After a brief mid-August rally, the A2 Milk Company Ltd (ASX: A2M) share price tumbled 12% in the past week to a 2-month low of $5.82.
Why the A2 Milk share price continues to fall
Gloomy near-term outlook
A2 Milk released its FY21 results on Thursday, 26 August.
The result was in line with the company’s guidance it downgraded four times during FY21.
But at face value, the figures were far from inspiring. The company’s revenues declined 30.3% to NZ$1.2 billion, while net profit after tax (NPAT) took a 79.1% hit to NZ$80.7 million.
The company flagged that “China market growth has reduced significantly from globally high rates to be flat, and cross -border trade has been disrupted significantly which has had a profound impact on the Company’s results”.
A2 Milk’s near-term outlook wasn’t so bright either.
A2 Milk observed that the Chinese infant nutrition market was “materially impacted by a lower birth rate, especially recently due to COVID-19 and related vaccination programmes causing many people to delay pregnancy”.
As a result, the company expects the value of the overall infant nutrition market to decrease due to the lower number of births, an increase in competitive intensity and promotional activity impacting average pricing.
In addition, A2 Milk flagged that “market share gains by domestic brands compared to international brands are expected to continue”.
A2 Milk share price tumbles on high volume
The A2 Milk share price tumbled 11.8% to $6.05 on Thursday, 26 August following the release of its FY21 results. By market close, approximately 27 million shares had traded hands, more than double its current 10-day average volume of 9.5 million.
The selling pressure would carry over to the next day, with A2 Milk shares sliding another 2.64% to $5.89. Selling volumes remained elevated, with just over 15 million shares traded on Friday.
The post Here’s why the A2 Milk (ASX:A2M) share price is down 12% in a week appeared first on The Motley Fool Australia.
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More reading
- ASX 200 Weekly Wrap: A mixed bag of earnings dominates ASX
- Top brokers name 3 ASX shares to sell next week
- Despite disappointing FY21 results, the A2 Milk (ASX:A2M) share price is still up in August. Here’s why
- Leading brokers give their verdict on the A2 Milk (ASX:A2M) share price
- The ASX reporting wrap-up: A2 Milk, Woolworths, Appen
Motley Fool contributor Kerry Sun 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 recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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