A2 Milk (ASX:A2M) rethinks game plan as annual profit dives

Company News

by Melissa Darmawan

The A2 Milk company's (ASX:A2M) outlook is in a “strategic review” following a year which saw the embattled infant milk company’s profit dive by over 79 per cent.

The dual-listed milk company faced a series of headwinds which dragged on their performance. From a tumble in sellers in their daigou channel to China’s shrinking birth rate, the company’s revenue channels rapidly dried up shaking the company to rethink their game plan.

Revenue sunk 30.3 per cent to NZ$1.21 billion ($1.16 billion) within their guidance provided in May, while their EBITDA tanked 77.6 per cent to NZ$123 million.

The company had a trail of profit downgrades throughout the year on hopes that the Chinese market would recover. However, that wasn’t enough for the company after they were forced to write-down NZ$108.6 million ($104 million) of stock as it neared its expiry date. Also, the completion of their acquisition of Mataura Valley Milk in July put a $10 million debit on their ledger, both dragging the EBTIDA lower.

Elsewhere, their net profit after tax declined 79.1 per cent to NZ$80.7 million ($77.3 million). Their balance sheet remains in a strong position with closing net cash of NZ$875.2 million ($838.1 million).

By no surprise, the milk formula company did not declare a dividend.

Earlier this month, according to sources at the Australian, A2 Milk was apparently named out by global giant Nestle for a takeover. If this is the case, the outlook ahead might see some green shoots.

Shares in A2 Milk (ASX:A2M) are trading 7.7 per cent lower at $6.33.

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