While the Bubs Australia board and shareholder faction Save our Bubs go ten rounds in the play pen, the company says it has more than five years’ worth of its Bubs Supreme product stored in multiple warehouses and subsequently anticipates a $20-25 million non-cash impairment.
In a trading update, the formula company’s China net revenue is expected to be at the lower end of its $13.5-13.8 million forecast, compared to $53.6 million in FY22.
Sales through its exclusive China distribution deal have been below expectations and “continue to disappoint”, Bubs said.
The distribution deal was with AZ Global affiliates Alice Trading and Willis Trading, which are subsidiaries of Hong Kong SX listed Alpha Professional Holdings.
The excess Bubs Supreme stock was produced for AZ Global and Alice Trading to distribute in China.
Bubs said the online-to-offline sales promised in China have not materialised, which not only resulted in the large inventory backlog, but a significant amount of bulk raw materials at the Deloraine manufacturing plant, purchased to meet supply obligations under the agreement with Alice.
Willis Trading and Alice Trading also owe Bubs’ wholly owned subsidiary, the Infant Food Co, $5.56 million.
Meanwhile, the joint venture with Shitong (Hangzhou) Health Technology Co and sales and supply agreement with Shitong and Heilongjiang Anjia Dairy Co, agreed to in January has not progressed, with the board telling the other partners it does not want to proceed.
The JV was conditional on State Administration for Market Regulation (SAMR) approval following Heilongjiang renewing its existing registered SAMR goat infant formula brand slot licence for exclusive use by Bubs. No approval has been forthcoming.
The board said the company will now embark on a “refreshed strategic direction” under its new China based leadership team, led by Jackie Lin, a managing partner at C2 Capital Partners, the largest shareholder in Bubs.
