December 21, 2020

a2 Milk slashes revenue projections due to declining China demand

New Zealand's a2 Milk said it has cut it first-half revenue forecast because of a bigger than expected decline in informal demand from China fueled by the COVID-19 pandemic, resulting in a 25% drop in its shares, Reuters reported.

a2 Milk's new revenue outlook between July to December is NZD 670 million (~US$478.98 million; NZD 1 = US$), much lower compared to its previous NZD 725 million to NZD 775 million forecast and last year's NZD 806.7 million.

The company's shares dropped to NZD 10.49 after the announcement, the lowest since January 2019 and their worst drop since November 2008.

A significant portion of a2 Milk's revenue comes from the "daigou" channel, where shoppers from China buy goods in bulk from overseas stores and imports them informally.

But COVID-19 related restrictions in Australia's Victoria state had pressured retail sales and affected its daigou network. The company also said fewer Chinese tourists and student arrivals have also hampered recovery.

a2 Milk cut its full-year revenue guidance range to NZD 1.40 billion to NZD 1.55 billion. Its previous estimate was NZD 1.80 billion to NZD 1.90 billion.

- Reuters