Shares of infant formula maker Bubs Australia Limited (ASX:BUB) rose today after the company reported record sales in its half-year results.
BUB shares traded up 4.651% at AU$0.450 per share at 11:45 a.m. AEDT.
The infant formula producer returned to a high growth trajectory with a 73% increase in gross sales, mainly supported by Chinese demand for its infant formula. As such, let’s look at its half-year results for the half-year ended December 31, 2021.
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Bubs Australia 1H FY22 Results Highlights –
- According to the release, the infant formula maker reported record gross sales of A$38.5 million, up 73% on pcp.
- Meanwhile, gross margin improved by 38% and revenue increased by 84% to A$33.6 million.
- The company posted record revenue of A$33.6 million, up 84% pcp.
- Underlying earnings before interest, tax, depreciation and amortization (EBITDA) was A$1.2 million.
- Bubs reported a pre-tax loss of A$0.6 million.
- The company has reported positive cash flow for two consecutive quarters. It reported a cash balance of A$30.6 million for the period.
BUB strategic milestones
The company has taken important steps to achieve a high growth program despite continuing difficult market conditions. During the period, Bubs infant formula sales doubled with gross revenue growth of 100% on pcp.
Image source – © Ipopba | Megapixl.com
Moreover, the company has achieved this high level growth mainly thanks to the record revenues of the Corporate Daigou channel. The channel’s gross revenue grew 276%, surpassing pre-COVID levels.
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The company recorded a significant improvement in its group gross margin. This was mainly due to the optimization of the product and channel mix, improved supply chain efficiency, revising the trade spend strategy and reversing the inventory provision.
Bubs also continued to be the fastest growing infant formula manufacturer in Chemist Warehouse and Australia’s two major supermarket chains.
BUB prospects
After posting record first-half revenue, the infant formula producer expects modest half-on-half revenue and underlying EBITDA growth in 2H22.
Management also expects revenue to be realized from business development prior to the fourth quarter and after taking into account the seasonally calmer third quarter.
Evolution of the BUB share price
The stock has fallen 9% year-to-date this year and 24% in the past 12 months. It traded at AU$0.615 per share at its 52-week high.
Way to go
After seeing strong demand from China for its infant formula, the company sees the United States as the next important horizon for its growth potential. The company is focused on growing its brands in China and will continue to build its brand presence and capabilities in the US market.
