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1
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· Posted on
February 21, 2024

A2 Milk's uninspiring growth in China leaves investors feeling lactose intolerant

A2 Milk wasn't overly confident in its future prospects due to its consumer problem in China.

What's the key learning?

  • The number of newborns in China are dropping by 10% and Chinese consumers are starting to shift back on Chinese-label products again.
  • Investors had a bit of a sour milk after this guidance and A2 Milk's share price dropped over 12%.
  • An earnings guidance is when a company gives a forecast or "guidance" to investors on what they should expect in the upcoming period.

👉 Background: A2 Milk is New Zealand-based, ASX-listed company that has been a big player in the infant formula market, especially in China.

👉 What happened: A2 Milk released its full-year results for FY 2023, which showed a 10.1% increase in revenue and an 11.8% lift in EBITDA. But the A2 Milk CEO wasn't overly confident in their future prospects..

👉 What else: There are a couple of major factors working against A2 Milk:

  • The number of newborns in China are dropping by 10%
  • Chinese consumers are starting to shift back on Chinese-label products again (up more than 26%)

All in all, investors had a bit of a sour milk after this guidance and A2 Milk's share price dropped over 12%.

What's the key learning?

💡An earnings guidance is when a company gives a forecast or "guidance" to investors on what they should expect in the upcoming period.

💡It's kinda like a CEO or Chair pulling out their crystal ball and providing a sneak peek into the company's financial future, and investors use this information to make decisions.

💡It kinda seems like A2 Milk's CEO wants to spook investors... In the hope it can deliver a knock out blow when it over-delivers in the future.

‍

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