Blackmores CEO is ‘frustrated’ at share sell-off triggered by Chinese tax changes

Blackmores shares have been getting hosed this week, falling 20% at the open today before recovering to a loss of around 5% on top of the 13% fall yesterday.

China this week introduced changes the rules and taxes on online purchases, leading to a sharp revaluation in the share price.

CEO Christine Holgate told Business Insider from China that the changes have not had an impact on business.

She is currently in China building new channels to market for Australian-made vitamins and infant formula.

Blackmores shares are still Australia’s most expensive. Last year they hit $200 each.

Shares in Bellamy’s Organic and a2 Milk, both makers of infant formula, have also fallen. Blackmores has a joint venture with Bega Cheese in infant formula. Most of it is currently sold in Australia.

A new 11.9% value-added tax on foreign goods bought online came into force on Friday.

And the finance ministry is also being stricter on which goods bought online can be imported through free trade zones in 12 cities.

Holgate told Business Insider from Beijing: “We’re a little frustrated.”

Some are seeing this as closing the whole China health-related sales growth story down.

But Holgate says it’s good news that China has brought clarity to the free trade zones.

“I haven’t seen or have any reason to believe that anything on the regulation that came out last week would not be good news for Blackmores,” she says.

Many of Blackmores products reach China via resellers who buy in Australia and sell in China online.

There had been rumours for the last year or so that the free trade zones were going to close completely.

“I do understand that change does create uncertainty for people,” she says.

“If anything, I welcome the Chinese government opening more products that we can bring in to the direct retail market. There are about 22 ingredients that they’ve improved.

“I think the increase in taxes from 10% to 11.9% will not have a material difference. I am surprised that they haven’t gone closer to the VAT in the normal retail market.

“Regulation here is an ever evolving path.”

She says she’s seen nothing yet to adversely impact the Blackmores business.

“If we did, we would be telling our chairman who would be telling our shareholders,” she says.

In the meantime, she is building more routes to market in China. Today she is meeting with JD.com, an online marketplace.

Tomorrow she is launching Blackmores on Leyou.com, a large mother and baby chain in China.

“This is a really exciting place,” she says. It reminds her of the US in the early 1990s, a period of dynamism, growth and excitement.

“I just wish Australia would embrace China. We are in just a great position as a country to partner with the people here … and provide jobs and growth for our economy.”

Blackmores in February posted a record half-year profit of $48 million, a rise of 160%.

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