On Wednesday, Shine Lawyers confirmed it has brought a class action against the New Zealand company on behalf of “bitter” a2 Milk shareholders in the Victorian Supreme Court.
Investors who purchased shares between 19 August 2020 and 7 May 2021 have alleged that they were misled by the company’s “inflated” forecast of baby formula sales.
“Our claim alleges that A2 Milk had predicted its baby formula would have a high sales performance in FY21, contributing to a 30 per cent boost to its earnings before interest, taxes, depreciation and amortisation, but the forecast was misleading and caused our clients significant financial loss,” class actions practice leader Craig Allsopp said.
Mr Allsopp added that a2 Milk may have breached the Corporations Act by engaging in misleading and deceptive conduct, claiming the company “did not reasonably predict its profit margin” and should have known expected earnings were not going to be achieved.
“In our view, this may have constituted a breach by A2 Milk of its continuous disclosure obligations for failing to inform shareholders of its future trade plans,” he said.
“A2 Milk tried to increase sales performance by advertising its English label baby formula online, but this plan failed, instead causing a decline in sales among Daigou or Chinese consumers in Australia who purchase baby formula in Australian stores and post it to family overseas,” he said.
Early last month, Slater and Gordon Lawyers also brought a class action claim against a2 Milk on allegations of misleading conduct against shareholders between the same dates of 19 August 2020 and 9 May 2021.
Slater and Gordon alleged that on 10 May, 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.
A2 Milk CEO and managing director David Bortolussi said in a statement last month that it will be defending the class action by Slater and Gordon, however it has yet to respond to Shine’s claim.
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.
