Poor daigou sales hit a2 Milk Company’s revenue, shares hit three-year low

Lower revenue for The a2 Milk Company has impacted on its share price. Here’s what else has caused the shares to plummet.

SHARES in The a2 Milk Company have plummeted to their lowest level in three years after the specialist dairy processor released its half-yearly results today.

The a2M share price on the Australian Securities Exchange fell $2.12 to bottom out at $8.33 this morning but has since recovered to $8.78.

At the current price, about $1.2 billion was been wiped off the company’s market capital.

The share price drop came after the company said revenue for the six months to December 31 had fallen 16 per cent to $NZ677.4 million ($A628.9 million) compared with the previous corresponding period.

Net profit after tax for the six months fell 35 per cent to $NZ120 million ($A111 million).

The a2 Milk Company said revenue in the Australia and New Zealand segment had fallen 31 per cent to $NZ317.2 million ($A294.5 million), largely due to a downturn in daigou and retail trading.

Daigou buying – where Chinese customers buy off the retail shelves in Australia and ship back to China for sale at a healthy margin – has been curtailed due to COVID-19 restrictions limiting the number of Chinese students and tourists in Australia.

The a2 Milk Company said cross-border e-commerce sales of English label infant nutrition products had fallen 35.5 per cent to $NZ103.5 million ($A96.1 million) but this was offset by a 45.2 per cent rise in the Chinese label products

“While our performance in the competitive 11/11 online sales event (often referred to as Singles Day) showed year-on-year growth with higher promotional activity, sales in the period following that event were below expectations with subdued pricing,” it said.

“The important role daigous play in stimulating demand across multiple points of distribution and the interdependence of CBEC with the daigou/reseller channel is relevant to performance in the CBEC channel.

“With this interdependence in mind, the company is actively rebalancing inventory in the channel and continuing to refine its promotional approach.”

The a2 Milk Company said its revenue for the full year to be at the lower end of the previous guidance range.

Its revenue forecast has now been revised to $NZ1.4 billion ($A1.3 billion), but based on the assumption the daigou problem will improve in the June quarter.

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