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 16,000 local and international shares via CFDs share trading – and trade it all seamlessly from the one account. Learn more about share CFDs trading with us, or open an account to get started today.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important 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.


Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

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.