Dairy giant A2 Milk’s net profits have fallen sharply in the December half as the once-ASX market darling grapples with COVID disruptions and a declining Chinese birth rate.
The company saw profits fall by 53 per cent to $NZ56 million ($52 million), and earnings before interest, taxes, depreciation and amortisation (EBITDA) retreat by 45.3 per cent to $NZ98 million.
The company has been hurt by supply chain issues.Credit:Peter Meecham
Its Australia and New Zealand markets have been hit hardest, with revenue dropping by 10.7 per cent to $NZ283 million. Operating revenue in China and other Asian markets also fell by 6 per cent while revenue from the US slid 5.2 per cent to $NZ32 million. Earnings per share halved to NZ8.02 cents.
Global supply chain knots that arose from the pandemic have disrupted international sea freight, leading to rising costs for the business and affecting timeliness and availability of their products, A2 Milk boss David Bortolussi said.
“COVID-related disruption to our international cross-border business over the past 18 months has had a huge impact on our business, which led to the inventory imbalances,” said Mr Bortolussi, referring to the $90 million worth of expired milk formula it was forced to dump last year.
The Omicron wave also significantly hampered operations among processing facilities over the Christmas and New Year period which at one point resulted in staff absentee rates of over 40 per cent, he added.
The dual-listed company has also given up hope that its once-lucrative ‘daigou’ reseller channels will return to its heyday.
“Although we’re seeing improved engagement … we’re not expecting that to get back to pre-pandemic levels,” Mr Bortolussi said. “We’re expecting to regain half of that.”
The $45 billion Chinese infant milk formula market has shrunk as a result of a steep drop in the number of newborns per year, which has declined five years in a row from roughly 17 million to 10.6 million in the 2021 calendar year.
