New Delhi, October 06, 2021: A Victorian law firm, Slater and Gordon, has filed a class action against the a2 Milk Company on behalf of shareholders who say they lost money because they say they were not fully aware of the company’s financial position.
The class action alleges that a2 Milk engaged in misleading or deceptive conduct in breach of the Corporations Act.
The company is accused of breaching continuous disclosure rules in posting four downgrades on September 28 and December 18 last year, and February 25 and May 10 of this year without disclosing information about how sales were being affected in China.
The class action relates to a2 shares bought between August 19, 2020, and May 7, 2021 inclusive.
Slater and Gordon say that by August 19, 2020, a2 was or ought to have been aware that the FY21 Guidance and subsequent representations did not adequately take account of a number of factors which would impact the Company’s financial performance.
“On May 10, a2 Milk flagged a review of its key China business and a blowout of more than $NZ100 million ($92.9 million) in provisions for old stock.
“The latest cut to its outlook resulted in a2 Milk expecting full-year sales of $1.2 billion–$1.25 billion and a group EBITDA margin of 11–12 per cent according to the reports published in abc.net.au.
“This compared to August 19, 2020, guidance for strong sales growth and an EBITDA margin of 30–31 per cent.”
Slater and Gordon allege the repeated downgrades by a2 during the August 2020 to May 2021 claim period caught the market by surprise and revealed that a2 had been facing systemic and structural issues with its distribution networks at an early stage of the financial year.
The company’s profits have fallen significantly over the period and the share price has halved in the last year.
The a2 story
a2 Milk is produced from cows that carry the A2 protein which has some reported health benefits for people who are lactose intolerant.
The company was established in New Zealand and later listed on the Australian stock exchange.
a2 Milk succeeded in breaking into the Chinese market, which had been lucrative up until daigou sales collapsed during the pandemic.
Before COVID-19, there were an estimated 150,000 Chinese personal shoppers — known as daigou — in Australia who bought and sold Australian-made products including baby formula, to Chinese consumers.
That badly affected sales and Slater and Gordon allege the company should have withdrawn the guidance it had given the market late last year about forecast profits and disclosed what was really going on.
The class action has affected the company’s stock price today with shares falling almost 4 per cent at time of publication.
a2 to ‘vigorously defend’ itself
The company has issued a statement to the Australian Stock Exchange saying it has “at all times complied with its disclosure obligations, denies any liability and will vigorously defend the proceedings. “
“The company remains confident in the underlying fundamentals of the business and growth potential.”
