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 for its first quarter results is CEO, Christine Holgate.
Christine welcome back. Net profit came in at $7.8 million on sales of $60.6 million, how does this compare with the same period last year?
Christine Holgate: Well our profits are up 13% and our sales are up 11% so you’re seeing a margin improvement there as well. We’re really pleased, very strong results, good growth here in Australia on the back of good retailer support and continued growth and contribution from Asia which we’re particularly pleased about.
Clive Tompkins: So was this better than expected given the continuing strength in the Aussie dollar and generally difficult retail trading conditions?
Christine Holgate: It was better than we expected. In fairness the strong Aussie dollar - it sort of moved in September last year, so that didn’t make such an impact this period. In fact in constant currencies our Asian revenues were about 10% growth and in Australian dollars 9%. But I think perhaps what’s more important is the first quarter last year - you might recall Clive - we had very exceptional growth on the back of the H1N1 crisis in Asia. So to get growth on top of that again, we were particularly pleased about. And you know, it is a tougher retail environment here in Australia at the moment and we are very cognizant of that, so we were very pleased with the result.
Clive Tompkins: Your record in growing sales through new products is clearly working, how many products do you typically launch in a quarter?
Christine Holgate: Well it does vary quarter to quarter. We did 15 this quarter, 13 of them in Asia, 2 sorts of mega blockbuster products here – an everyday stress product, and a fantastic new fish oil with vitamin D. I think that’s going to be a real winner for us to be honest. But I think it’s rather than the number of products as how they actually keep re-stimulating the whole category, so it’s important for a number of different reasons.
Clive Tompkins: Looking at Asia now sales grew 9.8% as mentioned in constant currency terms, what’s the actual dollar value of those sales?
Christine Holgate: Just shy of$ 10 million for this quarter and if you went back, probably just about two years ago, you’d see that’s quite a significant rise from that. It’s probably close to a 50% uplift for the whole region, so we’re particularly pleased with the result.
Clive Tompkins: Thailand and Malaysia are your biggest markets in the region, is the makeup of sales similar to Australia or are these markets quite different?
Christine Holgate: If you went to Asia and you were to experience, actually quite similar to leading pharmacies here, so we have actually very strong brand presence and a range of products there. So it’s not just one category or one product that dominates, although in each market there are certain products that suit that market better than another.So in Thailand for example vitamin C is a huge product for us and that’s partly because of regulation, but also because in Thailand just generally consumers take a lot of vitamin C. In other markets it might be fish oil. So each market does vary but what you will experience is a broad range of products.
Clive Tompkins: So can you tell us a little bit more about your footprint in Asia?
Christine Holgate: If you go back to this same quarter last year, you will recall that in July and August we had this H1N1 crisis and you know we did get a significant uplift in our sales - with vitamin C predominantly. However, this period if we look at Thailand, we’ve actually got flat sales in Thailand for that period when last year that was a double period - so phenomenal underlying growth in that period of time, but now from a range of products.I think what we were fortunate enough to do is the H1N1 crisis brought a lot of people closer to our brand because we’re seen as the most quality brand in Thailand. In fact we just recently won again the Readers Digest Most Trusted Brand Name. So as people came in on the back of H1N1 and took vitamin C, we were able to capture them and in the halo impact of the brand, bring them into more products. So a year later we’ve actually just taking double months sales as a month’s sales, but really from a much broader range of products.In Hong Kong alone we’ve more than doubled the number of points of distribution in the last six months. In Taiwan we’ve tripled them. Now albeit they’re coming from a very small base and a small base of revenues, but our sales uplift from doing that I can assure you, has more than doubled in that period of time. And I think it’s, you know, sets the seeds or lays the stone for I think a healthy performance from that region going forward.
Clive Tompkins: When we last spoke Christine you just announced the acquisition of natural pet products company, Pure Animal Wellbeing or PAW, can you provide an update. Is the business now under the one roof in Warriewood?
Christine Holgate: It is under the one roof, in fact we acquired that business on July the 2nd and the following Monday, the team were inside our building and had desks and had email accounts. I am very pleased to report that on the 30th September, we’d actually fully integrated the back of house operations in that business. And so if you popped down to Warriewood today, you’d see in our distribution the Blackmores PAWs products going out the door. And I think that’s, you know, a very exciting step. We will now go to the second stage of integration where we’re working on the rebranding of the stock and the whole new marketing effort which will go behind it. And I think you know, we’re on track for a sort of Q3 launch early next year.
Clive Tompkins: And do you still maintain your forecast for the business to be earnings per share neutral in the first year?
Christine Holgate: Absolutely, absolutely we do. The business, you know when we bought the business, it was less than a million dollars of sales - for the first half it’s mildly diluted, but it’s mildly diluted. Second half its mildly accretive, net-net washes its face in the first year and going forward I think it’s going to be a very interesting revenue line for us.
Clive Tompkins: Last question. I believe the Blackmores Sydney Running Festival was again well received, how many people participated and how much did the event raise?
Christine Holgate: Raised $2.2 million for charity which we are very proud about and over 34,000 people participated in the event - another record event. And in fact with several of the runs, we actually had to close off because they were full. So a fantastic record performance and one we are very proud to be associated with.
Clive Tompkins: Christine thanks for the update.
Christine Holgate: Thank you.
