Blackmores warns of price rises as it pivots away from China

Blackmores is hoping strong growth in Asian markets outside China will help insulate it from a slowdown in the world’s second-largest economy as the vitamin maker flags price increases for some of its products.

Net profit from continuing operations rose 27.8 per cent to $30.6 million in the year ended June 30, the company said on Thursday. Revenue was up 12.8 per cent to $649.5 million for the year, including a 10.6 per cent lift in revenue from China.

Blackmores CEO Alastair Symington.

But bigger growth rates were achieved in international markets such as Indonesia and Thailand, which each saw revenues increase by more than 30 per cent.

Chief executive Alastair Symington said those markets were star performers for the company as it looks to move away from a reliance on China and daigou, the professional shoppers buying luxury goods in countries like Australia to resell to Chinese buyers.

“Just five years ago, China and Australia were really disproportionately contributing to overall revenue for the company,” Symington said. “There was a period of time there when the whole vitamin category was reliant on the daigou [market] … part of [our] diversification strategies is to ensure that we’re not overly reliant on one channel or one market, that we can actually spread the options that we have for growth and margin expansion.”

In 2018, the daigou channel accounted for more than a third of Blackmores’ sales, but travel restrictions and a Chinese government crackdown have stymied the purchasing power of the grey-market network, and that figure has dropped to 10 per cent.

Overall for the year, Blackmores reported a 7 per cent rise in net profit to $30.6 million and declared a final dividend of 32c a share.

Earnings were affected by a 4.4 per cent rise in production costs, and Symington warned prices would be lifted by 5 to 6 per cent on average to cover rising costs across the company’s range of more than 1000 products.

The pills and vitamins maker reported growth in all three of its brands – Blackmores, BioCeuticals, and its pet vitamins business PAW – for the first time in four years despite the rising costs and supply chain issues.

But citing uncertainty caused by inflation, changes in consumer behaviour, ongoing issues with the global supply chain and geopolitical risk, the company declined to make a profit forecast for the current year.

“You put all that together, and it’s extremely difficult for any business to be able to provide any guidance in the current environment,” Symington explained.

Blackmores share price plunged by more than 10 per cent to $72.99 by mid-afternoon.

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