Bon Natural Life Limited Q2 FY2022 earnings call

Company Overview

• Bon is a bio-ingredient solution provider in natural health and personal care, with three product categories: fragrance compounds, health supplements, and bioactive food ingredients.

Manufacturing Facilities

• Yumen Plant construction complete, first phase to increase capacity for fragrance compounds and bioactive food ingredients, second phase for new proprietary products with 200% production capacity increase and 150% revenue potential.

Proprietary Product Development

• Received initial purchase order for FeatherPure personal care product, launched broccoli-based probiotic powdery drink, plans for immune boosters, digestive health products, weight loss, and sleep aids in cruciferous vegetable series.

Growth Strategies

• Expand global operations, especially in US, Japan, Europe; expand product line with 2-3 new raw material categories; focus on human microorganism regulation; plan 2-3 mergers and acquisitions.

In the first half of 2022, Bon Natural Life had total revenue of approximately $13.7 million, a 17% increase from the previous year. Fragrance compounds revenue increased by 24.9% from $6 million to $7.4 million. Health supplements' powder drink segment decreased by 28.5% from $4.7 million to $3.3 million due to raw material shortages and COVID-19 logistics disruptions. Bioactive food ingredients revenue surged 171.8% from $1.1 million to $2.9 million due to volume growth and higher selling prices. Domestic China revenue was $13.1 million, accounting for 95.7% of total revenue, while overseas sales were $600,000, making up 4.3%. Gross profit was approximately $4 million, up 19.6%, with net income increasing from $2.3 million to $2.5 million, a 10.2% rise.

Fiscal Year 2022

• Confident in maintaining price increases in the second half of 2022. Yumen Plant is expected to have two stages of contribution: first year 100% production capacity increase and 75% revenue contribution, second year 100% production capacity increase and 70% revenue contribution. Revenue and net income growth to continue in the second half with a decent growth rate.

• Supply chain disruptions impacting health supplements.
• Impact of COVID-19 on logistics and raw materials.
• Uncertainty in global market conditions affecting sales and operations.

Q: Can you elaborate what the drivers behind the average selling prices trending up and can we expect the same trend going forward for the second half of the year?

A: Two drivers are global inflation and supply chain disruption. We believe we can maintain such price increases and there's possibly additional room to improve pricing power in the remainder of the year.

Q: What's your guidance for the fiscal year 2022?

A: We feel comfortable that the growth will continue for the remainder of the second half, still growing at a decent growth rate despite COVID-19 and supply chain impacts.

Q: Will your third plant be up and running on schedule and what can investors expect in terms of revenue and earnings contribution from that plant?

A: The plant is on schedule to commence around September 2022. First stage (year one) expects 100% increase in production capacity and 75% in revenue contribution. Second stage (year two) expects similarly 100% production capacity incremental and 70% additional revenue contribution.