A2 Milk shares are getting creamed

Marco Green
May 16, 2018

By the close of trading a2 Milk had recovered some ground to finish at $11.36, down 13.28 per cent for the day.

The A2 Milk Company Ltd (ASX:A2M) share price has crashed $2.22 or 18.3 per cent to $9.91 despite saying it expects full year revenue to rise as much as 67 per cent after a surge in revenue in the first nine months of the financial year.

Revenue in that year rose 56 per cent to $549.5m. Deutsche Bank had forecast $NZ923 million in sales after A2 unveiled a strong first-half result in February, and reiterated its expectation in March.

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.

In an investor presentation released today, a2 Milk said revenues from sales to China nearly trebled from the prior comparative period.

"But what we have seen here is that they are already doing 70 per cent better than [this] time past year, so that is a massive growth number", he said.

Revenue for the 12 months to June 30 is expected to be between $NZ900 million and $NZ920 million ($A826.8 million and $A845.2 million) compared to $NZ549.5 million in the previous year, the company said on Wednesday.

Could drinking a2 milk help lactose intolerant people digest dairy long-term?

The mid-point of the new sales guidance is 4 per cent down from the consensus of market expectations of $947m.

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.

Despite today's fall, shares in a2 Milk are up more than 40% since the start of the year.

a2 Milk's infant dairy formula splits out the A2 protein from cow's milk, which differeniates it from normal cow's milk which has both A1 and A2 proteins.

Other reports by Click Lancashire

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