)
The a2 Milk Company (ASX: A2M) has slashed its FY26 earnings guidance, warning that supply chain disruptions, driven in part by the Middle East conflict crimping global freight capacity, are choking product flow into China as demand for its infant milk formula is surging.
The downgrade, disclosed today, comes less than two months after managing director and CEO David Bortolussi declared during the release of the company's half-year results that its medium-term $2 billion revenue ambition was tracking "a full year ahead of plan."
The a2 Milk Company now expects FY26 revenue growth of only low to mid double-digit per cent, down from the mid double-digit growth flagged earlier this year.
EBITDA margin guidance has been cut to about 14 to 14.5 per cent from 15.5 to 16 per cent, while net profit after tax is now expected to come in "similar to down" on FY25's reported $203 million, a marked reversal from the previous expectation of growth.
The company says the disruptions are concentrated in its China label infant milk formula business, which is the core engine of the group's growth strategy.
A confluence of factors has conspired to create a supply bottleneck: the Middle East conflict has indirectly squeezed both air freight capacity and sea freight allocations; enhanced cereulide testing protocols are extending product release times; Chinese customs inspection rates have increased; and manufacturer Synlait (ASX: SM1) has been working through a production backlog stemming from past manufacturing challenges and the sale of its New Zealand North Island assets.
Product availability issues are expected to be most acute during April and May, the company says.
When announcing the 1H26 results in February, Bortolussi had struck a bullish tone, pointing to first-half revenue of $993.5 million, up 18.8 per cent, and EBITDA of $155 million as evidence the business was firing on all cylinders.
“The company’s strong performance in the half has enabled us to upgrade our FY26 full-year guidance and declare an interim dividend at the higher end of our policy range,” Bortolussi said at the time.
“Our upgraded outlook means we are now on track to achieve our $2 billion medium term sales ambition in FY26, a full year ahead of plan. This is testament to the execution of our team and the strength of the a2 brand.”
That optimism now sits in stark contrast with today's update.
Fellow New Zealand dairy producer Synlait today also confirmed the supply chain challenges outlined by its largest customer.
The manufacturer acknowledged that enhanced testing requirements had extended product release times and that ongoing supply chain disruptions were affecting deliveries.
Synlait says production has returned to target levels but the company does not specify when the backlog will be fully cleared.
)
