Goat milk infant formula company Bubs Australia says Chinese “corporate daigou” have bought more of its products in the past two weeks, as the country continues to struggle with the deadly coronavirus epidemic.
The extra activity among corporate daigou, highly organised shoppers who run their own businesses buying products in Australia to sell in China, is more than offsetting the reduced buying among Chinese tourists and students, the company said.
Bubs Australia boss and founder Kristy Carr says the building blocks are in place for the company to deliver its first profit next financial year.Credit:Chris Hopkins
Bubs’ fortunes are closely tied to China and its half-year result showed that revenue from China sales jumped almost 20 per cent in the December half to $5.44 million. Across all regions, total revenue jumped 38.7 per cent to $27.1 million.
Bubs said the coronavirus had not reduced demand for its products and that it had seen only “minimal disruption” due to the outbreak.
“Infant formula is perceived as an essential pantry item, as it is a key food source for babies. As a trusted premium international brand with transparent supply chain visibility, Bubs is well placed to appease Chinese parents’ heightened focus on food security and their children’s health and immunity,” Bubs said.
The company said demand for dairy products in China had been reinforced by a recent Chinese government statement on nutrition and coronavirus, which recommended consuming 300 grams of dairy products per day.
'That could be because people are worried, similar to toilet paper and masks and sanitisers, that they feel the need to actually stockpile, because of the uncertainty.'
Bubs executive chairman Dennis Lin said it was too early to tell whether the increased activity by corporate daigou was a short-term phenomenon or not.
"That could be because people are worried, similar to toilet paper and masks and sanitisers, that they feel the need to actually stockpile, because of the uncertainty," he said.
Bubs recorded a statutory loss for the half of $7.56 million, down from $8.83 million in the prior corresponding period.
Bubs recorded a normalised EBITDA (earnings before interest, tax, depreciation and amortisation) loss of $3.74 million for the half, pointing to substantial investments in marketing spending, the launch of products in Vietnam and the development of pending new products.
Bubs produces a range of products, including goat milk infant formula, cow milk infant formula and organic baby cereal.
Bubs does not own any goats but has long term contracts with goat farmers for exclusive access to the milk from a total of about 23,000 milking goats.
Bubs founder and chief executive Kristy Carr said the building blocks were now in place for the company to deliver its first profit next financial year.
"We've been very pleased with the results in the first half. We saw a continued solid trajectory of growth across all of our core product groups in all of the regions that we operate in," she said.
Mrs Carr said the infant formula products performed strongly in the half, with gross profit margins rising to 41 per cent.
Gross revenue from infant formula rose 77 per cent on the prior corresponding period, while adult goat milk powder revenue rose 30 per cent. Gross margins rose from 19 per cent in the prior corresponding period to 24 per cent.
Shares in Bubs closed down 2.8 per cent at 70.5¢.
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