The a2 Milk Company (ATM), having seen earnings slashed by about 80% in the year just finished, is not providing any specific financial guidance for the year to June 2022, but says the outlook "remains challenging and uncertain and it will take time to recover".
After riding high during 2020 in both share price and profit performance the company had a horror 2021 - and downgraded its earnings expectations no less than four times. Its share price, having hit the dizzying heights of $20 has been slashed by about two-thirds. The early reaction to release of its annual results saw the share price marked down 8% to about $6.50.
The results announced on Thursday were about in line with the most recent downgrade in May.
Detail of the results included:
- Revenue down 30.3% to $1.21 billion
- Earnings before interest tax depreciation and amortisation (EBITDA) down 77.6% to $123 million inclusive of $109 million in stock write-downs and $10 million in Mataura Valley Milk (MVM) acquisition costs
- EBITDA to sales margin of 10.2% or 11.1% excluding MVM acquisition costs
- Net profit after tax down 79.1% to $80.7 million (including discontinued operations)
In the year ahead the company says although the business will continue to make significant progress on many fronts, "FY22 is expected to continue to be a challenging and volatile year".
Due to the actions taken in the fourth quarter of the 2021 financial year to address channel inventory and improve product freshness, coupled with strong brand health, the business is "well-placed to adapt its strategy and execution to drive growth in the longer term".
"However, recovery in English label channels is expected to be slow and market growth in China will be subdued for some time."
The company noted "a rapidly changing China infant nutrition market" in the financial year just gone.
"Over the past year China market growth has reduced significantly from globally high rates to be flat, and cross-border trade has been disrupted significantly which has had a profound impact on the Company’s results," the company said.
The a2 Milk Company’s Managing Director and CEO, David Bortolussi said he remained "confident in the long-term opportunity that the infant nutrition market in China represents".
"We recognise that the China market and channel structure is changing rapidly and we are undertaking a comprehensive process to review our growth strategy and executional plans to respond to this new environment."
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