- A2 Milk’s (A2M) shares are in the red after revealing its pandemic hindered performance metrics from the first half of FY21
- Company revenue took a 16 per cent hit as disruptions in Chinese–Australian travel continued to stunt the flow of its daigou reseller channels
- As a result, the ASX-200-lister has advised full-year earnings guidance would be geared towards the lower end of the NZ$1.4 billion (roughly A$1.3 billion) to NZ$1.55 billion (roughly A$1.4 billion) spectrum
- Overall, net profits after tax fell by around 35 per cent to clock in at NZ$120 million (approximately A$111.9 million)
- Investors appear to have responded unfavourably to the announcement, as A2 Milk shares trade 14.6 per cent lower at $8.93
A2 Milk’s (A2M) shares are in the red after revealing its pandemic hindered performance metrics from the first half of FY21.
The company’s total revenue fell 16 per cent to NZ$677.4 million (about A$631.9 million) as COVID-19 stunted the flow of its daigou reseller channels, which relates to the practice of reselling consumer goods back into the Chinese market.
The channel plays a significant role in A2’s income streams but has been severely disrupted by travel restrictions imposed in light of the pandemic.
With recovery in this area coming slower than A2 expected, the ASX-200-lister has prepared investors for revenue to come in at the lower end of the NZ$1.4 billion (roughly A$1.3 billion) to NZ$1.55 billion (roughly A$1.4 billion) previous full year guidance range.
Overall, net profits after tax fell by around 35 per cent to clock in at NZ$120 million (approximately A$111.9 million).
It marks the latest instalment of a tough year for the company, which has lost 40 per cent of its market value in the last 12 months.
Its gross margins percentage also decreased to 50.3 per cent, which A2 primarily attributed to higher cost of goods sold for China label infant nutrition and a shift in product mix shift with a higher proportion of liquid milk to infant nutrition sales.
A2 says overall growth for the infant nutrition market in China was mostly flat during the 2020 calendar year, fuelled by pantry destocking, lower birth rates and an “increasingly competitive” market.
Despite this, the company experienced strong growth for China label infant nutrition products with a 45.2 per cent increase in sales. Its liquid milk sales also signalled an upward trajectory in China and Australia.
Looking forward, A2 referenced the invariable uncertainty of the pandemic but highlighted a focus on reactivating disrupted daigou channels and affirming it remains confident in the underlying fundamentals of the business.
A2 Milk shares are trading 14.6 per cent lower at $8.93 on the market at 12:24 pm AEDT.