TRANSCRIPTION OF FINANCE NEWS NETWORK INTERVIEW WITH BLACKMORES
(ASX:BKL) CEO, CHRISTINE HOLGATE
Clive Tompkins: Hello Clive Tompkins reporting for the Finance News Network. Joining me from Blackmores to discuss their annual results is CEO Christine Holgate. Christine welcome to FNN. You’ve just released your results which were at the top end of forecasts, with net profit $20.8 million up nine per cent in the same period last year, what were the key drivers?
Christine Holgate: They were great results and we were extremely pleased about them, but there were a number of factors that lead to that very strong result. Undoubtedly seven new products in the second half, a re-invigorated sales and marketing approach, global health concerns, but I think also our move to Warriewood enabled us to react much more quicker to demand and that supported the growth result as well.
Clive Tompkins: So what’s the split between domestic and international?
Christine Holgate: Crudely about 80 per cent of our revenue’s come from Australia, 15 per cent come from Asia, and about five per cent of our sales are generated in New Zealand.
Clive Tompkins: And what’s your best seller?
Christine Holgate: One of the most beautiful things about Blackmores is we have a really broad range of products and I’m pleased to tell you that we’ve done really well across all that range. So whether it’s everyday health such as fish oil, multi’s, pregnancy and breast feeding to whether it’s our new products, three new kids products; magnesium powder, joint formula advance. Or whether it’s the products that very much relate to the health concerns in the market; Executive B for stress release with the global financial crisis, or cold and immune defense products relating to the H1N1 epidemic.
Clive Tompkins: The worst of the downturn is hopefully behind us, what percentage of your sales is subject to discretionary spending and hence vulnerable to consumer confidence?
Christine Holgate: I don’t believe our sales are related to discretionary expenditure. First of all, our industry is growing by about approximately six per cent, and we’ve grown 12 per cent. And we are the industry leader here in Australia, and we’re known as the quality premium brand, Readers Digest has just nominated us as the most trusted brand in Australia, and I think when you’ve got that type of player growing at that rate then I don’t think anyone can says their discretionary.
Clive Tompkins: Ok Christine can you tell us now about the Warriewood facility or the campus, how has this helped with production spikes and general efficiency?
Christine Holgate: Undoubtedly Warriewood’s new stream line facility has enabled us to increase our capacity. But I think probably most importantly our ability to be able to respond quickly to demand is really where we’re proving the benefits already. And a real example of that is that at the moment I can’t sell Vitamin C quickly enough in Thailand with what’s going on with H1N1, and on Friday afternoon the components came into the factory, the new labels, by Tuesday morning they were quality checked, they were bottled and they were in air freight going to Thailand. That ability to be able to react so quickly, turnaround, not short-loop any of the quality checks and to deliver to customers at the right price without blowing out our cost base has proven the real benefits of Warriewood.
Clive Tompkins: Sales growth also depends on new products as well as selling more, how many products were released last year and how have they been received?
Christine Holgate: We had seven new products which came out in the second half. We had three new very innovative kids range, the only range in Australia I think which has a natural sweetener in them. We had magnesium powder, back pain formula, joint formula advance, but all of those products I think contributed very well to our fourth quarter up-turn – I think have really proven to me the importance of innovation in the market.
Clive Tompkins: And what’s in the pipeline?
Christine Holgate: Well I’d love to tell you more Clive but unfortunately my competitors will be watching this. But I am really pleased to be able to tell you that Blackmores, in September, will be launching our new heart range. And we feel extremely privileged that we will be the first to market using a new plant sterile as a supplement. It’s previously only been allowed in functional foods such as flora pro-active, but now it’s just been approved for a supplement. Now we’re very excited about this because one Australian every ten minutes dies (from) a cardio vascular related illness, and in Blackmores we feel that if we can improve that by just five percentage points we’d feel really proud of that. Because just think of all those lives we would have helped save.
Clive Tompkins: You’ve been in the job little under a year, its early day’s yet, but you’ve been tasked with revitalizing growth, especially internationally. How has that side of the business been performing?
Christine Holgate: Very strong. Asia sales are up 23 per cent in the year, and undoubtedly supported by a weaker Australian dollar earlier in the year, but all of our core businesses are growing stronger. But equally Australia at the half year, we were growing that business at about three per cent for the first half and in fact for the whole year we’ve now turned that round to a 10 per cent growth. So the fourth quarter results show a really strong growth against all our markets. So we sort of have double digit growth in every core market for the second half.
Clive Tompkins: And what else has been achieved this year?
Christine Holgate: They are fantastic results, but most importantly the amount of operational change we’ve had in our business. Both from an investment perspective, this year we’ve paid interest and depreciation for the first time. But also the amount of scale of change of moving five operations into one, that’s so significant. A new leadership team, a new CEO, a new way of doing your sales and marketing, you know reviewing your supply chain, it’s a phenomenal result and a real team effort.
Clive Tompkins: Last question. Where do you see Blackmores this time next year?
Christine Holgate: I would be really proud if this time next year we’ve been able to sustain the leverevitalisingl of sales that we have done. We are able to grow the business so that we can have a marginal increase in profits, and although that doesn’t sound particularly exciting at this moment when you’re looking at these results, what I would like to remind you of is that we have a full year of interest and depreciation next year which you know is approximately another two million dollars. And you know we are still working in very uncertain times. You know there is still a lot of volatility in our exchange rates so I think that would be a pretty god achievement.
Clive Tompkins: Christine Holgate thanks for explaining the results.
Christine Holgate: Thank you.
