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Bubs share price crashes following release of Q2 Activities Report

We examine the key details from the infant formula company's latest Q2 Activities Report.

Bubs share price in focus Source: Bloomberg

Bubs share price falls

Bubs Australia (ASX: BUB) most recently raised $30 million in fresh funds, from professional and sophisticated investors, at the $0.95 per share mark.

The purpose here was simple: 'accelerate customers acquisition in existing and new markets, advance new product development and meet M&A commitments reflective of the scale we want to achieve and the surrounding market environment.'

On that front, Bubs Executive Chair, Dennis Lin today commented that 'following the successful capital rasing and retail share placement in December, the Company continues to maintain healthy cash balances.'

Bubs today reported that it had cash on hand of $39.1 million.

Though a long-term plan; short-term, shareholders have faced steady share price declines in the wake of this cap-raise.

Indeed, when Bubs (ASX: BUB) released its Q2 Activities Report today – which highlighted some respectable growth figures as well as some seemingly disappointing surprises – its share price fell sharply, dropping over 12% by the afternoon, to a low of $0.81 per share.

From that $0.95 per share mark – where Bubs last raised capital – the stock is now down ~14%.

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Growth figures in focus

Looking at some of Bubs’ (ASX: BUB) Q2 financial highlights; overall, we see that the young company reported record quarterly gross revenues of $14.54 million – representing a 21% increase on the previous corresponding period.

All up, the Australian market made up a significant 79% of the company’s Q2 sales.

Looking at the company’s most important product, Bubs saw strong sales growth in its Goat Infant Formula during the second quarter – with sales rising 118%, on a quarter over quarter basis.

'Bubs goat milk infant formula continues to be the most profitable segment and strong growth driver in the business, delivering quarterly revenues in excess of $8 million [...] This is a clear indication that our infant nutrition strategy is well founded and being executed with precision alongside our key partners,’ said Executive Chair, Dennis Lin.

Looking at other parts of the business, the company’s Complete Nutritional Portfolio also saw sales increase strongly – up 77% – on a quarter over quarter basis.

The company’s emerging international markets did even better in Q2 – skyrocketing 1,319% and representing 6% of gross sales overall.

The Chinese opportunity

Mind you, it wasn’t all positive: today’s Q2 report also revealed significant declines in Chinese sales.

Specifically, Bubs reported that sales in the Chinese region fell by 32% on the previous corresponding period – making up just 15% of the company’s gross sales during the second quarter.

On this front, the company argued that the 'decline in China sales was driven by the phasing of CapriLac off-take sales pre-Winter following the strong Q1 distribution in the Daigou Channel.'

'Whilst China cashflow performance in the second quarter was affected by reduced CapriLac adult milk powder sales, it underlines our intention to relaunch products and brands that will reflect the premium positioning of our superior products in this category and we expect to do so in second half of this financial year,’ Mr Lin further said.

Fresh milk sales and adult milk powder sales were also both down 54% and 28%, respectively, during the quarter.

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