a2 Milk Share Price Sinks 11% on New Strategy (ASX:A2M)

By ,

The a2 Milk Company Ltd [ASX:A2Mupdated investors on its new strategy following disruptions faced during the pandemic.

Unprecedented change’ in the China infant formula market over the last 12 months led a2 Milk to alter its growth strategy, setting a medium-term goal of hitting NZ$2 billion in sales.

a2 Milk Company Ltd [ASX:A2Mshare price is currently trading for $6.09 a share, down 11%.

ASX A2M - A2 Milk Share Price ChartSource: Tradingview.com

A2M’s revised strategy

a2 Milk noted its new strategy aims to rebuild the company into an exciting, innovative, and sustainable growth company.

Capturing China’s IMF market is a key strategic priority.

a2 Milk aims to gain more control over its Chinese Label (CL) and English Label (EL) distribution to get closer to the final consumer.

A2M will also continue investing in brand name recognition, digital markets, and e-commerce.

As well, the dairy stock is focusing on product innovation, which should expand its product portfolio.

A2M additionally noted it will seek to realise market potential in the US.

How to Limit Your Risks While Trading Volatile Stocks. Learn more.

A2M’s NZ$2 billion sales ambition

A2M is setting a medium-term target of growing sales to NZ$2 billion.

This sales target is higher than FY21 sales of NZ$1.2 billion and FY20 pre-COVID sales of NZ$1.73 billion.

Due to ‘unexpected market conditions, investment and innovation’, EBITDA margins would likely be in the ‘teens’ in the medium term.

The new target is lower than the pre-COVID EBITDA margin of 31.7%.

A2M PresentationSource: A2M presentation

a2 Milk’s Managing Director and CEO, David Bortolussi, commented:

The China infant milk formula market has experienced unprecedented change over the past 12 months which has required us to adapt our growth strategy.

Our ambition is to rebuild the a2 Milk Company into an exciting, innovative and sustainable growth company.

We will innovate and expand our infant milk formula product portfolio to appeal to a broader set of consumers and to maximize our distribution potential.

Outside our core business, we are considering opportunities for adjacent category growth in China, ANZ and the USA as well as assessing opportunities in new emerging markets.

What does the future hold for A2M?

A2M said today its strategy is designed to ‘drive growth across multiple horizons.

FY22 will focus on stabilising and prioritising the restoration of demand and supply balance.

FY23–24 will be dedicated towards a full-scale rollout of growth initiatives, while FY25–26 will focus on delivering ‘next wave’ growth from innovation and supply chain transformation.

A2M PresentationSource: A2M presentation

As we’ve discussed earlier, A2M went from being the best-performing stock globally over a decade, to one of the worst-performing stocks on the ASX in 2021.

That kind of turnaround could make one uneasy about entering the stock market — doubly so with inflation fears swirling around.

However, I do think I have a revealing resource for you.

It’s a great report on technical analysis from our trading veteran Murray Dawes. There, Murray unveils his unique strategy to deal with market turbulence.

Regards,

Kiryll Prakapenka,
For Money Morning

PS: Our publication Money Morning is a fantastic place to start on your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here

About Kiryll Prakapenka

Kiryll Prakapenka is a research analyst focusing on investigating the biggest trends in investments. Kiryll brings sound analytical skills to his work, courtesy of his Philosophy degree from the University of Melbourne. A student of legendary investors and their strategies, Kiryll likes to synthesise macroeconomic narratives with a keen understanding…

Bubs Share Price Soars 30% on Rebounding First Quarter Sales (ASX:BUB)

Bubs Australia Ltd [ASX:BUB] share price was up a significant 30% at time of writing. Despite the big jump, the infant formula stock is still down 40% over the last 12 months.

a2 Milk Share Price Falls on Class Action News (ASX:A2M)

The A2M share price tumbling 6%. The a2 Milk Company Ltd [ASX:A2M] is set to face a class action lawsuit led by Slater and Gordon on behalf of unhappy shareholders.

This 500% Gain Is Causing Headaches for Nearly Every Industry

In today’s Money Morning…backlogs for months…how to navigate a freight crisis…any company heavily reliant on exports may be at potential risk…and more…

Bubs Launches in the US, Share Price Jumps 25% (ASX:BUB)

The Bubs Australia Ltd’s [ASX:BUB] share price are up 26% after BUB’s infant formula range goes live on Walmart.com. BUB shares spiked as high as 32% in early trade.

What Does China’s Child Policy Mean for Bubs Share Price? (ASX:BUB)

After soaring on Tuesday, Bubs Australia Ltd’s [ASX:BUB] share price is currently down 7% today as the market assesses China’s child policy…

What Is A2 Milk Share Price Worth? (ASX:A2M)

A2 Milk Company Ltd [ASX:A2M] share price continued their recent fall, with major brokers revising their price targets. The A2M share price is currently trading 70% below its 52-week peak…