Baby Food Maker Bellamy’s Ousts Top Execs as Stock Slumpsby
Company breaks month of silence to forecast profit plunge
CEO Laura McBain, CFO step down as supply contract extended
Bellamy’s Australia Ltd., the infant formula maker whose market value ballooned in 2015 amid surging Chinese sales, ousted its two top executives after forecasting plunging profits. The stock fell the most on record in Sydney.
Bellamy’s has racked up stockpiles of unsold infant formula and excess ingredients after making overambitious revenue estimates, the Launceston, Tasmania-based company said in a statement to the stock exchange Wednesday. Chief Executive officer Laura McBain and Chief Financial Officer Shona Ollington have stepped down.
The announcement breaks a month of silence from Bellamy’s on the state of its business following negotiations with suppliers and manufacturers, among them dairy companies Bega Cheese Ltd. and Fonterra Cooperative Group Ltd.
Bellamy’s has now amended its manufacturing agreement with Fonterra, extending a five-year contract by three years and limiting purchase commitments.
Earnings will be about half what analysts expected. Operating profit for the year ending June 2017 will range between A$22 million and A$26 million, Bellamy’s said. That compares with the median analyst forecast of A$46 million.
The stock fell as much as 44 percent as its shares came out of a month-long trading halt. The shares traded down 34 percent at A$4.35 at 2:05 p.m. local time.
Bellamy’s stock previously plummeted almost 44 percent on Dec. 2, when the company disclosed what it called a “temporary volume dislocation” in China. Days later, the company suspended shares from trading as it attempted to grasp the impact on earnings.
After listing in August 2014, Bellamy’s stock soared more than 15-fold in little more than a year to A$15.48 as Chinese consumers flocked to the company’s organic baby formula and food pouches for infants. Even when China said it was tightening import and registration regulations last April, Bellamy’s said it was “confident” the new rules wouldn’t hurt sales.
Bellamy’s revenue in the year ended June 2016 almost doubled to A$245 million. Of that, China revenue surged 331 percent to A$62 million. Net income in the period more than quadrupled to A$38.3 million.
Bellamy’s largest investor, Black Prince Private Foundation, this month moved to oust most of the board.
Black Prince, which owns about 14 percent of Bellamy’s, asked for a general meeting to replace four independent, non-executive directors with its own nominees, including one-time Bellamy’s board member Jan Cameron. Cameron is best known as the founder of outdoor equipment retailer Kathmandu Holdings Ltd.
Bellamy’s received Black Prince’s request on Dec. 30 and must hold the meeting within two months of that date.
Andrew Cohen, Bellamy’s chief operating officer, has been appointed acting CEO while the board searches for a permanent replacement.