ASX 200: A2M 1H 2023 earnings preview

When will A2M report its latest earnings?

A2M is scheduled to report its 1H2023 earnings on Monday, February 20th, 2023 Sydney time.

What should traders look out for?

The A2 Milk company was founded in New Zealand in 2000 and is dually listed on the ASX and the NZSX. A2M’s branded milk differs from conventional cow’s milk because it comes from cows selected to produce only the A2 protein type and no A1, which is alleged to be harmful. A2M is one of 78 companies under the ASX Consumer Staples sector.

By its own account, A2M has had an extraordinary journey in recent years. The arrival of COVID-19 saw sales surge on a wave of panic buying, only to suffer a dramatic reversal in fortunes as the closure of international borders brought the daigou/reseller channel it relied on to a halt.

In response, management moved to stabilise the business, writing down excessive stock and bolstering its leadership team – a move that saw the company announce a 19.8% increase in revenue to NZ$1,446 million in FY22, along with a 42.3% jump in NPAT to NZ$114.7 million and a NZ$150 million on-market share buyback.

Looking forward

The re-opening of the Chinese economy in December last year is expected to aid the turnaround and to be beneficial for the A2M share price in the periods ahead, driven by sales of infant formula and evidence that the company’s marketing is helping the company to gain market share.

One concern is that in January, the Chinese National Government stated that 2022 births would be down about 10%, a trend expected to continue in 2023 consequently providing a negative headwind to the infant formula industry.

A2M earnings – what to expect

The market is looking for Revenues to rise to $1.61 billion for FY2023, with approximately half that coming in 1H 2023, along with NPAT of NZ$61 million.

A2M revenue chart

A2M technical analysis

From its bull market high of $20.05 in June 2020, the A2M share price fell over 80% to a low of $3.90 in May 2022. Since then, the share price has been able to reclaim some lost ground, recently testing trendline resistance at $7.14, where the rally ran out of steam.

A move above $7.14/20ish would be a positive development and open up a move towards resistance $9.50/80 area coming from the December 2020 $9.82 low and the February 2021 $9.68 low.

On the downside, we expect dips to be well-supported at $6.20/10 ahead of the uptrend support coming from the June 2022 low.

A2M daily chart

Summary

A2M is scheduled to report its 1H 2023 earnings on Monday, February 20th, 2023. Its turnaround appears to be gaining traction supported more recently by the re-opening of the Chinese economy and evidence that the company’s marketing is helping it gain market share.