Consumer Discretionary

Bubs upgrades FY22 guidance: Australia, China and US sales 'performing strongly'

Fri 17 Jun 22, 9:49am (AEST)
Infant Formula Baby Formula A2M

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Key Points

  • Bubs expects FY22 gross revenue to exceed $100m compared to $46.8m in FY21
  • Turnover in the fourth quarter is "likely to be higher than originally anticipated"
  • The FDA guidance about the temporary enforcement discretion is in effect until November 14, 2022

Bubs (ASX: BUB) has upgraded its FY22 guidance due to strong momentum in China and a first response to the US infant formula shortage.

While still subject to scheduled operations occurring without disruption, Bubs expects FY22 gross revenue to be over $100m in FY22 compared to $46.8m in FY21.

Bubs said it expects “at least” a 100% increase on the $1.2m in underlying earnings reported at the half-year, which signals a potential return to profitability after a difficult last two years, where Bubs reported earnings losses of -$11.3m and -$28.5m in FY20 and FY21 respectively. 

It will be interesting to see how full-year margins perform under inflationary conditions and having to ramp up production to meet customer needs. Group gross margin was 38% in the first-half of FY22, -19% in FY21 and 19% in FY20.

Encouragingly, the earnings upgrade was driven by broad range of factors, not just the high-profile US baby formula shortage.

“All key product segments, including Bubs® A2 Beta-Casein Protein, Organic Grass-Fed, and Easy-Digest Goat Milk Infant Formula ranges, are performing strongly in Australia, China and the USA,” said CEO, Kristy Carr.

Carr expects the business to finish the financial year on a strong note, saying “four quarter turnover is likely to be higher than originally anticipated.”

US distribution

The US baby formula shortage has helped accelerate Bubs' US growth aspirations, with its products expected to available in approximately 4,800 stores over the coming days and weeks.

Bubs told Market Index that the current FDA guidance about the temporary enforcement discretion is in effect until November 14, 2022. They were not able to comment as to what the situation will be beyond that date.

Bub share price chart
Bubs share price chart

 

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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