NZ's a2 Milk profit halves on China slowdown but sees sales pick-up (updated)

A2 Milk

20/02/2022 20:33

(Adds outlook, further details on results, background)
    Feb 21 (Reuters) - New Zealand's a2 Milk  ATM.NZ  said on
Monday its first-half profit halved as sales of its infant milk
formula product continued to fall in China, but forecast
second-half revenue to be significantly higher than a year ago.
    The firm reported first-half net profit after tax of NZ$56.1
million ($37.54 million), down from NZ$120 million a year ago.
    The hit to its Chinese market stems from coronavirus-induced
supply disruptions to its "daigou" channel, a reseller network
where people outside China buy a2's products and ship them to
Chinese consumers informally.
    That, along with contracting market share in China owing to
declining birth rates, has caused a2 Milk shares to plunge more
than 60% from pre-COVID-19 levels, reportedly making it a target
for Canadian dairy firm Saputo Inc  SAP.TO . (https://bit.ly/3LNennj)
    A2 said it expects sales of its Chinese label and English
label infant milk formula products to pick up in the second half
of the year, with inventory levels expected to improve, driving
revenue growth.
    However, it said it does not expect this sales growth to
translate into higher profit, as it plans to spend more on its
expansion strategy and it is also battling rising costs.

($1 = 1.4945 New Zealand dollars)

 (Reporting by Harshita Swaminathan; Editing by Toby Chopra)
 ((Harshita.Swaminathan@thomsonreuters.com;))