February 25, 2019 / 11:45 PM / 8 months ago

UPDATE 2-CEO of Australian vitamin maker Blackmores resigns after China-linked profit warning

* CEO resigns following China business review, downgrade

* Company does not explain reason for departure

* Shares fall over 4 pct (Adds analyst comment, background, updates shares)

By Paulina Duran

SYDNEY, Feb 26 (Reuters) - Australia’s Blackmores Ltd said on Tuesday Chief Executive Richard Henfrey will step down, after the vitamin maker issued a surprise profit warning on slowing demand in China.

The resignation highlights the company’s troubles in China, which have driven down its share price and sparked a strategy review.

Henfrey, who has been CEO since August 2017, will remain in the position until the board names his successor, the company said in a statement that did not explain the reason for his departure.

Blackmores shares fell over 4 percent on Tuesday, while the broader market was slightly lower.

Blackmores’ cautious full-year guidance suggests the challenges in China are likely to continue, Macquarie analysts said in a note on Henfrey’s resignation.

“Blackmores’ China business appears in a state of flux, with sales trends weakening despite stronger marketing investment,” Macquarie said.

The company’s first-half update “clearly disappointed with execution on key internal initiatives proving evasive, seeing sales and margins impacted,” it added.

Chinese sales drove double-digit growth for Blackmores as recently as last year, however the Sydney-based company has been unable to protect its earnings from a slowdown in the world’s No.2 economy.

Sales to mainland China sank more than 10 percent in the six months to December. The firm hired Chinese-Canadian actor Shawn Dou as a brand ambassador in November to help turn that slide around.

A joint-venture partner in China could improve the company’s fortunes, analysts said.

Reporting by Paulina Duran in Sydney and Shanima A in Bengaluru; Editing by Stephen Coates

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