A2 Milk's shares dumped despite upbeat sales forecast

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A2 Milk's shares dumped despite upbeat sales forecast

Spooking the market is that despite the sharply increased marketing spend, revenue growth has slowed, with second half revenue forecast to be ahead of the first half by just 9 per cent.

By the close of trading a2 Milk had recovered some ground to finish at $11.36, down 13.28 per cent for the day.

Shares in The A2 Milk Company have plummeted after the New Zealand-based dairy firm said full-year sales revenue would be lower than analysts had forecast.

Revenue in the 12 months ending June 30 is expected to be $900 million-to-$920 million, up from about $550 million a year ago, when the Auckland-based company reported that profit tripled.

The dairy company reported revenues for the nine months ended March 2018 of $NZ660 million - a gain of 70% from the same time a year ago.

A2 Milk on Wednesday said it expects to spend about $NZ82 million to $NZ87 million on marketing investments for the full year, given higher expenditure primarily in its United States and China businesses.

A2 said its infant formula was now in more than 9000 mother and baby stores in China, while market research in China showed that a2's infant formula had 4.6 per cent market share in March 2018, up from 2.8 per cent in June past year.

a2's revenues more than tripled in the three years to June 2017 as its infant formula was embraced by Chinese parents, driving its shares up more than 600 percent since the start of 2016.

"When they don't meet market expectations, they get a caning by the market", he said.

Even after today's fall, a2 Milk has still had a spectacular run, with the stock having traded this time previous year at just $3.56.

Before today, A2 Milk sported a market capitalisation of nearly $9 billion.

A2 Milk believes that the A2 beta-casein protein milk is better for people, particularly those who have trouble digesting milk.

Higher expenditure in the second half will be primarily in its USA and China businesses.

In February, dairy co-operative Fonterra said it had formed a strategic alliance with a2 Milk, which led to a sharp rise in a2's share price at the time.

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