New Zealand’s A2 Milk Co. has said the outlook remains “challenging and uncertain” after a marked decline in its annual revenue and profits.

Revenue was down 30.3% at NZD1.21bn (US$841.6m) from a year earlier, while EBITDA fell 77.6% to NZD123m, inclusive of NZD109m in stock write-downs and NZD10m in costs linked to the acquisition of New Zealand dairy business Mataura Valley Milk.

The fresh milk and infant-formula maker, which this month has reportedly come on the radar of food giant Nestle, has downgraded its revenue outlook a number of times this year with China infant-formula sales a particular concern.

In commentary surrounding its 12-month results, released today (26 August), A2 Milk said it has experienced “a very challenging year in FY-21, impacted by unprecedented levels of uncertainty and volatility due to the prolonged impact of Covid-19 and a rapidly changing China infant-nutrition market”.

It added: “Over the past year, 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.

“While certain areas of the business performed well, with market share gains in China label infant nutrition and Australian fresh milk, the company was impacted by a significant decline in cross-border English label infant nutrition and other nutritional sales through daigou/reseller and e-commerce channels.

“This created substantial demand and supply volatility, which caused material excess inventory issues that exacerbated the impact.”

A2 Milk said that in response to the “dramatic change in circumstances”, it had taken “significant action” to address excess inventory issues, rebuild the management team, increase brand investment to drive demand, commence a review of its growth strategy, and review options to deploy available capital.

“These actions have put the company in a far better position now than it would have been otherwise to navigate the challenges ahead and enable it to return to growth in the medium term,” it said.

But it warned that “the outlook for FY-22 remains challenging and uncertain and it will take time to recover”.

With this in mind, the company said it will not be providing specific guidance regarding anticipated group revenue or EBITDA margin at this time. Rather, it is “providing current observations on key drivers and important issues that may impact its FY-22 results”.