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Earnings wrap: Blackmores share price drops 5.6% on FY20 report

We examine the key takeaways from Blackmores fiscal 2020 results, released to the market this Tuesday.

Blackmores drops on 2020 release, revenue flat

Health supplements company Blackmores Limited (BKL) saw its share price bid lower on Tuesday after releasing its full-year (FY20) results to the market.

Here, the company posted sluggish revenue growth, though earnings (NPAT) came in line with prior guidance. BKL said it would not be issuing a final dividend.

The response from the market to this release was a topsy-turvy one, with the stock proving volatile throughout the session. Ultimately though, the Blackmores share price finished down Tuesday considerably lower, dropping 5.64% to $71.58 per share, by the close.

Results at a glance

On the top line, the company delivered flat revenue growth, with full-year revenues coming in at $568 million, down 3% on a year-over-year basis.

Though revenue struggled overall, the company experienced strong growth in its international markets segment, with revenue climbing 30%.

Specifically, the company reported double-digit revenue growth in Malaysia and Singapore, while Indonesia gained 36%, a figure which management attributed to 'distribution expansion into modern pharmacy and strong collaboration with our joint venture partner Kalbe Farma.'

By comparison, the company’s Chinese business unit continues to struggle – with total revenues dropping 16% to $103 million in fiscal 2020. In spite of that, the company noted that the Blackmore's Chinese e-commerce market share actually increased during the year, gaining 2% across the second half of FY20.

While the company's revenues remained flat, Blackmores continues to struggle from an earnings perspective: for the full year, earnings (EBITDA) fell 42% to $50.6 million, earnings (EBIT) fell 61.6% to $29.3 million, while profits after tax from continuing operations (NPAT) collapsed a staggering 68.3% to $16.05 million.

'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,’ said the Blackmores CEO Alastair Symington.

On the front of costs, the company noted that its recent Braeside acquisition has seen an increase in raw materials costs, impacting the company's earnings (EBIT) by $10 million in FY20. In addition to that, higher transportation costs, purchase prices and 'material variances' – added $7 million in costs in H2.

Dividends and outlook

Elsewhere, Blackmores said it would not be paying a final dividend, though sought to remind investors that its cash position was strong – with the dividend decision being driven by the macroeconomic uncertainty created by the coronavirus pandemic.

Blackmores last paid a dividend in September 2019.

Looking forward, management noted that they expect to report profit growth during fiscal 2021, though noted that this growth may be skewed towards the second half of the fiscal year, potentially implying a weak first half in fiscal 2021.

'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,’ the company said in a statement to the market.

How to trade Blackmores, long or short

In the wake of Blackmores FY20 results, where do you stand: are you bullish or bearish on the health supplements company? Whatever your view, you can use CFDs to trade both rising and falling markets, through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) Blackmores using CFDs, follow these easy steps:

  1. Create an IG Trading Account or log in to your existing account
  2. Enter ‘Blackmores’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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