The a2 Milk Company’s full-year profit slumped 79 per cent and the specialty milk marketer warned the coming year would be challenging and volatile as it grapples with disruption in its key Chinese market.
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SUPPLIED A2 Milk has been hard hit by trading disruptions from Covid-19.

Profit fell to $80.7 million in the year to the end of June, from $385.8m the previous year, the company said in a statement to the NZX on Thursday.

A2 Milk has suffered a setback during Covid-19 as border closures and trade disruptions meant fewer tourists and international students shipped its products to China, known as the daigou trade.

The company wrote down $108.6m of stock to reduce the amount of older inventory in the market, and it said that’s proving effective, with product freshness improving and market pricing increasing.

However it noted the Chinese market dynamic is changing rapidly as a lower birth rate dents demand for infant formula, and competition heats up with local players gaining market share against the traditional multinational brands.

“It was a challenging year for The a2 Milk Company but we remain confident in the long-term opportunity that the infant nutrition market in China represents,” said chief executive David Bortolussi.

“We recognise that the China market and channel structure is changing rapidly and we are undertaking a comprehensive process to review our growth strategy and executional plans to respond to this new environment.”

A2 noted its balance sheet remains strong, with net cash of $875.2m.

Australian dairy farmers supplying milk to Fonterra could become part-owners of the co-operative’s business across the Tasman.

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