Skip to content

A2 Milk shares fall 12% to five-month low

A2 Milk shares fall 12% to five-month low

Navigation for News Categories

A2 Milk shares have taken a battering this morning after the company said it faced a tougher than expected first half because of reduced sales through a key channel.

Stock market exchange graph price drop with red numbers investment lose of business financial digital background / C

File photo.
Photo: 123RF

In an earnings update to the stock exchange, it said it expected first-half sales between $725 million to $775m from $805.3m a year earlier, with group revenue at $1.80 billion to $1.90b.

A2 Milk said sales through the daigou channel – purchases made by Chinese visitors or companies in New Zealand and Australia – had been disrupted because of border closures and Covid-19 lockdowns.

It said Chinese consumers, who had bought large amounts of infant formula when Covid-19 broke out were also “pantry destocking” – using up their stocks.

“It is currently anticipated that this will continue for the remainder of the first half of FY21,” the company said.

Sales in the unofficial daigou channel to China represent a significant proportion of infant formula sales in its Australia and New Zealand (ANZ) business.

“As such we now expect ANZ revenue to be materially below plan for the first half,” it said.

Shares in A2 Milk, the second most valuable company on the NZX, fell 12 percent to a five-month low.

However, A2 said the sales problems appear confined to just the daigou channel because demand underlying consumer demand in China remained strong.

“We are of the view that this short-term impact to the daigou channel will prove to be temporary, assuming stabilisation of Covid-19 related issues in Australia.”

It said sales of other products including its liquid milk businesses in Australia and the USA were strong, as was its local China business.

Last month A2 reported a record annual profit of $386m and is also looking to take a majority stake in Southland milk company Mataura Valley Milk.

Get the RNZ app

for ad-free news and current affairs
Download from Apple App StoreDownload from Google Play Store

XL subscribe to our newsletter banner

Get the latest news and advice on COVID-19, direct from the experts in your inbox. Join hundreds of thousands who trust experts by subscribing to our newsletter.

Send your news and stories to us or and WhatsApp: +447747873668.

Before you go...

Democratic norms are being stress-tested all over the world, and the past few years have thrown up all kinds of questions we didn't know needed clarifying – how long is too long for a parliamentary prorogation? How far should politicians be allowed to intervene in court cases? To monitor these issues as closely as we have in the past we need your support, so please consider donating to The Climax News Room.

Privacy Policy Designed using Unos Premium. Powered by WordPress.

Live Updates COVID-19 CASES