A2 Milk shares plunge on weak outlook
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More news: Shares in A2 Milk slumped more than 17% to $5.79 after the New Zealand dairy company warned its key China market will continue to be challenging in the year ahead and flagged a further market value decline in FY25.
E&P’s retail analyst Phillip Kimber said while FY24 earnings were in line with consensus, forecast, guidance for FY25 is below expectations implying 4% to 8% earnings growth vs Visible Alpha consensus of 18%.
"Whilst A2M’s initial guidance at the start of FY24 was conservative and they delivered 8% — our initial thoughts are for 5% to 10% downgrades to VA consensus earnings forecasts. VA consensus NPAT forecasts are likely to fall a similar amount," he said in a note.
A2 Milk lifts annual profit but flags China market challenges
The news: New Zealand dairy producer A2 Milk has reported a lift in full-year profit and sales but warned its key China market will continue to be challenging in the year ahead.
The numbers: Net profit for the year to 30 June rose 7.7% to NZD167.58 million ($152 million) but missed analyst expectations of NZD174 million.
Revenue was up 5.2% to NZD1.68 billion, with sales in its China and other Asia segment up 14.1% and USA segment up 8.2% but Australia/New Zealand sales dropping 14.6%.
The context: Despite higher sales, the group said conditions in the China infant milk formula market remained difficult, impacted by the cumulative decline in newborns over the past few years, increased competitive intensity, market-wide transition to new China national standardised products and macroeconomic conditions. Dairy exporters have felt the impact of a slow economic recovery in the world’s biggest infant formula market.
The dual-listed A2 Milk, which is largely dependent on China for its growth, has warned of conditions remaining challenging there, and flagged a further market value decline in FY25.
It expects mid-single digit percent revenue growth for the current fiscal with EBITDA margin to be broadly similar to FY24 as growth is affected by IMF supply constraints that are expected to be resolved in the first half of the year.
The source: ASX announcement
