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BWX Ltd HY20 Results – Fundamentals Of BWX Strong But Profit Below Market Expectations

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

BWX Ltd (ASX: BWX) is a vertically integrated developer, manufacturer, distributor and marketer of branded skin and hair care products with an emphasis on the natural segment of the beauty and personal care market. The Sukin brand is its most well-known product in Australia. BWX was listed in November 2015 and has a market capitalisation of $574 million.



What are the key features of BWX HY20 results?

BWX business units performed soundly in the HY20. BWX net revenue increased to A$84.1 million, up 23% (HY: A$68.1 million). Statutory net profit after tax (NPAT) increased to A$4.2 million, up 63% (HY: A$2.6 million). BWX has a strong balance sheet with a net cash position increasing to A$14 million (FY19: A$12 million). Finally, BWX has an interim dividend of 1.3 cents per share (HY19: Nill).


What are the drivers of this result?

BWX products performed strongly this half year. Sukin net sales increased by 43% in the half year. This is mainly attributed to increasing availability of the brand to consumers in APEC and the United States (US). Sukin also performed well in Australia that was supported by the Coles partnership.

Andalou Naturals net sales increased by 15% in the half year. This increase was driven by strong sales growth in the US and Australia. Andalou Naturals has strong market share in the US and is the number one US brand in the natural channel in facial skincare. The rollout of this product in Australia has been accelerated through the half year with Australian sales growth of 73%.

Mineral Fusion net sales increased by 28% in the half year. This result is attributed to the strong performance in the US. In Australia, the brand is now fully integrated with the Nourished Life platform which should underpin its growth in this market.

Nourished Life net sales increased by 5% in the half year. This modest result was driven by the launch of the refreshed Nourished Life website.


What is the outlook of BWX?

BWX are on tract to meet full year FY20 guidance revenue growth of 20% -25% and Earnings before interest, taxes, depreciation, and amortization (EBITDA) at 25% - 35%.

BWX has executed its Sukin brand launches in Indonesia and Vietnam during the half year and is taking a measured approach to its expansion in Europe. These expansion strategy in new markets could underpin future revenue growth.

BWX management notes that the company is actively monitoring the coronavirus situation in China and worldwide. BWX management is confident that is prioritised international strategy would offset any potential China-related shortfalls in the second half of the year.


What is the market reaction?

The market reaction to BWX announcement is negative. BWX is down around 5% and is currently trading at A$4.35. Even though BWX products performed strongly in the half year, the market was expecting higher profit numbers, which has affected the share price today. BWX is trading at a forward P/E ratio in the low-forties and has an annual dividend yield of around 0.8%.



This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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