A2 Milk Company Ltd (ASX: A2M)Â shares are on the slide on Monday morning.
In early trade, the ASX 200 stock is down 18% to $7.57.
Why is this ASX 200 stock crashing today?
The infant formula company’s shares are under pressure today following the release of a trading, supply chain, and outlook update.
According to the release, while demand for its products remains strong, A2 Milk is experiencing significant supply chain disruptions that are expected to impact its FY 2026 performance.
The ASX 200 stock revealed that it is currently facing temporary product availability issues in China, particularly for its China label infant milk formula (IMF) products.
These issues have been driven by a combination of factors, including strong demand, freight disruptions, production constraints, and longer product release and customs clearance times.
Management notes that freight capacity has been impacted by the Middle East conflict, while production has been constrained due to earlier manufacturing challenges and a backlog of orders.
As a result, the company expects these issues to materially impact product availability during the fourth quarter, particularly across April and May.
Guidance downgraded
Due to these challenges, A2 Milk has downgraded its FY 2026 outlook, putting significant pressure on its shares.
The ASX 200 stock now expects revenue growth in the low to mid double-digit range, which is down from its previous guidance of mid double-digit growth.
In addition, EBITDA margins are now expected to be between 14% and 14.5% in FY 2026. This compares to its prior guidance of 15.5% to 16%.
As a result, the company’s net profit after tax is now expected to be similar to or lower than in FY 2025, whereas previously it had been forecast to grow.
Cash conversion is also expected to fall significantly to around 50%, down from prior expectations of 80%.
Commenting on the situation, the ASX 200 stock said:
While the supply chain impacts are primarily timing-related and one-off in nature, their cumulative effect is now expected to impact the Company’s performance against FY26 guidance, noting their potential impacts are challenging to mitigate at this stage in the financial year due to proximity to year end and end-to-end supply chain lead times.
Notwithstanding these short term challenges, the Company intends to continue to reinvest in the business in 4Q26 to support brand health, growth and long term value creation.
The post Why are A2 Milk shares sinking 18% today? appeared first on The Motley Fool Australia.
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More reading
- The a2 Milk Company lowers FY26 guidance amid supply chain challenges
- Why A2 Milk, BWP, Core Lithium, and Newmont shares are sinking today
- 5 things to watch on the ASX 200 on Thursday
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.