Troubled infant formula maker Bellamy's Australia says its 18-month turnaround plan is underway after it unveiled a 47 per cent plunge in half-year profit to $7.2 million.
Revenue for the six months to December 31 rose 12.5 per cent to $118.3 million compared to a year earlier, but profit was hit by significant items totalling $8.6 million related to its poor sales in China.
The Tasmania-based company has endured a massive plunge in share price since December after it flagged a significant drop in sales in the key China market and downgraded its full-year earnings forecast twice.
Bellamy's said new e-commerce regulations in China led to an oversupply of Australian-labelled baby formula, causing widespread discounting which hurt its earnings in the second half of 2015/16 and first half of 2016/17.
Acting chief executive Andrew Cohen, who replaced Laura McBain after she resigned in January, tried to reassure investors that a recovery is underway ahead of a leadership spill.
Shareholders will vote on a board spill led by entrepreneur and Kathmandu retail chain's founder Jan Cameron at an extraordinary general meeting due on Tuesday.
Mr Cohen said Bellamy's had axed jobs and adjusted its manufacturing contract with Fonterra.
"We have pulled back on discounting, operating costs and overheads have been reduced materially and we are working with suppliers to lower future ingredients costs," he said.
"The strength of the brand and the size of the opportunity remains, however we need to continue to reset the business over the next 18 months to return to sustained profitable growth."
He said the group is also consolidating its Australian and Chinese reseller partners and plans to increase the number of stores selling its products in China.
The group will also focus on re-establishing its standing with "daigou" - Chinese buyers operating in Australia to supply the grey export market.
"The daigou offers an army of 50,000 plus people who are pushing and promoting your product with their closest network and friends in China and that kind of marketing spend is very difficult to replicate outside that channel," he said.
"We don't see it as a channel that's going to go away in the short term. We value them."
The company reaffirmed its full-year revenue guidance of between $220 million and $240 million.
However, its earnings before interest and tax forecast has been revised down from $22 million-$26 million to $19 million-$23 million due to higher expected legal, accounting and restructing costs in the first half.
Mr Cohen said the group plans to start targeting new markets in the 2018 financial year and if successful, Bellamy's would look to expand into a major market like the US.
Meanwhile, Boston-based investment group Delta Partners has increased its stake in the organic baby food company to 8.79 per cent.
Shares in Bellamy's fell 3.58 per cent, or 16 cents, to $4.31 on Friday.
BELLAMY'S PROFIT PLUNGE:
* Profit down 47pct to $7.2m
* Revenue up 12.5pct to $118.3m
* No interim dividend compared to 4.10 cents a share in previous half
