The a2 Milk Company Limited (ASX: A2M) has been dealing with the criticism of the sales decline lately. This criticism has been coming because of China’s new e-commerce law. Many views that the company’s top line is expected to get impacted by the Chinese e-commerce law which would be coming from January 2019. The decline would be experienced in the English labeled product. In addition, the company has been in the sight of critics primarily because the management has been unloading the shares.
The Chinese government came out with the law for the e-commerce trade. The law would be covering the platforms like Taobao as well as the social networks which are also being utilized for selling the goods like WeChat. The top management of a2, however, stood by the company in its defense. They added that they are ready for the changes which their company is expected to be witnessed shortly and they believe that their sales wouldn’t be impacted as a result of those changes reflecting strong confidence in regard to their business model.
The management of a2 Milk company reflected positive views related to the new Chinese law. They added that the law would improve the e-commerce business activities of China. Moreover, it also considers the protection of the consumers and considers it as a priority. As per Xinhua, the turnover of China’s e-commerce in the cross-border category witnessed the positive impact and stood at 90.24 billion yuan in the previous year and also higher complaints related to the milk, food, cosmetics etc. were witnessed.
The new law of China would also cover the shoppers which were fetching money and evading the Chinese tax laws. However, all of the market players are not convinced with the talks of the management. The players also worry about the labelling as well as the requirements of the product registration after the new law comes up. Also, the key personnel of the company have been offloading their shares in the significant quantity.
Primarily, it’s just a few days back that the group stated about actively monitoring China’s regulatory framework that has been evolving continuously. The framework is broad in scope and considers many domestic and cross border (CBEC) related e-commerce activities. On the other hand, and going back in time, A2M has had a stupendous run in last one year and its Net Profit after Tax was reported to be $195.68 million for the year ended June 30, 2018 while revenue from ordinary activities were $925.05 million. This revenue figure depicted a growth of 68.06 per cent from last year. The overall result led the diluted Earnings per share to be 26.3 cents compared to 12.29 cents for FY17. Despite this result, the group did not declare any dividends. Coming to next fiscal year performance, the group has already highlighted about higher expenses owing to enhanced investments. The stock that was up about 46 per cent in last one year, as at October 05, 2018, was seen to witness a fall of about 14 per cent in last one month. The group now trades at a price to earnings ratio of 38.930x. Recently, UBS Group AG and its related bodies have ceased to be substantial holder of the group. On the other hand, BlackRock and Pendal Group have become substantial holders lately.
The stock traded at $9.615 (down 0.259%) with the market capitalization of circa $7.07 bn as on October 08, 2018 (AEST – 04:20 P.M.).
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