Shares in A2 Milk crashed 20% at one stage yesterday after another downgrade was revealed, with suggestions another could be in the offing.
The main cut came amid no sign of an improvement in sales growth into China.
The share price struggled higher to end the day at $8.77, down 16% and are now down more than 40% in the past year, thanks to the impact of COVID and border closures and lockdowns on its core business.
The company had been hoping for signs of a pick up in sales after guiding the market to a weaker than expected performance for the six months to December.
But that hasn’t happened as tourists remain barred from Australia and local resellers face pressures from buying products and shipping it to China by repeated lockdowns in Brisbane, Melbourne, Adelaide, Perth and parts of Sydney.
A2 Milk reported a 35% fall in net profit after tax to $120 million for the six months to December on a 16% slide in revenue to $677.4 million.
That was due to falling sales in the ‘daigou’ reseller sale channel.
Earnings before interest tax depreciation and amortisation (EBITDA) fell 32% to $178.5 million for the half,
The company had been hoping to see a recovery in’daigou’ channel in the new year, however A2 on Thursday told investors the recovery had been slower than expected, downgrading its guidance.
“The pace of recovery in the daigou/reseller channel and in the CBEC channel has been slower than previously anticipated and the company now expects revenue to be at the lower end of the previous guidance range,” the business said.
“A lower EBITDA margin range is now expected due to lower revenue, higher brand investment, longer daigou/reseller support, movements in foreign currency and adverse channel mix relative to what was anticipated in December.”
Another downgrade is possible because the company is still hoping for an improvement in the daigou channel in the third and 4th quarters.
“The outlook for FY21 assumes the actions being taken to re-activate the daigou/reseller channel deliver a significant improvement in quarter-on-quarter growth from 3Q21 to 4Q21,” A2 Milk said in Thursday’s statement.
Full-year revenue is now expected to be around $1.4 billion, down from $1.73 billion in 2019-20. The original forecast was for sales this year to be between $1.9 and 1.9 billion.
A2’s fresh milk channel was a bright spot in the results, growing 16.3% to $86.9 million because of a continuing rise in sales in Australia.
There’s no interim dividend.
