There’s good news for followers of the infant formula theme today with Bellamy’s back into profit following a major slump sparked by regulatory changes in China.

Revenue at the China-focused infant formula maker rose 37 per cent to $329 million while profit was $43 million compared to a $809,000 loss in 2017.

Bellamy’s shares (ASX:BAL) now appear to be recovering after a 60 per cent decline earlier this year. The stock is up 20 per cent in the past two weeks, trading at $11.13 early today.

The news follows a strong result for fellow large cap formula stock a2 Milk which last week reported an amazing $660 million worth of sales of the stuff.

China-focused baby formula has been one of the most consistent performers among all ASX themes in recent years with stocks on average up 170 per cent year-on-year.

AuMake, the retailer targeting “daigou” and Chinese tourists, joined the party earlier this month after signing up a Kiwi dairy producer to develop an inhouse range of milk powder formula products.

AuMake joined other ASX china-focused baby formula makers such as Jatenergy, Bellamy’s, Synlait, Bubs, Clover, Wattle and newly listed Keytone Dairy.

Comeback story

It’s a compelling comback story for Bellamy’s.

The stock’s spectacular growth via China suddenly stalled in 2016 following regulatory changes.

The fallout claimed the scalp of the CEO, stripped millions of dollars from the market capitalisation and sparked a shareholder revolt which ended with a change in the board of directors.

The company now says its business has stabilised with a focus on a growth strategy that recognises the significant opportunity for organic infant nutrition in China and in Asia.

“The business has transformed over the period, in terms of process and disciplines, but more importantly in terms of culture and capability,” says chief Andrew Cohen.

“Today, Bellamy’s stands for a highly agile, passionate and commercial culture, underpinned by significantly stronger talent and capability.

“This is true at all levels, including the Board, management, in Australia, and most importantly for China.”

The revenue and earnings compared to previous years:

Source: Bellamy’s

The company, deciding not to declare a dividend, forecasts more moderate growth in 2019, with a slowing of China cross-border growth for infant formula.

Delays are also expected on the registration of a Chinese label product to be sold exclusively in offline channels in China.

“While this channel contributed less than 6 per cent of Bellamy’s sales in FY18, we believe it represents an important future platform for growth and continue to plan for a winning distribution model pending approval,” says Cohen.

Bellamy’s expects up to 10 per cent revenue growth for 2019 Australian-label business.

The 2018 results in detail:

Source: Bellamy’s


This article first appeared on Business Insider Australia, Australia’s most popular business news website. Follow Business Insider on Facebook or Twitter