Shares in A2 Milk Company slumped today after the infant formula company reported disappointing profit growth and warned of increased competition in the Chinese market.
The New Zealand-based infant formula producer delivered only weak profit growth for the 2024 financial year as it faced increased competition and macroeconomic difficulties in China — news that sent the A2M share price down by as much as 23%.
While the company increased its profit by 7.7% in FY2024 to NZ$167.6 million, this was below the anticipated NZ$173.3 million.
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A2 Milk CEO David Bortolussi said the company was making a strategic shift to diversify its product range beyond the Chinese infant formula market, even as the country still commanded 40% of the world’s infant market, despite its falling birth rate.
A2M is seeking to expand into other Asian markets such as Vietnam and Singapore, and is exploring opportunities in the US and the Middle East. Bortolussi said the company was also increasing its focus on a wider variety of product types.
“We’re increasingly focusing on our other Nutritionals category, and that’s fresh milk, UHT milk, powdered products, fortified products for the family, for kids, adults and seniors,” he said.
“That’s an important focus of us going forward and then outside China, we’re also starting to explore other markets. We’ve gone into Vietnam; we’re arranging fresh milk in Singapore, and over time we will expand into the other nutritional category and explore other Asian markets.”
Bortolussi also highlighted that the company had resolved its arbitration disputes with Synlait, allowing A2 Milk greater flexibility in its manufacturing and the potential to insource production in the future.
Looking ahead, A2 Milk has forecast revenue growth in the mid-single-digit per cent range for FY2025, with an EBITDA margin similar to that of 2024. The company did warn that this growth might be impacted by ongoing supply constraints and a projected decline in the value of China’s infant milk formula market.