A2 Milk upgrades FY26 guidance despite flagging weaker China sales

The news: A2 Milk has flagged a 14% year-on-year decrease in its China-label infant milk formula (IMF) sales, which will be recognised in full-year earnings, following fourth-quarter supply chain headwinds.

The context: The specialised dairy company said the shortfalls in China stemmed from a combination of factors, including stronger demand in the preceding quarter, global freight disruptions, extended customs clearance requirements and rigorous product testing measures.

However, the decline in the segment was offset by strong performance across A2 Milk’s other product lines, including growth in its English-label IMF, nutritional powders and liquid milk segments, all of which outperformed the prior corresponding period.

The company has upgraded its full-year guidance and now expects to deliver $1.9 billion in revenue, up 12% from the previous year. The company also projects its EBITDA margin to land at the high end of its 14% to 14.5% guided range, while net profit after tax is forecast to be slightly higher than FY25. Cash conversion is expected to hit approximately 70%, well ahead of previous 50% expectations.