Organic infant formula maker Bellamy’s Australia has more than tripled its full year profit to $38.3 million.
Bellamy’s record high revenue of $244.6 million is the equivalent of selling 8.4 million tins of infant formula. Sales in Australia were equivalent to 6 million tins of formula, in a country where just 300,000 babies are born annually.
The company’s revenue for the 12 months to June 30 climbed 95 per cent as sales from China and Hong Kong surged 331 per cent to $62.1 million. Australian sales rose 67 per cent to $178.6 million.
A price increase in Australian in December 2015 to nearly $30 per tin helped Bellamy’s boost its gross profit margin from 32.9 per cent in 2015 to 45.7 per cent.
In early trade, shares in Bellamy’s are up over 7 per cent to $14.34 .
The company declared a final dividend of 7.8¢ was declared, up 173 per cent on the prior year
Bellamy’s did not provide specific guidance, but said it plans to invest $15-$20 million in its product, people, marketing and promotional activities. It will also expand its manufacturing capacity in order to boost its penetration in the Australian and Chinese markets.
“I am very happy about today’s results,” chief executive Laura McBain told BusinessDay.
The business’ success is closely tied to increasing sales in China, where parents have well-founded concerns about the safety and purity of baby food.
Revenues from direct sales in China are up 331 per cent to $62 million.
“We have leveraged on that demand,” Ms McBain said.
“We have worked closely with our bricks and mortar retailers up there to grow that market, but equally we have embraced the opportunity to sell through…. ecommerce platforms. As a result we have seen that significant growth in the last 12 months.”
The ecommerce platforms include Tmall, JD, VIP and BabyTree.
Selling through chain stores that cater to mothers and babies in China helps Bellamy’s get new customers who then continue buying through online stores, Ms McBain explained.
Meanwhile the Daigou shoppers who buy Bellamy’s products here and post or carry them back to China have become more sophisticated in recent years and Bellamy’s was now working directly with large operators.
“We have seen it evolve from being, four years ago, a very mum-and-dad suitcase traders [scheme] into businesses really, that have strong logistics networks and frameworks to be able to support a brand like Bellamy’s that deserves and requires a good network of information and data flow to be able to ensure our customers get the very best quality products,” she said.
Daigou have earned a bad reputation in Australia for clearing supermarket shelves, particularly in late 2015 when formula supplies disappeared as tins were sent to China for Singles Day, a national holiday.
Ms McBain said Bellamy’s aims to have its products available to anyone who wants to purchase it and since the 2015 shortage has increased supply by purchasing milk products from Fonterra’s plant in Darnum, near Warrigal in western Victoria.
According to its annual report the company has $66 million worth of formula and food either in transit, warehouses or ready to be packaged. This time last year it had only $17 million worth of stock on hand.
“We will be making sure, as we did last year through the Singles Day period, mums can always access through our online store, but equally we will be making sure mums in China will be able to access our products through the e-commerce platforms,” she said.
Bellamy’s estimates its market share in China at 1 per cent, or 3 per cent online.
The company sold $178 million worth of baby formula and food in Australia, up from $107 million the previous year. Sales in China went from $14 million to $62 million, while sales in Singapore and Vietnam had a modest decline from $4.7 million to $4 million this year.
Bellamy’s has become one of the market’s darling stocks in recent years since listing in August 2014 and strong sales of its products to China has seen the stock surge.
Ms McBain said regulatory changes in China in early 2016 to improve product registration rules for infant formula should actually help the company.
“We have a positive view of the regulatory changes announced and believe they will further strengthen Bellamy’s growth opportunities in China where the Bellamy’s brand and our trusted, safe, organic products are highly valued by consumers,” she said.
Ms McBain said that the investments made in 2017 would “build strategic platforms for long-term sustainable growth for shareholders beyond FY17”.