Monday, April 22, 2024

Wine forecast sours but a2 Milk holds steady

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Contrast in immediate prospects as market leaders give their 2024 guidance updates.
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New Zealand share market leaders in the primary sector a2 Milk and Delegat have published guidance updates for the 2024 financial year, showing a contrast in their immediate prospects.

Winemaker Delegat trimmed 8-9% from its net profit forecast while a2 Milk left its earnings guidance unchanged.

The outlook for FY2024 is a double-digit decline in the China infant formula market but a2 Milk expects to deliver low single-digit revenue growth and a gross margin like last year’s, of around $750 million.

That delivered earnings before tax, interest, depreciation and amortization of $219m in FY2023.

Before the annual meeting last week, market commentators had thought a2 Milk may have lowered its sights since the FY2023 results in late August.

The following day A2 shares gained 10c to $4.15 but have slipped 37.5% over the past 12 months and are off 46% from their recent peak of $7.75 in February.

Delegat shares have lost 25% in price over the past year and have halved in price over 24 months.

They now sit around $7.35 and have come down $1 in the past month.

Managing director Steven Carden said Delegat’s forecast of case sales for FY2024 has been reduced by 1.7% on the previous financial year to 3,614,000.

This forecast is down 5.5% on the previous guidance.

Carden said the reasons include stabilisation in supply chains, leading to distributors and retailers holding lower stocks, resulting in lower replenishment orders year to date.

Accordingly, the guidance range for operating net profit after tax is now $57-$61m, having formerly been $62-$67m.

Case sales forecasts for FY2025 and 2026 have also been revised downwards, by 4-5%.

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