Vitamins company Blackmores has acquired a $43 million tablet and soft-gel capsule making plant in Melbourne from United States giant Catalent to gain more control over its supply chain after frustrations with supply shortages for some products.
The acquisition was announced on Tuesday as Blackmores also revealed that its sales into China were below expectations because of supply constraints and the impact of re-negotiations of trading terms with customers. But its Australian business made market share gains, strengthening its hold as the No.1 brand in the Australian market.
Blackmores lifted net profit after tax by 18 per cent to $17.4 in the three months ended March 31, with net profit after tax up 19 per cent to $51.6 million for the first nine months of 2017-18. The shares were steady on Tuesday at around $124.
Blackmores chief executive Richard Henfrey said the acquisition of the 30,000 square metre tablet-making facility at Braeside in Melbourne would give the company much greater control and flexibility after frustrations over the past six months.
There had been issues with supply continuity for a range of smaller product lines which had hurt the brand and curtailed exports.
But he said Blackmores would still use other contract manufacturers and wouldn’t race to make more acquisitions of this type immediately, although over the long term it would aim to take further control over its production.
“There’s certainly no grand plan to move straight onto the next one,” Mr Henfrey said. Blackmores had first approached Catalent almost two-and-a-half years ago but things became serious last year. “It has taken nine months to put together,” he said.
Debt funded
Catalent has been a supplier to Blackmores for about 30 years. But it currently only supplies about 15 per cent of its products. The plant has the ability to deliver up to 50 per cent of Blackmores’ manufacturing requirements in the future.
The Catalent plant has a workforce of 265 people and they will be transferred across to Blackmores under an 18-month transition period, with the finalisation of the deal earmarked for October, 2019. It will be debt-funded.
Catalent is a pharmaceutical company which is listed on the New York Stock Exchange and has a sharemarket capitalisation of $US5.6 billion ($7.3 billion). It operates 14 manufacturing plants in the United States and 11 across Europe.
Mr Henfrey said the Australian retail market was still tough, as buying from Australian pharmacies and supermarkets by smaller part-time daigou traders and students aiming to sell online in China slowed down, with highly-organised professional traders relying on bigger deals with vitamin makers. “It’s kind of moved through towards an organised export channel,” he said.
No Buyout Approaches
Having to rely on outside manufacturers hasn’t been a problem for one of Blackmores’ rivals, the No.3 player in the Australian vitamins market, Nature’s Care, which two weeks ago sold a majority stake to Chinese private equity buyers in yet another offshore buyout in the sector. This left Blackmores as the last big independent vitamins group in Australia. Mr Henfrey said there had been no buyout approaches since he had been at the helm. “In my time as CEO, no we haven’t,” he said when asked if there had been approaches.
A string of since he had been at the helm. “In my time as CEO, no we haven’t,” he said when asked if there had been approaches.
