Rumours impact Blackmores’ lucrative suitcase trade

VITAMIN maker Blackmores’ full year profit has tumbled as regulatory rumours dampened demand from Chinese consumers in Australia.

Chief executive Richard Henfrey said talk of potential changes to China’s e-commerce regulations and “the suitcase trade” had impacted the buying patterns of Chinese entrepreneurs and tourists who were previously purchasing products in Australian stores and taking them home.

The reduction was significant and came without warning, the company said, particularly in the first quarter of the financial year, and dragged full year profit for 2016/17 down 41 per cent to $59 million.

Blackmores made a record profit of $100 million in 2015/16 and estimated that more than $200 million of its total $717 million revenue came from Chinese consumers as visitors took products home.

Mr Henfrey, who replaced Australia Post-bound Christine Holgate less than two weeks ago, said regulatory changes never came about, but rumours about them created uncertainty in the market.

“Those Australian-Chinese consumers stopped buying at that point of time and we have worked pretty hard to recover from that,” Mr Henfrey said.

Full year revenue from ordinary activities fell 3 per cent to $693 million, with the bulk of sales coming from the company’s Australian and New Zealand arm, despite a 23 per cent drop compared to a year ago. Branded domestic sales were in line with the prior year.

Asia direct sales rose 36 per cent to $216 million, amid growing demand for products in China, where direct sales grew 71 per cent to $132 million. Blackmores said despite expected challenges, it expects its Asia division, particularly China, to strengthen.

Blackmores shares rallied $6.82, or 7.5 per cent, to $97.99. It will pay a final dividend of $1.40 a share.