New Zealand's a2 Milk said on Monday its first-half profit halved as sales of its infant milk formula product continued to fall in China, but forecast second-half revenue to be significantly higher than a year ago.
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FILE PHOTO: An A2 milk sign is seen at the third China International Import Expo (CIIE) in Shanghai, China November 6, 2020. REUTERS/Aly Song

The firm reported first-half net profit after tax of NZUS$56.1 million (US$37.54 million), down from NZUS$120 million a year ago.

The hit to its Chinese market stems from coronavirus-induced supply disruptions to its “daigou” channel, a reseller network where people outside China buy a2’s products and ship them to Chinese consumers informally.

That, along with contracting market share in China owing to declining birth rates, has caused a2 Milk shares to plunge more than 60per cent from pre-COVID-19 levels, reportedly making it a target for Canadian dairy firm Saputo Inc.

A2 said it expects sales of its Chinese label and English label infant milk formula products to pick up in the second half of the year, with inventory levels expected to improve, driving revenue growth.

However, it said it does not expect this sales growth to translate into higher profit, as it plans to spend more on its expansion strategy and it is also battling rising costs.

The marketers are at it again, breathlessly promoting “innovation” as a storm of startups gather, each hoping to cash out their venture capital before their business models crash and burn.

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