How do A2 Milk’s results compare to expectations?
The post How do the A2 Milk (ASX:A2M) results compare to broker expectations? appeared first on The Motley Fool Australia. –
The A2 Milk Company Ltd (ASX: A2M) share price has come under significant pressure on Thursday.
In afternoon trade, the struggling infant formula company’s shares are down 10% to $6.17.
This means the A2 Milk share price is now down 47% since the start of the year.
Why is the A2 Milk share price sinking today?
The A2 Milk share price is being sold down on Thursday following the release of the company’s full year results.
For the 12 months ended 30 June, the company reported a 30% decline in revenue to NZ$1.21 billion, a 77.6% fall in EBITDA to NZ$123 million, and a 79.1% reduction in net profit after tax to NZ$80.7 million.
This was driven by declines in revenue across all geographical segments during FY 2021. This was particularly the case for its two key segments. China & Other Asia revenue fell 16.6% to NZ$583.4 million and ANZ revenue dropped 42% to NZ$559.7 million.
How does this compare to expectations?
Over the last 12 months, the A2 Milk share price has been sold off due to management downgrading its guidance four times.
Fortunately, the company eventually achieved its final guidance, but only just. A2 Milk was guiding to revenue of $1.2 billion to $1.25 billion and EBITDA of $132 million to $150 million (before acquisition costs).
As mentioned above, A2 Milk ended up reporting revenue of NZ$1.21 billion and EBITDA of NZ$123 million (or NZ$133 million excluding acquisition costs).
However, the team at Bell Potter were optimistic that the company would perform better than this. Which may explain some of the weakness in the A2 Milk share price today.
What was the broker expecting?
According to a recent note, Bell Potter was expecting sales of NZ$1,222.7 million, EBITDA of NZ$138.2 million, and adjusted net profit after tax of NZ$96.5 million. The company missed on all three of these metrics.
Bell Potter also revealed that it was expecting EBITDA in the region of NZ$319.4 million in FY 2022. This compares to the consensus estimate of NZ$264 million, which the broker felt was “on low side.”
While no guidance has been provided for the year ahead, management’s outlook commentary appears to make achieving the broker’s FY 2022 estimate a very big ask.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.