Covid supply chain crunch the worst in 25 years, says Blackmores CEO Alastair Symington

Demand for immunity boosting products is soaring as Blackmores battles the worst supply chain crunch in a quarter of a century.

Blackmores more than doubled its half-year dividend to 63c, which it will pay on April 12.

Vitamin C, D, and zinc are set to be in hot demand in coming months as Australia faces one its worst flu season in years and Blackmores battles its biggest supply chain crunch in quarter of a century.

Blackmores more than doubled its half-year dividend to 63c, which it will pay on April 12, as chief executive Alastair Symington said the company had stabilised its earnings.

But it did not provide full-year profit guidance, citing “ongoing uncertainty due to Covid”, with its share price tumbling 9.2 per cent to $84.18 on Thursday. This compared to a 3 per cent drop across the broader sharemarket.

Although Blackmores has more control over its manufacturing, after it bought Catelent’s factory in Braeside in Melbourne’s southeast for $43m in 2019, sourcing raw materials remained challenging.

“The access to materials generally is far more challenging than I’ve seen in 25 years,” Mr Symington said.

“When you have contract manufacturers delivering raw material inputs, you could move between contract manufacturers, to sort of diversify your risk. For us, we eat what we cook and so we need to make sure that our planning systems are good, that we have the right strategic sourcing plans in place and access to all materials readily available.

“It (in-house manufacturing) has helped us to be a better company. It’s meant that we’re more in touch now with some of the issues that we see, so that we can get a plan moving forward.”

Blackmores chief executive Alastair Symington says ‘access to materials generally is far more challenging than I‘ve seen in 25 years’.

It comes as Mr Symington said demand for immunity strengthening products has begun to rise as children returned to school from the Omicron outbreak, and as Australians became more social again, with borders reopening and the scrapping of mask-wearing mandates in some states.

“We saw a lot of that changing consumer behaviour at the beginning of this calendar year. The key products for us … vitamin C, vitamin D, and zinc, sales increased, in January in particular.”

And demand will continue in coming months into the annual flu season. “This season, we’ve had more social contact and so influenza strains will potentially impact people more severely than the most unless they get their flu shots.”

He said Blackmores was positioned for future growth; resuming its brand campaign – halted at the onset of the Omicron wave – and cutting back on steep discounting across supermarkets and other retailers, as well as expanding deeper into India and Indonesia and launching a halal range.

The company’s net profit firmed 4.2 per cent into $20.3m in the six months to December 31. Meanwhile, revenue jumped 14.3 per cent to $346.02m.

The result came amid a tumultuous period, involving a dispute between the company’s biggest and namesake shareholder, Marcus Blackmore, and chair Anne Templeman-Jones. Mr Blackmore campaigned against the re-election of Ms Templeman-Jones, who suffered a no vote of 38.75 per cent, which included Mr Blackmore’s 23 per cent stake.

The high-profile brawl also came at a time the company began exporting to India, diversifying its international markets from China and accelerating its plans to reach one billion consumers by 2025.

Revenue across its international division leapt 49.8 per cent to $116.2m, while earnings before interest and tax soared 61.3 per cent to $19.6m.

“This half 58 per cent of sales came from China and international combined. That’s a very different geographic channel footprint that this company had just two or three years ago. So this diversification and having a number of different markets with revenue and profit growth for us is a real focus area for us,” Mr Symington said.

Originally published as Covid supply chain crunch the worst in 25 years, says Blackmores CEO Alastair Symington