April 15, 2019 / 11:25 PM / 4 days ago

UPDATE 2-Australia's Blackmores says quarterly profit hit by China import rules

* Blackmores Q3 profit A$9.9 mln vs A$17.3 mln previous Q3

* China import rules took effect Jan. 1, affecting “daigou”

* Blackmores shares down up to 8 pct (Recasts on third-quarter result, adds shares, analyst quotes)

By Byron Kaye and Paulina Duran

April 16 (Reuters) - Australian vitamin maker Blackmores Ltd posted a slump in third-quarter profit on Tuesday, as tough new import rules in China hammered sales there, with the result sending its shares down sharply.

The result confirms Blackmores as the highest-profile Australian casualty of China’s moves to tame a runaway market of informal importers, known as “daigou,” which make tens of billions of dollars a year selling foreign goods online.

After saying in February it expected a sales decline, citing faltering demand in China, the Sydney-based company quantified the impact of the regulations that are aimed at cooling the explosion of foreign goods sold online by daigou. Profit fell 43 percent in the three months to end-March.

From Jan. 1, Chinese companies that import goods online need to be registered with the government, while certain products were also required to pass through government-linked customs warehouses where they incurred tax.

“The third quarter has been challenging for the company,” said interim chief executive Marcus Blackmore, the founder’s son who owns a quarter of the company and stepped into the role last month following the departure of its last CEO.

“We firmly believe that this result does not reflect the long-term growth potential of the business. We are committed to a major streamlining of the business, to simplify and improve our processes and structure.”

For Blackmores, which racked up double-digit sales growth in fiscal 2018, largely due to China sales, the regulatory change comes on top of a spending slowdown in late 2018 as trade tensions with the United States eroded Chinese consumer confidence.

Blackmores shares fell as much as nearly 8 percent, recovering to be down by 5.2 percent by midsession, while the broader market was up by 0.4 percent. The shares were just above a near four-year low.

The company’s China business, which is under review, “remains in a state of flux, with sales trends weakening despite stronger recent marketing investment”, Macquarie Group analysts wrote in a research note.

Blackmores repeated its guidance from February when it said it expected modest full-year revenue growth but that its second-half profit would be below the first half.

$1 = 1.3947 Australian dollars Reporting by Byron Kaye and Paulina Duran; Additional reporting by Nikhil Subba in BENGALRU; Editing by Shri Navaratnam and Aaron Sheldrick

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