Jatcorp’s Revenue Drops 57% as Trademark Dispute Hits China Sales

Financial Impact of Trademark Dispute

Jatcorp Limited (ASX: JAT) reported a significant downturn in its quarterly financial results for Q2 FY25, with revenue from ongoing operations plunging 57% year-on-year to $4.68 million. This steep decline is primarily attributed to a trademark dispute in China that forced the company to suspend sales of its Neurio® products in the mainland market. The gross profit also contracted sharply by 74% to $1.09 million, reflecting the operational disruption and stock returns linked to the trademark conflict.

Underlying EBITDA, excluding approximately $2 million in legal costs, was a negative $2.42 million, marking a $3.19 million deterioration compared to the prior corresponding period. Despite these financial headwinds, net operating cash flow remained relatively stable at a negative $13,000, down $159,000 on the previous year.

Trademark Dispute and Legal Strategy

The trademark dispute centers on an alleged malicious registration of the Neurio® trademark by a third party in China, which Jatcorp contends is a deliberate attempt to block its distribution in the region. In response, the company has suspended Neurio® sales in mainland China but is vigorously pursuing multiple legal avenues across China, Australia, and New Zealand to protect its intellectual property rights.

Jatcorp is challenging the adverse ruling through judicial channels and has initiated administrative proceedings to invalidate the disputed trademark registration. The company’s legal team is leveraging international precedents and evidence of bad-faith registration, underscoring Jatcorp’s commitment to safeguarding shareholder value and market integrity despite the complex challenges posed by trademark squatting in China.

Growth Initiatives Amid Challenges

In parallel with its legal efforts, Jatcorp is accelerating the rollout of its Moroka® brand, which focuses on lactoferrin-based health products. The company launched five new Moroka® products during the quarter, expanding its total product range to 13 SKUs that target immune support and cognitive health. This product innovation aligns with Jatcorp’s strategy to build Moroka® into a household name in the Asia Pacific region.

Distribution channels have also been expanded. In Australia, approximately 30 new retail outlets, including gift shops and pack-and-send locations, have been onboarded to distribute Neurio® products, targeting international visitors. Online, Moroka® products have gained placement in about 15 third-party point-of-purchase stores on major Chinese e-commerce platforms such as JD.com, Douyin, VIP.com, and Tmall, enhancing the brand’s digital footprint despite the mainland China sales suspension for Neurio®.

Operational Enhancements and Market Engagement

Manufacturing upgrades at Jatcorp’s ANMA facility in Melbourne were completed, boosting sachet production capacity by 70% and improving automated packing and QR code printing capabilities. These enhancements are designed to meet growing demand, increase OEM production efficiency, and reduce costs.

Jatcorp’s active participation in key industry events like the China International Import Expo (CIIE) and VitaFoods Bangkok has yielded new OEM customers and promising partnerships aimed at Southeast Asian market entry. These efforts reflect a broader strategy to diversify revenue streams and mitigate risks associated with the China trademark dispute.

Leadership and Outlook

Leadership changes include the promotion of Dr Xinpeng Li to General Manager, tasked with improving operational efficiency and driving growth targets. CEO Sunny Jian Xin Liang reaffirmed the company’s resolve to defend its intellectual property rights vigorously while continuing to pursue growth through its diversified portfolio.

While the trademark dispute presents a significant near-term challenge, Jatcorp’s strategic focus on product innovation, channel expansion, and manufacturing capability upgrades positions it to navigate current headwinds and pursue long-term growth opportunities.