Published: Wed, May 16, 2018
Business | By Tara Barton

A2 Milk shares are getting creamed

A2 Milk shares are getting creamed

A2 said today it expects revenue for the 12 months to June 30 to rise as much as 67 per cent to between $NZ900 million and $NZ920 million ($A826.8 million and $A845.2 million), but that was lower than analysts had expected.

Marketing investment spending in the year is expected to be in a range of $82 million-to-$87 million, reflecting increased spending in the USA and China.

A2's "crime" was that its sales forecast for the year fell about 4 per cent below market expectations of around $950m and the stock was savagely sold down as a result.

"When they don't meet market expectations, they get a caning by the market", he said.

By mid-morning the stock was at $10.25, down more than 20 per cent or $2.60 from Tuesday's close, putting downward pressure on the NZX50 index, which fell by more than 2 per cent'.

A spokesman for a2 Milk said the company had become aware of some overly bullish revenue forecasts and had moved to clarify what its view was.

That's a significant increase from FY17 revenues of $NZ549.5 million, which in turn represented a 55.8% increase from the previous year.

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A2 Milk Co shares shed about a fifth of their value after a trading update today disappointed investors optimistic about the milk marketing firm's outlook, dragging down production partner Synlait Milk and weighing on the broader market.

Gross margin was 49.8 percent in the first half, which the company said at the time was higher than expected "primarily due to the higher proportion of infant formula sales, currency movements and favourable net selling prices relative to plan".

A2 Milk previously forecast marketing spend for the full year to be in the range of $NZ61 million to $NZ65 million.

New Zealand's benchmark S&P/NZX 50 index closed 1.8 per cent or 153.27 points lower at 8,555.51, in its biggest one-day drop since February.

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

Most cows produce the A1 and A2 versions of beta-casein protein, but about 30 per cent of the world's herd produces just the A2 variety.

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