Blackmores to slash jobs, axe dividend, as profit dives 66 per cent

Blackmores will sack 10pc of its workforce to sharpen its focus on ‘high growth’ Asian markets after its profit dived 66pc.

Blackmores vitamins on sale in Sydney. Picture: AAP

Vitamins maker Blackmores will sack about 10 per cent of its workforce and scrap its final dividend after it posted a 66.2 per cent dive in full-year profit to $18.1m, as coronavirus-enforced travel bans cut the flow of cashed-up Chinese tourists.

The company — which employs about 1000 people, including 300 in Asia — is looking to reshape itself into a leaner operation as it targets “high growth” markets in a global economy rocked by COVID-19.

As it abandoned its final dividend, Blackmores said, “while our cash position and balance sheet is strong, the continued uncertainty in the current global climate underpins this decision”.

Chief executive Alastair Symington said about 10 per cent of the workforce will be made redundant as it implements an “organisational redesign” at a time when Australia’s unemployment rate has hit its highest level in almost 20 years.

He said that will result in a sharpened focus on high growth markets in Asia, and the company was beginning to see results.

“We are already seeing improvement in Asia generally. Our international business is growing at 30 per cent,” Mr Symington said.

“As we shift and reshape the business, we expect that will not only be able to better support international markets, which have been underinvested for many years, but those investments and much needed resources will fuel longer term growth in those markets, and that’s what we are planning for.”

Travel restrictions enforced to limit the spread of coronavirus has hit Blackmores hard, with Chinese tourists representing about a quarter of its Australian sales.

“In the 2019 calendar year, demand for Australian vitamin and dietary supplement products from Chinese shoppers was 24 per cent of Australian retail sales. In the second half of the 2020 financial year this dropped to 16 per cent as travellers to and from China stopped visiting due to COVID-19 restrictions,” Mr Symington said.

But it wasn’t only the Australian market that took a hit. Sales in mainland China slumped 16 per cent to $103m in the year to June 30, but Mr Symington said Blackmores’ share of the Chinese e-commerce market firmed 2 per cent during the second half of the year.

However, Mr Symington said the company was yet to see any shunning of its products in China from heightened political tensions between Beijing in Canberra, which has already seen punitive 80 per cent tariffs on Australian barley and the communist regime launch an anti-dumping investigation into Australian wine.

“In regard to the geopolitical tensions, we are obviously concerned when there is an increase in rhetoric in general across trading partners” he said.

“The thing that we are most focused on is, we are monitoring consumer reactions in places like China and there is still very high interest for health products coming from Australia like Blackmores.

“Our focus is making sure we continue to make available those products not just in China but across all our markets during a time when there is a global health crisis going on.”

Blackmores shares closed 5.6 per cent lower at $71.58 on Tuesday, compared with a 0.5 per cent gain across the broader sharemarket.

Its full-year earnings result included a $141m capital raising, which included $49m from a shareholder purchase plan.

Blackmore’s overall revenue fell 3 per cent to $568m. Its shift from being just a brand owner to a fully integrated vitamins company — it bought Catelent’s factory in Braeside in Melbourne’s southeast for $43m last year — continued to weigh on earnings.

“At the half year we announced that the acquisition of Braeside had resulted in cost variances associated with product mix, capacity under-utilisation and increased raw material costs,” Mr Symington said.

“At the end of the year, the combined adverse variance in Braeside was in line with February expectations of a $10m full-year earnings before interest and taxes impact.”

He expected Braeside to contribute to earnings growth this financial year but did not provide a full year profit outlook.

“Despite the additional cost variances which will arise from our first full year of Braeside manufacturing ownership, we anticipate full-year profit growth in the 2021 financial year.

“This profit growth will come predominantly from the second half of the fiscal year, but given the many uncertainties associated with COVID-19 we are not providing full-year profit outlook for FY21.”

Mr Symington remained optimistic about Blackmores’ longer-term prospects, saying COVID-19 had underlined the importance of staying healthy.

“We now know that the use of mask can help in the prevention or at least act as a barrier (to limit the spread of coronavirus). We have to start changing and modifying our behaviour in the way we interact — that’s the main thing.

“The second thing is really increasing awareness around the benefits of having a healthy lifestyle, which is great for companies like us, which are in the health and wellness space.”

Blackmores CEO Alastair Symington.