Bubs sales jump 499% in Q2 with higher margins

Infant formula and baby food company Bubs (ASX: BUB) has seen explosive growth in its sales to China and at home in the second quarter, with gross revenue up 499 per cent year-on-year at $12.1 million.

This figure represents 35 per cent growth on the previous quarter for the company which focuses on goat's milk products, while for the first half revenue more than doubled year-on-year to reach $21 million.

In its quarterly results released today, the Sydney-based company highlighted a strong domestic presence, China cross-border e-commerce sales and the activation of the Corporate Daigou distribution channel contributed to the good performance.

Profitability has improved too, with the gross margin up five percentage points to 37 per cent.

CEO and founder Kristy Carr says the group is very pleased with the positive sales momentum in the Bubs portfolio, which includes infant formula, organic baby food, organic toddler snacks and CapriLac powder.

"At the same time, as the scale of the business grows, we are making significant progress on closing the gap between revenue and production and operating expense," says Carr.

"In addition to strong (375%) domestic growth, our strategic underpinning, sales into China have been catalysed by traction on China's major eCommerce B2C platforms and the successful activation of the Corporate Daigou distribution channel in Australia.

"Sales into China are 23-fold up on the same period last year, demonstrating our route-to-market strategy is being successfully executed."

She emphasises a good balance has been struck between the portfolio's key elements as well, with Bubs products and CapriLac powder making up 48 per cent and 38 per cent respectiveyl, with fresh dairy products accounting for the remainder.

"As foreshadowed in the last report, we are now in a position to deliver sustainable locally sourced production of infant formula and have invested significantly in production anticipating increased sales volume related to our expanding network of Chinese partners," says Carr.

"In December 2018 we announced Bubs had secured additional goat milk supply with Central Dairy Goats Pty Ltd, representing an established group of goat dairy farmers on the North Island of New Zealand.

"This new arrangement provides Bubs guaranteed access to an additional milk pool in excess of 6 million litres of premium New Zealand goat milk per annum."

The company's total goat milk capacity now stands at some 20 million litres annually, which Carr believes can support Bubs' growth trajectory in the medium term.

"Meanwhile, our overall strategic direction remains unchanged. It has delivered excellent volume growth in the premium infant nutrition segments both here and overseas, with a key focus on China," she says.

"We continue to invest in product development and expect to release new product innovation in the market during the coming months."

At 10:36 AEDT BUB shares were up 9.3 per cent at $0.47

Business News Australia