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Earnings

New Zealand's a2 Milk flags slightly lower margin as virus-led stockpiling unwinds

FILE PHOTO: A2 milk is seen on a supermarket shelf in Singapore April 16, 2018. REUTERS/Thomas White

(Reuters) - New Zealand's a2 Milk Co ATM.NZ forecast a slightly lower earnings margin for fiscal 2021 on Wednesday, as coronavirus-driven stockpiling that boosted its annual profit started to fade.

The dairy producer’s profit for the year jumped 34.1%, buoyed by stronger demand for its infant formula and other products as customers purchased essential items in bulk ahead of lockdowns.

Revenue from the infant nutrition segment, its biggest earner, rose 33.8% to NZ$1.42 billion ($937.20 million), with sales from a2’s China label effectively doubling to NZ$337.7 million during the year.

However, a2 Milk said it expects fiscal 2021 core earnings margin between 30% and 31%, slightly below the 31.7% recorded in 2020, due to higher costs and the lack of forex and COVID-19 tailwinds it experienced this year.

“In our view, a proportion of consumer pantry stocking driven by COVID-19 unwound in the fourth quarter,” the company said in a statement.

“However, this will remain a dynamic situation and we will continue to monitor changes in consumer behaviour moving forward.”

The dairy producer said net profit after tax was NZ$385.8 million for the year ended June 30, compared with NZ$287.7 million a year ago.

The figure came in slightly below estimates of NZ$389.9 million, according to IBES data from Refinitiv.

Reporting by Arpit Nayak and Sameer Manekar in Bengaluru; Editing by Devika Syamnath

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