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The a2 Milk Company (ASX:A2M) releases updated FY21 outlook
Source: The Sydney Morning Herald
  • The a2 Milk Company (A2M) has advised that COVID-19 is having a worse impact than first anticipated on its Daigou business
  • Daigou are essentially individuals or businesses who export Australian goods to customers in China
  • In an updated FY21 outlook, released today, a2 Milk said COVID-19 restrictions and pantry destocking have affected the channel
  • As a result, its wider sales numbers for the September quarter have been affected
  • A2M also advised it expects its first-half sales results to also contract due to the Daigou disruption
  • However, the company is confident its other areas of the business are performing well and it expects an FY21 earnings before interest, taxes, depreciation and amortisation (EBITDA) margin of 31 per cent
  • Shares in A2M have opened trading 9.82 per cent down at $15.48 each

The a2 Milk Company (A2M) has released an updated FY21 outlook, advising shareholders its Daigou business has been impacted by the COVID-19 pandemic.

However, the company is still predicting an overall 2021 financial year earnings before interest, taxes, depreciation and amortisation (EBITDA) margin of around 31 per cent — which is in line with expectations.

Daigou

Looking at its Daigou sector, A2M said the stage four lockdown restrictions in Melbourne, coupled with lower international students and pantry destocking have led to a drop in sales.

Daigou are essentially individuals or businesses who export Australian goods to customers in China, with infant formula one of their key export products.

In a statement to shareholders, the company said "this disruption in the Daigou channel is impacting our September sales and it is currently anticipated
that this will continue for the remainder of the first half of FY21."

It also added that "sales in the Daigou channel represent a significant proportion of infant formula sales in our Australia & New Zealand business and, as such, we now expect ANZ revenue to be materially below plan for the first half."

FY21

Looking at the wider business though, A2 Milk said the rest of its operations continues to perform well.

It also believes that demand in China for its products remains strong and it expects exports to resume back to normal levels once COVID-19 subsides.

As a result, the company expects its results to rebound in the second half of the 2021 financial year once the Daigou disruption subsides.

In an update to its FY21 guidance, A2M said group revenue for 1H FY21 should total between $725 million to $775 million.

Revenue across the group for FY21 is estimated to hit between $1.8 billion and $1.9 billion, while a2's EBITDA margin for the period is expected to remain unchanged at 31 per cent.

Shares in A2M have opened trading 9.82 per cent down for $15.48 each at 10:43 am AEST.


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