On Tuesday, it was announced that the class action against a2 Milk Company was filed in the Supreme Court of Victoria on behalf of investors who bought shares between 19 August 2020 and 9 May 2021 during which the infant formula maker posted 4 earnings downgrades.
It’s alleged that a2 Milk engaged in misleading or deceptive conduct and breached continuous disclosure rules in posting the 4 downgrades.
On 10 May, it’s alleged that a2 Milk noted a review of its China business and a “blowout” of over $92.9 million in provisions for old stock resulting in a group EBITDA margin of 11-12 per cent, down from 30-31 per cent in August 2020.
Slater and Gordon class actions practice group leader Kaitlin Ferris said the New Zealand company knew or should have been aware that the full year FY21 guidance did not “adequately consider” factors that could have impacted its financial performance, including an alleged attempt to increase sales by pushing English label infant formula tins through the cross-border e-commerce channel “with discounting consequences that would in turn negatively impact sales in the daigou channel”.
“As a result of our investigation following a2’s profit downgrades throughout FY21, we concluded that there was a strong basis to allege that the company provided misleading guidance and was obliged to correct the market’s understanding of its financial position at a much earlier time,” Ms Ferris said.
“Investors are entitled to assume that when they purchase shares in a listed company, all of the material information relevant to its financial position has been disclosed.
“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 a2 Milk Company has yet to publicly respond.
Neil Griffiths
Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.
Neil is also the host of the ifa show podcast.
