Bubs Australia (ASX:BUB) executives told investors the company’s brand continues to resonate with its targeted consumers and said the business is positioned to benefit from premium segments across multiple markets, while monitoring a volatile external backdrop that includes currency moves, tariff uncertainty, and broader geopolitical and regulatory developments.
Management highlighted that it is focused on higher-margin subcategories within infant formula, particularly premium natural offerings, and noted ongoing industry quality issues affecting some competitors globally. Executives said the company is working through these conditions with its own quality systems and emphasized its Australian sourcing as a point of differentiation.
U.S. expansion: more doors, more products, and logistics pressure
Retail partners referenced on the call included Target, Walmart, Sprouts, and Sam’s Club. Management said Target will increase the number of stores and products on shelf, while Walmart will step up significantly in store count. The company also said it has secured ranging at Sprouts and at Sam’s Club.
Executives said an air freight program was undertaken during the half and described execution as strong operationally. They also noted that U.S. annual range reviews and intake for major retailers are currently underway, with purchase orders “rolling in,” and described the near-term sales cadence as linked to consumer offtake and subsequent replenishment. Management said it expects the second half to be better in the U.S. as distribution expands.
The company also pointed to evolving digital marketing tactics, including increased focus on platforms such as Meta, TikTok, and Reddit, and said it is seeing AI-driven changes in search behavior.
China performance: channel momentum and Seabuck stake increase
Management described performance in China as encouraging, with activity concentrated in second- and third-tier cities. Executives said they had worked down extra stock sitting in the trade and were pleased with “sell out” performance and channel results. They also said its online-to-offline approach is performing strongly.
The company reported maintaining a number one position on Tmall and said it has secured an additional 77% of Seabuck, which it described as an imported product. Management said it believes the business is well set for sustained growth in China in the second half, citing both Bubs and Seabuck as showing strong growth.
In response to a question about Daigou and English-label trends, management said it was not seeing a large shift in its own exposure, noting activity across general trade alongside cross-border e-commerce product. Executives added that broader category shifts could be either a benefit or a headwind depending on how they develop.
Australia and Rest of World: investment lift, portfolio change, and regulatory hurdles
In Australia, management said it is investing to reestablish performance and acknowledged it “need[s] to do better” in the home market. The company said advertising and promotion was about 8% of net sales and has been upgraded to 12% in the second half. Management also referenced price activity that it said has been well received by consumers and retailers, and noted improving shelf availability as the business works through prior stock rationing.
The company also disclosed it discontinued its food portfolio during the half, stating it expects to cycle into stronger performance in its core Australian business as it moves forward.
In the Rest of World segment, management said rationing has been a factor and pointed to regulatory challenges, particularly Vietnam requirements, which it said it worked through with its distributor partner. Japan was described as a strong market, and Malaysia as an emerging buyer. The company also referenced modern platform activity, including TikTok, as well as in-store activations.
Financial results: revenue up, EBITDA improvement, and inventory rebuild
Chief Financial Officer Naomi Verloop said the key takeaway from the profit and loss statement was an underlying EBITDA result that improved by AUD 0.7 million versus the prior corresponding period. She said overall revenues increased 14% year over year, with the increase in U.S. revenue cited as the major driver.
Verloop said performance “held up surprisingly well” despite the impact of air freight and tariffs, and she attributed resilience to product mix and a greater share of sales into the higher-margin U.S. market. She said operating expenses were lower than the prior period primarily due to the completion of initiatives.
On the balance sheet, Verloop said cash increased from AUD 20.1 million to AUD 28.1 million, and indicated the company expects cash of approximately AUD 8 million at the end of the financial year. She said trade receivables increased in line with revenue, while payables rose largely due to extra payments to suppliers for raw materials from Australian farms. She also noted right-of-use assets increased due to a lease at the Deloraine Dairy facility, which she described as the company’s manufacturing and office site.
On cash flow, Verloop highlighted net cash used in operating activities of AUD 4.4 million versus an outflow of AUD 0.5 million at the prior half, tying the change to an inventory rebuild process. She also said National Australia Bank had extended the limit on the company’s working capital facility, which she said would help during the inventory rebuild.
Gross margin for the half was described as above 50%, exceeding earlier guidance of 40%–45%, despite air freight costs. Verloop said the company still expects margins to be in the 40%–45% range through the end of the year as it cycles through tariffs and air freight impacts.
Net working capital increased to AUD 33.0 million from AUD 23.2 million, which management attributed to inventory build. Inventory was cited at AUD 30.3 million at the same point last year, with inventory as a percentage of sales down to 26%, and management said it expects that to pare back by year end.
Outlook, tariffs and air freight, and operational readiness
Management discussed the impact of air freight and tariffs as key moving pieces. On the call, executives referenced AUD 1.8 million in air freight and discussed tariff impacts above the baseline 10% in certain sourcing situations. Management said it expects higher revenues in the second half alongside additional air freight and continued reliance on overseas sourcing to meet demand from new ranging outcomes.
For FY26, Verloop said the company anticipates revenue of AUD 25 million, representing 22%–27% growth on the prior corresponding period, with gross profit expected in the 40%–45% range. She said reported EBITDA is expected to be between AUD 9 million and AUD 11 million.
In operations, management said its Dandenong facility is running at about 40%–60% of nameplate capacity on a six-day schedule and described a multi-step supply chain involving partners and inputs including goat milk solids and overseas-sourced ingredients. Executives characterized the supply chain as “long” and “thin,” but said they are confident they can secure sales associated with increased U.S. distribution.
On foreign exchange, management said it hedges transactional exposure and discussed that currency movement can affect reported results due to repatriation, while transactional impacts are hedged.
The company also said it is establishing a transformation office and plans to provide more detail at a strategy update later in March. Executives cited initiatives including consumer research in China and the U.S., increased digital marketing, portfolio optimization, product development, supply chain savings, and improved integrated business planning.
About Bubs Australia (ASX:BUB)
Bubs Australia Limited, together with its subsidiaries, engages in the production and sale of various infant nutrition products in Australia, China, the United States, and internationally. The company offers organic baby food, goat milk infant formula, cow's milk, adult goat milk powder, and fresh dairy products, as well as plant based baby food pouches, cereals and porridges, rusks, and snacks under the Bubs brand. It also provides vitamins and purees products; canning services for nutritional dairy products; and holds IP and trademarks.
