a2 Milk profit nosedives

The company says it experienced a very challenging year ending June 30, 2021 with total revenues down 30% to $1.2 billion and net profit down 80$% to $80m.

Releasing its annual results last week, the company said it was hit by unprecedented levels of uncertainty and volatility due to the prolonged impact of Covid-19 and a rapidly changign China infant nutrition market.

"Over the past year, China market growth has reduced significantly from globally high rates to be flat, and cross-border trade has been disrupted significantly which has had a profound impact on the company's results," it says.

While certain areas of the business performed well, with market share gains in China label infant nutrition and Australian fresh milk, the company was impacted by a significant decline in cross-border English-label infant nutrition and other nutritional sales through daigou/reseller and e-commerce channels.

This created substantial demand and supply volatility, which caused material excess inventory issues that exacerbated the impact, it says.

The company says it responded by addressing excess inventory issues, rebuilding the management team, increasing brand investment to drive demand, reviewing its growth strategy and reviewing capital deployment options.

“These actions have put the company in a far better position now than it would have been otherwise to navigate the challenges ahead and enable it to return to growth in the medium term,” it says.

“The board and management are confident in the underlying fundamentals of the business and that the growth opportunity in core markets remains strong.

“Coupled with opportunities for product innovation, category expansion and new markets, and supported by a healthy brand and strong balance sheet, the long-term outlook is positive. “

However, a2 warns that the outlook for this financial year remains challenging and uncertain and it will take time to recover.