Bubs blames China sales for milk inventory hit
Baby formula maker Bubs, the subject of a bitter board split, will write down up to $25 million worth of inventory after its goods piled up in China.
China distributors had five years’ worth of tins stowed in warehouses, Bubs said on Friday, and had failed to take contracted amounts of formula from the Australian company. Bubs also wants to axe a joint venture to supply goat infant formula under its namesake brand in China.
Baby formula group Bubs says it will have to impair inventory levels.
The move carved 1¢ off Melbourne-based Bubs’ share price to 17¢. The stock was trading above the $1 mark during the onset of the COVID-19 pandemic in 2020.
The board, which is facing a challenge from founder Kristy Carr and former executive chairman Dennis Lin, has argued its China strategy under previous leadership was flawed, which has been disputed. The present board and its former top brass are also defending a legal claim and respective counterclaim.
Bubs said its revenues in China for the year were expected to be at the lower end of forecasts of $13.5 million to $13.8 million, compared to the previous year’s result.
The company pointed the finger at distributors Willis Trading and AZ Global, and affiliates for sales being “below expectations” and continuing to “disappoint”.
Bubs said it understood “there is more than five years’ of Bubs Supreme finished goods inventory held in multiple warehouses, based on the current rate of sale”.
The company repeated that AZ Global and Willis, both subsidiaries of Hong Kong Stock Exchange-listed Alpha Professional Holdings, owed $5.65 million for delivered goods and “despite repeated requests for payment, the debt remains outstanding”.
AZ had also taken lower volumes of Bubs products
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