‘Completely unsatisfactory results’: Blackmores boss cites unexpected costs and coronavirus for poor performance

13-Feb-2020 - Last updated on 13-Feb-2020 at 01:31 GMT

The firm cited several factors for the slump, including the impact of the coronavirus, which has hit supply chains into China.

Rising costs, unexpected operational challenges and the coronavirus impact has led to Blackmores halving its profits forecast and scrapping its dividend.

Blackmores now expects to report an after-tax net profit for the full financial year ending June of A$17m to A$21m (US$11.4m to $14.1m). This is half of what was expected and considerably below last year’s profit of A$53m.

CEO Alastair Symington told shareholders: “The Board understands and acknowledges that shareholders will be bitterly disappointed with the financial performance of the business. The Board acknowledges that these results are completely unsatisfactory and we have much work to do to restore confidence in Blackmores.

“The Board wants to assure shareholders that the matters shared today are being fully and comprehensively addressed by the Board and new Executive Team. The company has a largely new leadership team, led by myself since joining the business in late 2019.

“The team has quickly made inroads to identify the challenges facing the business and to progress a plan to return the company to an acceptable level of performance. There is a lot of work to do to restore the trust of our shareholders and we are resolute in our commitment to doing what it takes to achieve this.”

Symington cited several factors for the slump, including the impact of the coronavirus, which has hit supply chains into China.

“While the outbreak has resulted in increased demand for key immunity products in Australia and Asia, the impact of the sales has been countered by supply chain disruptions across the region as a result of the contagion.

“Some e-commerce partners have cancelled or modified February promotions with a slowdown of China inbound and internal freight, which has made it difficult to serve the local market demand with much needed product,” he added.

Production problems

Other problems have stemmed from adverse costs at the Braeside facility, which it took over in October.

“Capacity under-utilisation, increased raw material costs and changes to the manufactured product mix have become apparent,” said Symington.

He added additional, one-off, costs were being incurred to adhere to new labelling guidelines, while a long-term objective of reducing margin erosion by cutting excessive discounting in Australia will also hit the numbers in the second half.

Despite this, Symington told investors there were reasons for optimism.

“Despite challenges in the second-half, the Board and new management team are very confident and optimistic about the future of Blackmores.

“Blackmores’ brand metrics are the strongest they have been for many years. We have the number one market position in Australia and a number of Asian markets, and we are quickly building a much stronger team in China.

“Since the new management team has been in place, we have worked to develop a solid and credible plan for the business going forward.

“We are also exploring a number of new ventures and growth opportunities to help to deliver consistent and higher quality earnings for the Blackmores Group in FY21 and beyond, and we look forward to outlining some of these initiatives when we release our full first-half year results on 25 February.”