Pop goes another ASX China consumer bubbler – Blackmore’s, Bellamy’s, and now a2 milk have all flown high on the China consumer (and the daigou or local buyer) boom.
And with a2 owning up to a slide in the daigou side of the market yesterday, all three have seen their share prices crunched.
Blackmore’s was the worst hit the shares losing more than half their value in the past year to 18 months, Bellamy’s saw its shares fall, recover and then the company was bought by a Chinese group.
a2 is a larger and better run group with markets outside China in Australia, NZ, and increasingly in the US. But the growth story was selling to Chinese consumers here for re-export to China, or directly into the Chinese market.
a2 milk told the NZX and ASX yesterday that it is now expecting a slide in December half-year sales because of the disruption of daigou sales into China during Victoria’s COVID lockdown.
That news saw the shares lose 11.4% to end at $15.20.
The forecast revenue for the first half of FY21 of between $NZ725 million and $NZ775 million (or $A675m and $A721m), down from $NZ806.7 million ($A750.6m) a year ago.
Full-year revenue is expected to be between $NZ1.8 billion and $NZ1.9 billion ($A1.67b and $A1.77b), up on $NZ1.73 billion in 2019-20 with the company expecting what is now a standard (for it) second-half recovery.
In a release, a2 said in September it had observed emerging additional disruption to the corporate daigou / reseller channel, particularly due to the Stage 4 lockdown in Victoria.
This was on the back of the existing flow-on effect of pantry destocking following a strong sales uplift of infant formula products in 3Q20 and lower than anticipated sales to retail daigou’s in Australia, due to reduced tourism from China and international student numbers.
“This disruption in the daigou channel is impacting our September sales and it is currently anticipated that this will continue for the remainder of the first half of FY21,” a2 said in a release.
“Sales in the daigou channel represent a significant proportion of infant formula sales in our Australia and New Zealand business and, as such, we now expect ANZ revenue to be materially below plan for the first half.”
The company said, however, the underlying strength of its infant milk formula brand in China and the rest of its business was healthy, and it expected a better overall second-half performance.
“We are of the view that this short-term impact to the daigou channel will prove to be temporary, assuming stabilisation of COVID-19-related issues in Australia,” CEO Geoffrey Babidge said in the update to the ASX.
“Performance in all other areas of our business is strong, including our liquid milk businesses in Australia and the USA.
“Importantly, our local China business is performing strongly, notably in mother and baby stores, which we anticipate will continue,” he said.
It should be mentioned that a 2 milk does have something of a history of weak first half performances which are covered by a second-half rebound, though the impact of the pandemic here and in china does make for a very different set of circumstances.
