China struggles see Blackmores’ profit drop 24% but sales surge in Vietnam and Indonesia

15-Aug-2019 - Last updated on 15-Aug-2019 at 04:03 GMT

Blackmores saw its profits drop 24% over the last year. ©Getty Images

Australia’s biggest supplement firm Blackmores saw profits drop 24% over the last year, with struggling performance in China cited as the key factor.

However, the firm saw strong growth at home and in developing markets, with sales up 157% in Vietnam and 90% Indonesia.

As a result, net profit after tax (NPAT) nosedived by 24% yoy to $53m, while full year revenue grew by 1% to $610m, the firm said in its FY2019 financial report released today.

In China, overall key exports accounts and in-country sales were down by 15% yoy to $122m. The drop follows three consecutive years of growth from 2015 to 2018.

This was attributed to stricter e-commerce laws introduced in the country since the start of this year, because in-country sales in health and beauty chains actually grew by 22% during the year.

It expects the challenges stemming from China’s cross-border e-commerce regulatory changes to continue into the next financial year.

“We continue to see an ongoing evolution in the way Chinese consumers access our products, with a shift away from Australian retailers to more direct purchasing from e-commerce platforms in China,” the firm said in the report.

In view of a tougher e-commerce environment in China, the firm had deliberately reduced its inventory for this segment during the last quarter.

The firm added that its EBIT was down 40% due to a weak sales performance, increased investments in the brand, and expansion in the capabilities within China.

Fast growth areas and India

With the exception of China, the other Asian markets delivered a strong performance, with sales going up by 30% to hit $107m.

Vietnam, Indonesia, and Korea were highlighted as the fastest growing markets.

Sales in Korea grew by 28%, while sales in Indonesia turned profitable ahead of expectations.

The firm said it would evaluate market entry into India as one of its strategic priorities and launch new products at the same time.

Still No. 1 at home

In the domestic market, Blackmores remained the market leader in Australia with a market share of 15.9%, with a “strong gap over the nearest domestic competitor”.

Combined with New Zealand, its performance in the ANZ market had remained constant in the past three years.

This year, sales grew by $1m to $267m in the ANZ markets due to “modest gain in Australia and a slight decline in New Zealand,” the firm said.

Upcoming plans

To pump up the number and volume of products manufactured onsite, the firm will officially take ownership of pharma firm Catalent’s manufacturing facility in Victoria, Australia in October this year.

It said that doing so would allow greater control over supply chain and strengthen its R&D capabilities.

It added that it had made “good progress” towards saving $60m over three years, which would allow it to invest in strategic initiatives, build up its capability, and deliver overall margin improvement.

Last year, it also acquired Impromy – an evidence-based weight management program developed in collaboration with the CSIRO – to build on its health and wellness portfolio.