WELLINGTON, New Zealand — Infant formula company a2 Milk Ltd. said its first-half earnings declined by half due to pandemic disruptions and a declining birth rate in China.
The company on Monday said it couldn’t give specific forecasts for future revenue and earnings, but warned that expected improvement in revenue would not translate into higher profits because it will spend significantly more on brand investment.
A2 Milk’s July-December net profit of 59.6 million New Zealand dollars ($39.9 million) was down 50.3% from a year earlier and its revenue of NZ$660.5 million was 2.5% lower.
It said the China infant-formula market had shrunk 3.3% in value during the financial first half due to the country’s declining birth rate.
A2 Milk in October had signaled a prolonged period of reduced profitability after its business was upended by the Covid-19 pandemic and changes in its crucial China market.
Shares of the company have sunk more than 70% since August 2020 on a series of profit downgrades as the pandemic caused a collapse in sales of baby formula via Chinese surrogate shoppers. Its growth prospects in China also have become less certain because of a declining birth rate and foreign brands losing some of their appeal.