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New Zealand’s a2 Milk sees a spike in quarterly sales on consumer stockpiling

22 April 2020

On 22 April, a2 Milk Co raised the outlook for its full-year core earnings margin as consumers stockpile goods during the coronavirus outbreak.

According to reporting in Reuters, the company’s raised earnings expectations comes as food retailers benefit from panic buying of essential goods ahead of mandatory lockdowns to curb the spread of COVID-19.

a2 Milk forecast full-year 2020 earnings before interest, tax, depreciation and amortisation (EBITDA) margin between 31 percent and 32 percent, from the previous range of 29 percent to 30 percent it had forecast in February.

As customers stockpiled the company's products, particularly infant nutrition products sold in Australia and China, a2 Milk said revenue for the three months ended 31 March was above expectations.

The surge in sales was mostly through online and reseller channels, the company said.

A2 Milk's revenue from China, accounted for in US dollars, was also boosted by a significant depreciation of the New Zealand dollar against the US dollar during the quarter.

These two factors, combined with lower-than-expected costs and a delay in planned recruitment due to the virus outbreak boosted the company's results.

"We are unable to estimate the timing and extent to which pantry stocking may unwind," the Auckland-based company said. "It is unlikely that these factors will be sustained as these unprecedented circumstances begin to unwind."

The company added that despite uncertainty posed by the coronavirus pandemic, it expects annual revenue in the range of NZ$1.70 billion to NZ$1.75 billion.

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