The CEO of Bellamy’s, Laura McBain, is leaving after sales of the company’s organic infant formula in China suddenly stalled and the share price more than halved.
Chief Operating Officer Andrew Cohen, a former partner with Bain & Company, has been appointed acting CEO. The Chief Financial Officer, Shona Ollington, has been replaced by Nigel Underwood who is now acting in the role.
The company’s shares fell 40% as they came out of a five week trading halt imposed after sales of infant formula hit a wall in China following regulatory changes. A short time ago, the shares were trading at $4.36, down 35% today and less than a third of the year high of $15.38.
In a business update, the company announced a cost cutting program and estimated revenue for the current financial year would at best be flat on 2015 with profit margins being squeezed.
A group of shareholders had been pushing to get rid of McBain and all the directors other than the chairman, Rob Woolley.
Woolley says the board of directors and management are focused on rebuilding confidence with key stakeholders, customers, suppliers and investors.
“(CEO) Laura (McBain) has overseen the growth of the company over the past decade since she joined Bellamy’s as general manager in 2006, including the expansion of Bellamy’s markets and its brand. I would like to thank Laura for her contributions to Bellamy’s over the last 10 years,” Woolley says.
Sales had been soaring on strong demand from China with McBain, a former Telstra Business Woman of the Year, driving overall company growth by up to 70% a year from 2008.
In 2016, revenue from China/Hong Kong grew 331% to $62 million. This encouraged the company to put in place manufacturing deals with other players so it could meet demand.
Bellamy’s says it has responded to falling sales by amending a key manufacturing contract with Fonterra, the world’s biggest dairy exporter, reducing production and better managing stocks.
A cost cutting program has been launched to reduce expenses throughout the business.
The company says revenue for the first half of the 2017 financial year is expected to be between $115 million and $120 million.
The full year number is expected to be in the range of $220 million to $240 million, at best flat on 2015 and well below previous analyst expectations of about $330 million.
“This guidance reflects the impacts of higher than anticipated stock levels held by Bellamy’s trade customers,” the company said in a business update.
This will mean profits falling to between 4% and 6% of revenue in the second half, down from 6% and 9% of revenue in the first six months.
EBIT (before interest and taxes) for the first half is expected to be between $12 million and $14 million. For the full year, EBIT is expected to be between $22 million and $26 million.