Why the a2 Milk (ASX:A2M) share price is crashing 20% to a multi-year low

The A2 Milk Company Ltd (ASX:A2M) share price crashed 20% lower this morning to a multi-year low. Here’s why investors are selling…
The post Why the a2 Milk (ASX:A2M) share price is crashing 20% to a multi-year low appeared first on The Motley Fool Australia. –

asx share price falling lower represented by investor wearing paper bag on head with sad face

The worst performer on the S&P/ASX 200 Index (ASX: XJO) on Thursday has been the A2 Milk Company Ltd (ASX: A2M) share price.

In morning trade the fresh milk and infant formula company’s shares dropped as much as 20% to a multi-year low of $8.33.

When its shares hit that level, it meant they were down a very disappointing 45% over the last 12 months.

Why is the A2 Milk share price sinking?

Investors have been heading to the exits in their droves on Thursday after a2 Milk released its half year results.

For the six months ended 31 December, the company posted a 16% decline in revenue to NZ$677.4 million and a 32.2% decline in earnings before interest, tax, depreciation and amortisation (EBITDA) to NZ$178.5 million.

This was driven by weakness in the daigou and cross-border e-commerce (CBEC) channels. These channels have been significantly impacted due to disruption resulting primarily from COVID-19.

However, as poor as this might look on paper, it was actually in line with its downgraded guidance. Management was aiming for first half revenue of ~NZ$670 million and an EBITDA margin of ~27%. Excluding the impact of its acquisition of Mataura Valley Milk, a2 Milk’s EBITDA margin would have been in line at 27%.

In light of this, investors may be wondering why the a2 Milk share price is being hammered today. The reason for this is the company’s outlook.


Despite only downgrading its FY 2021 guidance on 18 December, management has been forced to do it again today.

This has been driven by the company once again failing to correctly estimate the pace of recovery in the daigou and CBEC channels.

Management is now forecasting FY 2021 revenue of ~NZ$1.4 billion with an EBITDA margin of 24% to 26% (excluding acquisition costs).

This compares to its December guidance range of NZ$1.4 billion to NZ$1.55 billion with an EBITDA margin of 26% to 29%.

Though, it has warned that this guidance assumes that actions it is taking to reactivate the daigou channel deliver a significant improvement in quarter-on-quarter growth in the fourth quarter.

Judging by the a2 Milk share price performance today, it seems as though some investors are concerned that this guidance may also be downgraded in the future.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of February 15th 2021

More reading

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and 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.

The post Why the a2 Milk (ASX:A2M) share price is crashing 20% to a multi-year low appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!