Organic baby food and formula producer Bellamy’s Australia Limited [ASX:BAL] has continued their disappointing run as their share price is hit by a 3.35% decline and is currently trading at $7.80.
Bellamy’s share price has been on the decline since it hit its peak of $23.07 back in March of last year. The past 12 months has seen the share price drop by almost 55% — prices haven’t been this low since October of 2017.
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Half-year results spell more disappointment
In its half-year results released this morning, Bellamy’s announced the company posted a 25.9% decline in revenue to $129.6 million, a 59.9% drop in EBITDA to $13.9 million, and a 63.7% decline in net profit after tax to $8.1 million.
Bellamy’s has blamed rebranding and delays in Chinese regulatory approval and has warned a worse than expected hit is in store for the company’s full-year result.
The company had predicted 10% full-year revenue growth to $360 million back in August, but cut its guidance in October following a delay in approval from China’s State Administration for Market Regulation (SAMR).
Bellamy’s said the revised figure reflects increased investment in marketing and the China team over the coming period.
Management blamed the poor half on a decline in sales due to a number of factors. Delayed SAMR registration is estimated to have cost BAL $18 million.
Planned reduction in trade inventory prior to the rebrand set them back $10 million, and an observed slowdown in category performance cut revenue by $14 million.
What’s next for Bellamy’s share price?
The disappointing half-year result will see BAL cut its normalised earnings margin to 18– 22%, down from 22– 25%, with a revised group revenue target of $275–300 million.
According to a note out of Goldman Sachs, analysts were expecting Bellamy’s to post a 29% decline in sales to $124.8 million and a 27% decline in EBITDA to $25.5 million.
On a normalised basis the company’s result met the broker’s estimates, however, when accounting for one-off losses, Bellamy’s fell short.
Investors will likely be holding out to see if the company can secure its SAMR registration.
China’s tainted milk scandal, combined with the scrapping of the one-child policy, and clever marketing, continue to drive strong demand for baby formula in the country. The baby formula in China is thought to be a US$20 billion industry.
For Money Morning
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