a2 Milk shares are getting creamed

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

The dairy company reported revenues for the nine months ended March 2018 of $NZ660 million — a gain of 70% from the same time last year.

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

That’s a significant increase from FY17 revenues of $NZ549.5 million, which in turn represented a 55.8% increase from the previous year.

So the company is tracking strongly, and today’s price action is not reflective of any negative surprises.

Rather, it’s the result of excessive demand for a2 stock, which has been a market darling in 2018.

Despite today’s fall, shares in a2 Milk are up more than 40% since the start of the year.

And with the higher share price came increasingly bullish analyst’s forecasts for sales growth, which a2 was unable to meet with today’s result.

Shares fell by as much as 19%, and a short time ago were more than 14% down in afternoon trade.

a2 Milk said the revenue figure for March reflected increased sales for both nutritional products and liquid milk.

“It also includes the impact of seasonal sales from key China selling events weighted towards 1H18,” the company said.

In an investor presentation released today, a2 Milk said revenues from sales to China almost trebled from the prior comparative period.

It also announced global supply partnerships with Synlait Milk Limited and Fonterra Co-Operative Group for distribution of its milk products.

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.

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