Eco Investor February 2015

Pre-Dividend Securities

Bellamy's to Beat Prospectus Forecasts

Organic baby food maker Bellamy's Australia expects to exceed its prospectus forecasts for 2014-15. If the momentum continues in Australia and China and normal formula ingredient supply arrangements, it expects the business will exceed its prospectus forecast for sales and for net profit by 20 per cent each.

The company said it now has 14 per cent of the Australian retail formula market. It attributes the market share growth from 12 per cent in the prospectus to deeper distribution across Australia and stronger brand recognition.

"The formula category in Australia remains one of the fastest growing categories in the grocery trade, despite a relatively flat birth rate in Australia. Our view is the growth in the Australian industry is in part a result of offshore consumers, particularly in China, purchasing Australian formula for use at home," it said.

"Bellamy's is satisfied with the progress made in a short time-frame following the licencing of our Infant Formula manufacturer by Chinese Authorities. Bellamy's is on plan to meet our Forecast China Sales FY 2015. As an initial part of our market expansion into major supermarkets in China, Bellamy's formula recently launched in Wal-mart stores in Guangdong. We have been pleased with the results to date and, importantly, this step will contribute to increasing the brand profile in the China market.

"As a result of the growth in formula sales, we are yet to reach our preferred stock levels. We are mindful, however, that there are risks in having lower stock levels, which could limit our capacity to respond to sudden increases in demand. We maintain good cash levels to support the planned increases in production." (ASX: BAL)

 

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