CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved.

A2 Milk share price plunges again as FY21 profits collapse

We examine the highlights from the infant formula company’s FY21 results.

A2 Milk (ASX: A2M) – once a market darling – has in the last 12-months become far removed from that coveted title.

The stock crashed again on Thursday after releasing its full-year FY21 results to the market. Investors were likely not expecting much heading into these results: the stock, after all, had been sold-off heavily leading into them as the coronavirus continues to extract a significant toll on the company’s operational performance.

FY21 results

On the top-line, the company reported a steep slump in overall sales, with revenue down ~30% to $1.21 billion. Broken down segment by segment, the company saw its China & Asia revenues fall 16.6% to $583.4 million, while Australia and New Zealand revenues plunged a more significant 42% to $559.7 million, and North American revenues dipped 3.7% to $63.6 million.

From there, things got worse. Earnings across the board collapsed, with earnings (EBITDA) falling a staggering 77.6% to $123 million. While the company stressed that much of this was driven by write-downs and acquisition costs, the market likely paid little attention to those qualifiers.

At the year end, A2 said it had $112.2 million of inventory, reflecting the significant write-down costs the company incurred in the period. Management noted that the inventory situation has improved, noting that 'early signs of price stabilisation in the CBEC channel and some recovery in the daigou/ reseller channel' has already been observed.

Net profits were equally impacted, FY21 NPAT was down 79.1% to $80.7 million.

With a mind to maintaining balance sheet strength, A2's management said they would not be declaring a dividend or pursuing any other capital management initiatives.

This weak performance was framed against macroeconomic and demographic trends that have thus far and may indeed continue to, negatively impact the company. Management stressed that the dynamics of China’s infant formula market are changing rapidly, noting that reduced volumes have been driven by lower birth rates in the country.

From a competitive perspective, it was added that 'Local players continue to gain share against the traditional multinational brands, driven both by the strength of local brands in domestic channels, as well as an overall mix shift from cross-border to domestic channels.'

Click here to read our beginners’ guide to fundamental analysis.

The outlook

Looking forward, given the current uncertainties and volatility across the company's key consumer markets, management said they would not be providing specific FY22 revenue and earnings (EBITDA) margin guidance, at this time.

Off the back of the full-year release, the stock fell 8.45% to $6.28 by 12:12 PM. At those price the stock is down ~46% year-to-date.

Take your position on over 13,000 local and international shares via CFDs or share trading – and trade it all seamlessly from the one account. Learn more about share CFDs or shares trading with us, or open an account to get started today.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.