Published: Wed, May 16, 2018
Markets | By Otis Pena

A2 Milk shares are getting creamed

A2 Milk shares are getting creamed

Revenue in the 12 months ending June 30 is expected to be $900 million-to-$920 million, up from about $550 million previous year, when the Auckland-based company reported that profit tripled.

It expects to spend about NZ$82 million to NZ$87 million on marketing for the full year, including a video billboard campaign in Hong Kong and increasing its presence in Chinese stores with "Push Girls", or sales assistants that work on behalf of a brand.

Harbour Asset Management senior research analyst Oyvinn Rimer said several other high-growth stocks - particularly ones like a2 Milk that trade on high price earnings multiples - had seen their share prices drop over the last six months after issuing guidances that failed to match optimistic market expectations.

The forecast revenue also reflected the impact of seasonal sales in China, which are weighted towards the first half of the financial year.

Shares of a2 Milk Company, listed on both Australia and New Zealand stock exchanges, were the biggest drags on both benchmark indices, diving as much as 20 per cent before closing 13.7 per cent lower in New Zealand.

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In February the company more than doubled its first-half profit to $NZ98.47 million on the back of strong growth in A2's infant formula business and higher liquid milk sales in core markets.

Before today, A2 shares had soared 62 percent so far this year, while Synlait was up 49 percent, compared to a 3.7 percent increase on the NZX50 over the same period.

Synlait Milk Ltd, which has infant formula supply agreements with a2 Milk, closed 4.2 per cent lower.

A2's Milk's share price was sold down to a similar degree in March when news broke that worldwide food giant Nestle had launched an A1 beta free infant formula in China, and today's price action may have been linked to that, said Devon Funds Management's managing director Slade Robertson.

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