A2 Milk’s share price fell sharply after the company revised its fiscal year 21 revenue and earnings outlook.
Before the market opened on Thursday, the baby food company called a2 Milk (A2M) and was quickly brought to a trading freeze.
The management of A2 said it had become aware of information that may require an announcement to be made to revise our previously issued guidance to the marketplace. ‘
In September, the company downgraded its full year forecast (FY 21) and expected consolidated sales of between NZ $ 1 at the time. 8-1. 9 billion while maintaining a profit margin (EBITDA) on the order of 31%. .
This forecast assumed a strong acceleration in sales in the second half of fiscal year 21 – a fact that the company was aware of at its annual general meeting.
At that November meeting, the company reiterated these revised guidelines, but said at the time that “this forecast is of course uncertain. ‘
‘We also acknowledge that the outlook is for significant sales growth in the second half of the year, based on a number of key assumptions, including an improvement in the Daigou Channel and continued growth in our China Label business. ‘
A2M finally released a trading update called Updated 1H21 and FY21 Guidance on Friday afternoon. That included what many expected: A significant downgrade in sales and profit margins for the full year.
Investors reacted quickly and with little hesitation to this news to sell the stock. In fact, at 1:24 p.m., A2M had sunk by 25. 15% up to $ 9. 94 per share.
Looking at the exact numbers for this downgrade in the first half of FY21, the company now anticipated sales of $ 670 million and emphasized that sales will be higher in the second quarter of FY21. The profit margins for the first half of the year (EBITDA) are expected to be around 27%. .
Looking at the year as a whole, management now anticipated total sales of between USD 1. 40-1. 50 billion, while at the same time a profit margin for fiscal year 21 (EBITDA) between 26 and 29% is achieved.
This is due to the fact that the disruptions in A2’s Daigou / Reseller channels lasted longer than expected. The Daigou channel’s performance improved somewhat in the second quarter, with infant formula sales through this channel expected to be higher in the second quarter than it was in the first quarter, the acceleration of the recovery in recent weeks has been slower than we previously expected. ‘
While these disruptions primarily impacted infant formula sales, it was worryingly determined that sales in our other nutrition segment were now also impacted. ‘
Despite today’s significant drop in sales, management indicated that the performance of its mother & baby stores (MBS) continues to be strong. The company said it expects sales to grow 40% year over year.
Looking ahead, management also said, ‘Despite the current headwinds, the Board of Directors believes the brand strength and business fundamentals remain solid over the medium term. ‘
In a notice released prior to today’s update to FY21 guidelines for clients, UBS analysts correctly predicted that A2M’s trading update would be related to a slower-than-expected recovery in infant formula (IF) sales. ‘
Despite that accurate forecast, the investment bank said ahead of the company’s trading update, ‘We continue to believe that most of that demand should return over time as the disruptions associated with COVID-19 subside. ‘
In line with this view, UBS reiterated its Buy recommendation and high NZ $ 20. 50 target for A2M while saying:
« Our buy rating uses short-term earnings volatility to examine the likely long-term prospects for significant market share gains in China through the introduction of MBS branches and the expansion of the free trade zones in China and the associated CBEC activities. ‘
It will be interesting to see if / to what extent UBS analysts will change their rating and price target for a2 Milk in the coming days, given the extent of today’s revisions for fiscal year 21.
What do you think of today’s downgrade and market reaction? Regardless of your opinion on A2M, you can trade CFDs in indices, currencies and stocks – both LONG and SHORT – with IG’s easy-to-use trading platform.
For example, to buy (long) or sell (short) the A2M with CFDs, proceed as follows:
This information was produced by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices or an offer or solicitation to enter into a transaction in any financial instrument. IG assumes no responsibility for the use of these comments and for the consequences thereof. No representation or guarantee is given for the correctness or completeness of this information. Consequently, any person acting on it is at their own risk. The research provided does not take into account the specific investment objectives, financial situation or needs of any particular person who may receive them. It was not prepared in accordance with legal requirements to promote the independence of investment research and is considered marketing communication. While we are not specifically compelled to act before our recommendations, we do not attempt to exploit them until they are made available to our customers.
The above prices are subject to the terms and conditions of our website. All share prices are delayed by at least 20 minutes. The prices are for guidance only.
Discover why so many customers choose us and what makes us one of the world’s leading providers of CFDs.
IG | Sitemap | Conditions and agreements data protection | How do I finance? Cookies | About IG
CFDs are a leverage product and can lead to losses that exceed your deposits. You have or have no interest in the underlying asset. Please refer to the Margin Trading Product Disclosure Statement (PDS) before entering into a CFD transaction with us.
The value of stocks and ETFs purchased through an IG stock trading account can go down as well as up, which can mean you get less back than you originally entered. Past performance is no guarantee of future results.
IG does not provide advice, recommendations, or opinions regarding buying, holding, or selling our products. IG is not a financial advisor and all services are provided on an execution basis only.
Stock trading accounts and New Zealand CFD accounts (opened under IG’s Margin Trading New Zealand Client Agreement) are provided by IG Markets Limited (Level 15, 55 Collins Street, Melbourne VIC 3000). ABN: 84 099 019 851, Australian Financial Services License No.. . 220440. License for issuers of derivatives in New Zealand, FSP No.. 18923).
Australian CFD Accounts (opened under IG’s Australian Margin Trading Client Agreement) opened before May 15. November 2020 are also provided by IG Markets Limited. From the 15th. Australian CFD accounts opened November 2020 are provided by IG Australia Pty Ltd (Level 15, 55 Collins Street, Melbourne VIC 3000). ABN 93 096 585 410, Australian Financial Services License No.. . 515106).
The information on this website is not directed to residents of the United States or any particular country outside Australia or New Zealand and is not intended for distribution to or use by any person in any country or jurisdiction in which such distribution or Use would violate local laws or regulations.
Your capital is at risk. CFDs can result in losses in excess of your original deposit. Please make sure you fully understand the risks involved.
The a2 Milk Company, share
World News – AU – Why A2 Milk’s share price fell 25% on Friday
Related title :
– > Why the share price of the A2 milk crashed 25% on Friday
– A2M – UBS rates the stock as a Buy
Donnez votre avis et abonnez-vous pour plus d’infos
Vidéo du jour: