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Poor quarter prompts Blackmores warning

AAP logoAAP 26/10/2016 Lilly Vitorovich

Vitamins maker Blackmores warns it is unlikely to match last year's doubling of net profit to $100 million after its first quarter earnings nearly halved due to a slump in Australian sales.

Blackmores on Thursday reported a 40 per cent drop in Australian sales for the September quarter, the result of excess stock and changes in the key Chinese market.

First quarter net profit was down 47 per cent from a year ago to $12 million, and sales were down eight per cent at $149 million.

Chief executive Christine Holgate said the Chinese export market had previously been "largely serviced through Australian retailers" and a change to buying patterns had hit local sales.

"Blackmores Australia sales of $68 million were down 40 per cent compared to the prior corresponding period as Chinese exporters transitioned to new channels and Australian retailers worked through excess stock," Ms Holgate said.

However sales to China through a new export division had more than tripled against the previous corresponding quarter, to $31 million.

"The rapid growth of sales through these channels is encouraging as it validates continuing demand for our products in China," Ms Holgate said.

Ms Holgate said about 20 per cent of Australian sales in the first quarter were estimated to be to consumers in China.

At Blackmores full year results in August the company said about 40 per cent of local sales were attributable to Chinese consumption.

Following the market update, Ms Holgate told Blackmores' annual general meeting conditions had started to improve by the end of September.

"Whilst we don't expect to match last year's exceptional performance for the full year, we are pleased with the improving trends," Ms Holgate said.

"Pleasingly, we entered the second quarter with an improving sales and profit trajectory, there are positive sales trends that indicate overstocking is easing, consumer demand remains robust and we have been able to capture significant new sales in China."

Blackmores shares fell as much as 6.2 per cent shortly after the results were released and dropped below $100 apiece at one stage, but the stock recovered to close $1.35, or 1.3 per cent, higher at $105.74.

The shares hit a record high of $220.90 in January.

Asked by a shareholder about the group's appetite for a major acquisition, chairman Marcus Blackmore said Blackmores would tread carefully.

When another shareholder asked if the company would maintain its 71 per cent profit-to-dividend ratio, Mr Blackmore said that was "a good number for this business", though Ms Holgate cautioned the company should first wait to see what its 2016/17 profit is.

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