The a2 Milk Company (A2M) has significantly downgraded its sales and earnings forecast for the current financial year due to the pandemic headwind

The company had only revised its guidelines in late September and forecast consolidated sales of between $ 725 million and $ 775 million and annual sales of $ 1.8 billion to $ 1.9 billion for the first half of fiscal year 21

Those numbers were significantly slumped from $ 670 million in revenue for the first half and full year numbers in the range of $ 1 4 billion to $ 1 55 billion

Even the best scenario – the lowest number ($ 1 $ 8 billion) from the previous forecast and the higher number ($ 1 55 billion) from the new guidelines – would mark a 13 percent downgrade in forecast annual sales

The annual earnings before interest, taxes, depreciation and amortization (EBITDA) will also achieve a lower margin than previously forecast

The Group’s EBITDA margin is now estimated at 26 to 29 percent, down from 31 percent below previous projections, reducing potential annual profit

The company attributes the downgrade to a number of market forces as the global economy is disrupted amid the COVID-19 pandemic

a2 had forecast a recovery in sales to Daigou channels (people who sell goods back to the Chinese market) in the second half of FY21, but that recovery has not occurred

The company attributes this largely to a lack of travel from China, with the downturn being deeper and longer than previously expected

The cross-border e-commerce channel (CBEC) has also suffered – in part due to its interdependence on the Daigou channel

Daigou buyers play an important role in stimulating demand for the CBEC channel Therefore, both sales channels suffered from the Diagou downturn

While there’s no real way to turn the guideline downgrade into good news, there are still segments of the A2 business growing, albeit at a slower pace than predicted

The company’s liquid milk brands in Australia and the USAS have shown solid growth compared to the same period last year

Sales of mother and baby stores (MBS) in China have also increased Sales growth in the first half of the year was over 40 percent compared to the same period of the previous year

Brand surveys in the Chinese market also show growth in brand awareness and purchase intent, which is a good sign of future expansion

The company remains confident in its brand and will continue its marketing focus into the second half of the fiscal year

The a2 Milk Company is down 2406 percent, trading for $ 1009 at 1:53 p.m. AEDT

A2M ASX, a2m, A2 Milk

World News – AU – The a2 Milk Company (ASX: A2M) downgrades earnings forecast for FY21 – The Market Herald

Source: https://themarketherald.com.au/the-a2-milk-company-asxa2m-downgrades-fy21-earnings-guidance-2020-12-18/