The a2 Milk (NZX:ATM) revises 1H21 and FY21 guidance

Summary

  • On 18 December, The a2 Milk Company lifted the trading halt, following the release of an updated IH21 and FY21 guidance.
  • The internal sales predictions for diagou and the CBEC channels from the rest of FY21 is now materially lesser.
  • The Group revenue for FY21 is expected between $1.40 billion - $1.55 billion.

On 17 December, infant formula milk company The a2 Milk Company Limited (NZX:A2M, ASX:A2M) was placed under a trading halt pending a release of the entity’s notification on revising its earnings guidance in the current market conditions.

On 18 December, subsequent to the release of an updated 1H21 and FY21’s guidance, trading halt on The a2 Milk shares was lifted.

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COVID-19 related consequences

After revising its forecast earnings for the first six months of the trading year ending September, due to predicted sales fall in Australia and New Zealand, The a2 Milk had then revealed that the sales of their products had seen a downward trend because of COVID-19 related border restrictions. Chinese tourist, students, as well as other unofficial buyers went back to their native country.

During the annual meeting held last month, the Company observed they were adhering their earlier earnings guidance, however because of volatility erupting from the coronavirus, the situation appears to be challenging resulting in the ambiguity of the prediction.  

The a2 Milk’s latest sales performance

The a2 Milk’s sales performance in the daigou channel has not been as robust as was anticipated earlier. The Company believes that recovery in this crucial channel via balance of the financial year might be a little slow.

The a2 Milk anticipates coronavirus associated travel limitations would keep on negatively influencing the reseller channel because of lessened travel amid Australia and China during the rest of FY21. Also, there is a constrained prospect of students and tourists from overseas to come back to Australia in the same period.

The internal sales predictions for diagou and the CBEC channels from the rest of FY21 is now materially lesser. The Company plans to lay emphasis on reactivating the diagou channel in the latter part of the year.

Did You read; ATM Expects Trading Improvement in Second Half

Earnings guidance for 1H21 and FY21 period

The a2 Milk anticipates Group revenue in the order of $670 million, noting that 2Q21 will rise compared to 1Q21 period. Also, the EBITDA margin for 1H21 is expected in the order of 27%.

As per the Company’s latest guidance, Group revenue for FY21 is expected between $1.40 billion - $1.55 billion. While Group EBITDS margin for financial year 2021 is anticipated amid 26-29%.

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