Infant formula manufacturer Bubs Australia [ASX:BUB] is still tracking at a deficit to its mid-to-late 2022 share price highs, today dropping 10% after revealing lowering gross revenue indicators.
Bubs presented its ‘Quarter 2 Activities and Cashflow’ report to the market, revealing that Group Gross Revenue for the quarter was down 28% on the prior corresponding period, with a total of $14.3 million.
Revenue in China was also down 66% in the quarter, the result of prolonged COVID lockdowns taking their toll.
A BUB share was worth 32 cents at the time of writing, half its worth in August last year.
As the first month of 2023 comes to a close, the BUB share price has moved up nearly 7% in the year so far. And yet, in the last 12 months, it’s down nearly 31% and 39% below its 12-month industry average.
Source: tradingview.com
Bubs Australia reports lower revenue for Q2
BUB reported that although it made significant progress in the US, prolonged COVID lockdowns in China offset what could have been a stronger cash flow report for Q2 FY23.
Bub reported group gross revenue, totalling $14.3 million, was down 28% on the same time last year.
However, looking over the results for the full first half of 2023, the total, more or less, plateaus, with group gross revenue only 1% down with $37.9 million.
FThere was a 16% rise in the prior corresponding period for the company’s branded products, totalling $36.5 million in group gross revenue in the half year
.At home here in Australia, the infant milk retailer managed higher momentum, with gross revenue climbing 28% in Q2 FY22 and Bubs Infant Formula sales growing at almost seven-times the market growth rate.
As mentioned, China lockdowns impacted baby formula trade, amounting to a 66% decrease in gross revenue in Q2, which offset the 26% rise in international gross revenue.
CEO of Bubs, Kristy Carr, commented:
‘…Group gross revenues for the first two quarters are largely consistent with the first half of last year, arising from strong year-on-year growth in Australia and the United States being offset by the impacts of China’s now abandoned COVID-zero policy on channel dynamics and consumer purchasing activity.’
‘Nonetheless, the impact on group gross revenues from infant formula was limited to 10 percent for the quarter compared to the prior corresponding period, and strong pricing discipline was maintained across all markets.’
BUBs looking ahead
As China emerges from its COVID-induced slumber, BUB can take full advantage of its finalised definitive agreement with its Chinese JV partner and SAMR submission for its Chinese labelled infant formula under the new GB standards.
BUB has pulled through some tough conditions recently, especially after the future looked so promising on the US’s ‘Operation Fly Formula’ rescue mission last year.
BUB approaches permanent access to the US infant formula trade market by October 2025 and has so far shipped more than one million tins of baby formula to the US.
Will it be able to chase similar highs as last year now with China back on board?
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Regards,
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For Money Morning
