It marks a tricky period for Blackmores in reading and understanding the Chinese market. Last year its profits dropped 23.6 per cent to $53.5 million on the back of a drop in sales to China.
China has delivered mixed results for Blackmores which is dependent on its trade within and to that country for much of its success. Amid a difficult 2019, Blackmores went through a board reshuffle and executive changes that led to Alastair Symington being named boss in July replacing outgoing boss Richard Henfrey.
On Monday, the company issued a short ASX announcement in regards to the trading halt. “The trading halt is requested pending an announcement by Blackmores concerning its half-year results and outlook for the full year.”
Last week analysts at Goldman Sachs named Blackmores as one of six companies that it believed could surprise to the downside during earnings season.
“We see potential for further weakness with the challenging conditions in China persisting for longer than expected,” Goldman Sachs said in a note to clients.
Goldman Sachs’ tracker of sales on popular Chinese business-to-consumer online retail website Tmall (previously known as Taobao Mall) had shown Blackmores was underperforming compared to its peers, the note said.
“Blackmores has lagged the broader Vitamin and Health Supplements category with Blackmores growing at 3 per cent year on year over the last six months versus 22 per cent increase for the broader category.”
Blackmores products are widely used in China where the population has a voracious appetite for vitamins and other consumer healthcare products.
Recent commentary suggests vitamin companies, including Blackmores are benefiting from the increased demand for immunity products such as Vitamin C tablets in China.
At the same time the “suitcase trade” of buying up large amounts of vitamins in Australia and selling them online in China has been hampered by travel bans and tourism restrictions.
“We are seeing an increase in demand for immunity products across many of our Asian markets,” a Blackmores spokesman said in a statement last week.
“We continue to monitor impacts on sales and disruptions to distribution (due to the extension of the Lunar New Year holidays and restrictions due to Coronavirus).”
“In Australia, the decline in tourists from China has [affected] sales,” the spokesman said.
The spokesman added that the company’s chief concern was for the health and safety of its staff and partners in China. Blackmores declined to comment on Monday outside of its ASX statement.
Sarah Danckert is a business reporter.