decline in profit in FY 2020.

How did Blackmores perform in FY 2020?

For the 12 months ended 30 June 2020, Blackmores posted revenue of $568 million and a reported net profit after tax of $18.1 million on. This was 3% and 66% decline, respectively, year on year. The latter compares to the guidance range of $17 million to $21 million given with its half year results.

The main drags on the company's sales performance in FY 2020 were its ANZ and China businesses. The ANZ business posted a 15% decline in sales to $227 million due to lower retail foot traffic of Chinese shoppers and the impact of the pandemic. Whereas the China business recorded a 16% decline in sales to $103 million. Management blamed the pandemic, a reduction in inventory levels for key customers due to upcoming new label changes, and regulatory challenges.

This offset sales growth from its International and BioCeuticals businesses. The International business recorded a 30% increase in sales to $139 million thanks largely to double digit sales growth in Malaysia, Singapore, and Indonesia. The company's BioCeuticals business posted a 12% lift in sales to $99 million after the pandemic drove increased demand for immunity products.

In light of its weak profit result, the company will not be paying a final dividend.

Management commentary.

Blackmores' CEO, Alastair Symington, commented: "We have finished the year with some very good results in our International markets with revenue up 30% on the prior year, BioCeuticals revenue up 7% while Blackmores strengthened its leadership position in Australia with 16.4% share of the vitamin and dietary supplement (VDS) market."

"This is despite the unprecedented disruption due to COVID-19 and highlights the strength of our brands in meeting consumer health needs," he added.

Mr Symington was pleased with the progress the company is making in China, despite the sales decline.

He commented: "We are making good progress in China with stronger leadership in place and, for the first time, in market dedicated resources who are close to our China consumers and using these insights for our new product innovation pipeline."

Margin weakness.

The chief executive explained why its profits were down materially in comparison to its sales in FY 2020. He said: "Our full year results today reflect the anticipated transition to a vertically integrated business. However, this comes with a higher operating cost structure in the short term."

"I am pleased with the improvements that have been made to ensure we have much better visibility and control of our fixed costs, while delivering a very strong operating cash performance. We will continue to step up our business improvement program to aggressively manage our cost base and improve gross margins," he added.

FY 2021 outlook.

The company intends to enter the India market in FY 2021. And while its entry plans have slowed due to the onset of COVID-19, a Blackmores India entity has been formed and is planning for a test market entry. Management believes India represents a very attractive market.

And while no formal guidance has been given for FY 2021, management anticipates full year profit growth. Though, it has warned that this profit growth will come predominantly from the second half of the financial year.

Looking further ahead, management commented: "There is great confidence from the Board and Management that by implementing our strategic priorities, simplifying our operating model and delivering consumer led innovation consistently it will put the company back on the path to sustainable, profitable growth and restore future dividends."

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Happy miner giving ok sign in front of a mine.
Opinions

Which ASX 200 stock offers 'material upside' amid continuing uncertainty over US tariffs?

Blackwattle Investment has identified one ASX 200 large-cap stock that is thriving on the uncertainty.

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Bapcor, Boss Energy, Macquarie, and Novonix shares are falling today

These shares are having a tough session on Thursday. But why?

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
Financial Shares

2 rising ASX financial shares with 'meaningful upside' still left: fundie

Financials outperformed every other sector in FY25, but there are still buying opportunities left, say these experts.

Read more »

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
Share Gainers

Why Fortescue, Lynas, PEXA, and Regis Healthcare shares are charging higher

These shares are having a strong session on Thursday. But why?

Read more »

Stock market crash concept of young man screaming at laptop on the sofa.
Share Fallers

Guess which ASX 200 stock just crashed 31% on slumping sales

The $1.3 billion ASX 200 stock is getting hammered today.

Read more »

A woman walks along the street holding an oversized box wrapped as a gift.
Broker Notes

Fundie reveals why these 3 ASX 200 large-cap shares ripped 35% to 96% in FY25

Blackwattle Investment Partners discusses the performance and outlook for 3 ASX 200 shares in its Large Cap Quality Fund.

Read more »

Five young people sit in a row having fun and interacting with their mobile phones.
Broker Notes

This fund manager just delivered a stellar year and he's bullish on these 5 stocks

With standout returns in both Australian and global equities, Andrew Mitchell shares five high-conviction stocks primed for long-term growth.

Read more »

A woman ponders over what to buy as she looks at the shelves of a supermarket.
Broker Notes

Does Macquarie prefer Woolworths or Coles shares today?

Which supermarket giant was recently named the favourite?

Read more »