China’s regulatory rumours hit Blackmores
Blackmores CEO Richard Henfrey said talk of potential changes to China’s e-commerce regulations and “the suitcase trade” had impacted the buying patterns of Chinese entrepreneurs and tourists who were previously purchasing products in Australian stores and bringing them back home.
The reduction was significant and came without warning, the company said, particularly in the first quarter, and dragged full-year profit for 2016/17, down 41 per cent to $59 million. It compares to 2015/2016 when the company posted a record profit of $100 million and estimated that more than $200 million of its total $717 million revenue came from Chinese consumers as visitors taking products home.
Henfrey, who replaced Australia Post-bound Christine Holgate less than two weeks ago, said while those regulatory changes never came about, rumours about them created a great deal of uncertainty in the market.
“Those Australian-Chinese consumers stopped buying at that point of time and we have worked pretty hard to recover from that,” Henfrey told AAP on Tuesday.
Full-year revenue from ordinary activities fell three per cent to $692.8 million, with the bulk of sales coming from the Australian and New Zealand arm despite a 23 per cent drop compared to a year ago.
Excluding the impact of Chinese influenced sales, branded domestic sales were in line with the prior year. Asia direct sales rose 36 per cent to $216 million, amid growing demand for products in China where direct sales grew 71 per cent to $132 million.
Blackmores’ BioCeuticals Group, which includes the BioCeuticals and Global Therapeutics brands, also grew with sales of $102 million. The vitamin maker said it had increased its inventory provisions from $2 million to $14 million to protect against possible future uncertainty, which had impacted earnings by around $10 million for the full year.
It said it expects regulation, pricing and evolving market conditions to continue to provide challenges in the year ahead but, notwithstanding these challenges, believes its Asia division, particularly China, will strengthen. Blackmores’ shares were 5.5 per cent higher at $96.15 at 1145 AEST.