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Why the Blackmores share price is in a trading halt

James Mickleboro
Blackmores vitamins

The Blackmores Limited (ASX: BKL) share price won’t be going anywhere on Monday.

Before the market open this morning, the health supplements company requested a trading halt for its shares.

Why is the Blackmores share price in a trading halt?

Blackmores requested the trading halt pending an announcement concerning its half year results and outlook for the full year.

The company has requested that its shares remain halted until earlier of the release of this announcement or opening of trade on Wednesday.

Given that it is rare that a company will request a trading halt like this for a good result, it appears as though Blackmores may have fallen short of expectations in the first half.

What was the market expecting from Blackmores?

At its annual general meeting in October Blackmores warned that its first half performance was not expected to be ahead of the prior year due to disruptions caused by channel shift and China regulatory changes.

In addition to this, increased ingredient and raw material costs, along with short-term phasing of transition costs associated with the Catalent transaction, were expected to weigh on its gross margins during the half.

In light of this, management guided to a first half profit result that would be at a similar level to the second half of FY 2019.

Given that in FY 2019 Blackmores posted a first half profit after tax of $34 million and a full year profit of $55 million, this would imply a first half profit after tax of ~$21 million in FY 2020. This equates to a decline of ~38% on the prior corresponding period.

But given today’s trading halt, it could be a sign that it will be even lower now.

Incidentally, last week analysts at Goldman Sachs named Blackmores as one of six companies that it believed could surprise to the downside during earnings season.

Goldman explained: “… we see potential for further weakness with the challenging conditions in China persisting for longer than expected. Based on our Tmall/Taobao tracker, BKL has lagged the broader Vitamin and Health Supplements category, with BKL growing at +3% YoY over the last 6 months vs +22% for the broader category. Whilst we lack a comparison for 1H20, our FY20E NPAT forecast of A$45.2mn is -8% below Bloomberg consensus.”

Other companies tipped by the broker to negatively surprise include Commonwealth Bank of Australia (ASX: CBA) and Domain Holdings Australia Ltd (ASX: DHG).

The post Why the Blackmores share price is in a trading halt appeared first on Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020