Blackmores Limited

BKL Details
 
Investing for future growth
Since 2010, the company assessed 20 new markets and entered 11, while implementing multiple different market entry models. Currently, strong macro trends with growing consumer demands positively impacting market dynamics. Further, the company’s profound expertise in natural health and supply chain traceability, and strong operational base providing a competitive advantage. Currently, the company has 24 clinical trials and research projects ongoing, while it has launched 11 new products in FY16. Recently, MyDNA, an established provider of pharmacogenetics has partnered with BioCeuticals to deliver Nutrigenomic testing. Despite, the explosive volume growth in FY2016, it was stabilized after challenging Q1 in FY17. Further, BKL is investing in a new western Sydney distribution center with state of the art picking/sortation technology and capacity to support future growth. Notably, growing consumer demand across all core markets, as well as the impressive performance of practitioner businesses and emerging markets in Asia expected to provide medium-term growth opportunities.
 

$63 billion opportunity in Asia alone as per 2016 reports; (Source: Company reports)
 
Well established to capture substantial growth in Asian region
Blackmores is partnering with leaders in the research and cultivation of medicinal cannabis, while BioCeuticals seeking authorization to launch medicinal cannabis products through general practitioners and medical specialists. BioCeuticals is well-placed to educate and support practitioners and patients in emerging area of herbal medicine. Importantly, the company is exploring clinical trials in the areas of palliative medicine, brain tumors and chronic pain.

China has emerged as Blackmores’ single most important overseas market and currently the cross-border e-commerce market is undergoing rapid evolution as the company is fostering strong partnerships and a unique understanding of new opportunities. Further, the company is building staff capabilities, operations, supply chain and governance. Notably, China in-country and export sales grew by 60% yoy to $92 million during 9MFY17, and recent announcement about the free trade zones and cross border e-commerce is expected to boost the sales going forward.

Recently, the company entered into an agreement with Kalbe to take BioCeuticals into Indonesia’s hospital and pharmacy channels. In Indonesia, VDS market is 15% yoy with market size of A$1.2 billion, driven by growing middle class, high spending capacity and increasing health focus. Further, the venture invested $2.6 million and has achieved initial sales of $2.8 million for the first few months in stores. Kalbe Farma is the leader in pharma and nutrition space with an extensive distribution covering 12 major cities across Indonesia.

In Vietnam, BKL has signed distribution agreement with the Mesa group in March to launch a range of 13 products in the coming months. Further, Mesa’s distribution with established track record of multinational brands (e.g. Nestle, P&G) coupled with increase in spending expected to aid the growth.
 
9MFY17 impacted by decline in Australian sales and higher operating costs: During 9MFY17, the group sales declined by 6.7% yoy to $496 million, while net profit tumbled by 42.8% yoy to $43 million. However, sales trend is encouraging with moderate increase in Q3FY17 despite fewer trading days than Q2. NZ and Australian sales declined by 26% yoy $264 million during the same period impacted by changing patterns of Chinese buyers. BioCeuticals and global therapeutics contribution stood at $76 million by growing at 53% yoy. 

Invoiced Sales by Quarter FY17 ($m); (Source: Company reports)
 
 
BKL Daily Chart (Source: Thomson Reuters)

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