A2 expecting Covidrelated dip

AUCKLAND: A2 Milk said its firsthalf revenue would drop because Alert Level 4 restrictions in Melbourne had affected its ‘‘daigou’’ sales — a form of crossborder exporting — more than it had previously thought.

However, the company was continuing to see strong demand out of China.

A2 Milk, in an earnings update, said it expected firsthalf sales to come to $725 million to $775 million, down from $805.3 million in the previous corresponding period.

It forecast its annual group revenue to come in at $1.80 billion to $1.90 billion for the current year.

It expected group ebitda margin for 2021 to be about 31%.

The company said disruption in the daigou channel had affected sales in September ‘‘and it is currently anticipated that this will continue for the remainder of the first half of FY21’’.

The unofficial daigou trade channel to China represents a significant proportion of infant formula sales for a2 Milk’s Australia and New Zealand (ANZ) business.

‘‘As such we now expect ANZ revenue to be materially below plan for the first half,’’ it said.

At its last result, the company noted that there continued to be uncertainty resulting from Covid19 and the potential for the moderation of economic activity, which could have various impacts, including on participants within the supply chain. It also previously said there were issues being experienced relating to its infant nutrition business as a result of the pandemic.

This included the flowon effect of pantry destocking continuing into FY21 following the strong sales uplift in 3Q20 and lower than anticipated sales to retailers in Australia, due to reduced tourism from China and international student numbers.

‘‘The performance in all other areas of our business is strong, including our liquid milk businesses in Australia and the USA. Importantly, our local China business is performing strongly, notably in Mother & Baby Stores which we anticipate will continue,’’ the company said.