The a2 Milk Company has provided an update confirming that supply chain disruptions affecting its China infant milk formula business in the fourth quarter of FY26 have substantially been resolved. The disruptions, which stemmed from strong demand, freight challenges, a Synlait production backlog, extended product release times, and additional customs clearance requirements, resulted in a material decline in China label infant milk formula sales for the full year, down approximately 14 percent compared to FY25. Despite this significant headwind in its largest market segment, the company’s overall financial performance has exceeded initial expectations.
The operational challenges caused many existing customers to switch to competing brands during the critical fourth quarter period, representing a competitive risk that the company now must navigate as it attempts to win back market share. Product availability issues also affected the English label a2 Genesis variant, though to a more limited extent, as these stemmed from planned production downtime at the a2 Pokeno facility and changes in Chinese import requirements. The materiality of the supply chain disruption is evidenced by the 14 percent contraction in China label infant milk formula sales, which represents a substantial portion of the company’s revenue base.
Against this backdrop, the company has delivered preliminary FY26 results that tell a more nuanced story. Revenue reached approximately $1.97 billion, representing growth of over 12 percent year-on-year and tracking at the stronger end of the April guidance range of 10 to 20 percent growth. The EBITDA margin sits at the high end of the previously guided 14.0 to 14.5 percent range, while net profit after tax is expected to be slightly ahead of FY25 reported results, with underlying net profit after tax projected to be materially higher. Cash conversion has improved significantly to approximately 70 percent, substantially exceeding the 50 percent guidance that was provided in April.
The results highlight the strength of the company’s diversified product portfolio. English label infant milk formula, other nutritional products, and liquid milk categories have all performed significantly above prior year levels, more than offsetting the decline in China label infant milk formula. This diversification has been crucial in underpinning overall financial performance despite the challenges in the company’s core China market segment.
For investors, the resolution of supply chain constraints and the company’s ability to exceed earnings guidance despite losing market share to competitors provides some reassurance on operational execution. However, the loss of China label infant milk formula customers to alternative brands remains a material concern that will require sustained marketing and sales effort to reverse. The company’s next opportunity to provide investors with detailed guidance will come when it releases its FY27 outlook alongside audited FY26 results on 17 August 2026. This announcement is price sensitive and has been flagged as material by the ASX.
View the full ASX announcement (PDF)
About The a2 Milk Company Limited (ASX: A2M)
The a2 Milk Company Limited is a dairy nutritionals company that sells A2-type protein branded milk and related products, including infant milk formula and other dairy products. The company operates across Australia, New Zealand, China, rest of Asia, and the United States, manufacturing and selling nutritional products and providing licensing services under the a2 Milk and a2 Platinum brands.
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