During the company’s virtual annual meeting, acting chief executive Geoffrey Babidge forecast annual revenue in the range $1.8 billion to $1.9b, compared with $1.73b in FY2020.
But revenue in the first half-year ended December 31 would be $725 million to $775m, down from $807m in 1H20.
A2 expects a growth recovery in the second half of the financial year, dependent on a number of key assumptions, including improvement in the daigou channel for sales and continued growth in the China label business.
Babidge says due diligence on the proposed purchase of 75% of Mataura Valley Milk (MVM) was nearly complete and it supported the rationale for the investment.
He described MVM, now owned by state-owned China Animal Husbandry Group, as a state of the art nutritionals facility within the favourable Southland milk production environment.
The daigou sales channel had been hammered by covid-19 lockdowns that prevented Chinese agents and resellers accessing infant formula cans in Australian and New Zealand stores to freight to China.
The other sales channels are in-market mother and baby stores and e-commerce sites.
A2 has grown infant formula sales by 500% in the past five years and all three sales channels have contributed.
Presently, ANZ daigou sales are half of the total, cross-border e-commerce is 25% and Chinese label in stores and supermarkets make up the other 25%.
It expects ANZ daigou sales to recover as the threat from covid-19 recedes and it drew attention to the good growth in Chinese-label products in stores in China.
“Our China label and English label products don’t compete with each other, but rather work together to enhance our overall brand proposition,” Babidge said.
Brand awareness and loyalty were still growing in the core markets of China for infant formula and Australia for liquid milk.
“This gives us confidence that, notwithstanding the current headwinds, the fundamentals of the business over the medium term remain sound,” he said.
Chair David Hearn echoed those statements, saying sales would improve as the channel mix adjusted, restrictions eased, pricing stabilised and the unprecedented impact of the pandemic receded.
The Mataura deal, if it proceeded, would deliver a world class plant in operation without the usual time and risks that developing a greenfield opportunity would inevitably entail, for approximately $270 million.
During the annual meeting, A2 paid a tribute to the late Sir Robert Elliott who conducted some of the early scientific work on distinguishing A2 beta protein in milk from the more widespread A1 and any human health effects.
A2 Milk was founded 20 years ago by Dr Corrie McLachlan with encouragement from Elliott.
UK-based Hearn and director Julia Hoare of NZ were re-elected and independent director Jesse Wu, of Shanghai, was re-elected for a short period only before stepping down to an advisory role.
Former managing director and acting CEO Babidge is to step down from his acting position in early 2021 when appointee David Bortolussi will join the company.
The company’s volatile share price dropped 4% on the day of the meeting, to below $15, having traded in a wide range from $21 to $14 during the turbulent year.
