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A2 Milk (A2M) $6.03

A2M -11.97%: Hit hard today following their strategy update where they doused expectations for a strong rebound in the short term, instead they refocussed the markets attention on the longer term strategy calling FY22 a year of stabilizing and resetting while we’ll need to wait until FY25-26 for the next leg of growth. They talked to unprecedented change in the market (China) and their need to adapt to it while the market (MM included) was thinking today was a likely opportunity for them to speak about improving conditions as their main competitors had recently done. They did talk to sales growth improving, a good tie-up with Hershey to produce Chocolate milk, however growth will now come at the expense of margins, which are likely to be high teens versus historical levels around ~30%. We have given this position the benefit of the doubt, however it’s hard now to see a catalyst in the near term for a change of fortune.

A2M
MM is now reviewing our position in A2M
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A2 Milk (A2M)
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