Troubled infant formula maker Bellamy’s Australia has reported a 47 per cent drop in half-year profit to $7.2million following weaker-than-expected sales in China.
Revenue for the six months to December 31 rose 12.5 per cent to $118.3million compared to a year earlier, but profit was hit by significant items totalling $8.6million related to its poor sales in China.
The Tasmania-based company has endured a massive plunge in share price since December after it flagged a significant drop in sales in the key growth market of China and downgraded its full-year earnings forecast.
Bellamy’s said new e-commerce regulations in China led to an oversupply of Australian-labelled baby formula, causing widespread discounting and hurting its earnings in the second half of 2015-16 and first half of 2016-17.
The group on February 24 reaffirmed its full-year revenue guidance of between $220million and $240million, and said it expected the business to return to sustainable growth in about 18 months.
Acting chief executive Andrew Cohen, who replaces Laura McBain after she resigned in January, said Bellamy’s had axed jobs and adjusted its manufacturing contract with Fonterra.
‘‘We are making strong progress with our business plan and have already undertaken several structural improvements aimed at a material reduction in our operating costs and staff numbers have been reduced to a sustainable level,’’ Mr Cohen said.
‘‘We are reviewing our supply chain to reduce ingredient costs, consolidating our Australian and Chinese reseller partners and plan to increase the number of stores selling our products in China by 1600.’’
At the special meeting on February 28, two new directors were elected and three directors were removed. Chairman Rob Woolley resigned as a director.
Kathmandu founder Jan Cameron did not win a seat on the board.
Meanwhile, Boston-based investment group Delta Partners has increased its stake in the organic baby food company to 8.79 per cent.