A2 Milk's shares dumped despite upbeat sales forecast

ASX:A2M

ASX:A2M

a2 Milk issued guidance for full-year revenues to reach between $NZ900-920 million.

Shares in a2 Milk are tanking after the company's third-quarter trading update fell short of analysts's expectations.

The company said it was anticipating revenue in a range of $900m to $920m for the 12 months ended June 30, which would compare to last year's actual number of $549m.

A2 Milk said its group revenue came to $660 million in the nine months to March 31, up 70 per cent on the previous corresponding period, reflecting continued sales growth in both nutritional products and liquid milk.

A2 Milk Co forecast a surge in full-year sales and said its gross margin in the second half has stayed in line with its first half, as expected.

BHP was the biggest boost to the index, advancing 1.4 per cent as iron ore, oil and copper prices rose.

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 a year ago.

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The company's more modest revenue expectation was based on the possibility that a planned labelling change may have an impact on sales, he said.

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

Could drinking a2 milk help lactose intolerant people digest dairy long-term?

Gross margin was 49.8 percent in the first half, which the company said at the time was higher than expected "primarily due to the higher proportion of infant formula sales, currency movements and favourable net selling prices relative to plan".

A2's Milk's share price was sold down to a similar degree in March when news broke that worldwide food giant Nestle had launched an A1 beta free infant formula in China, and today's price action may have been linked to that, said Devon Funds Management's managing director Slade Robertson.

a2 Milk's infant dairy formula splits out the A2 protein from cow's milk, which differeniates it from normal cow's milk which has both A1 and A2 proteins.

New Zealand's benchmark S&P/NZX 50 index closed 1.8 per cent or 153.27 points lower at 8,555.51, in its biggest one-day drop since February.

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