The a2 Milk Company faced significant supply chain disruptions in its China infant formula segment during late FY26, causing a 14% sales decline in that category. Despite this, overall revenue rose 12% on FY25, supported by strong performances in other product lines and improved margins.
- China label infant formula sales down 14% in FY26 due to supply issues
- Overall FY26 revenue up 12% to approximately $1.97 billion
- EBITDA margin at high end of guidance, NPAT slightly up on FY25
- Supply chain disruptions largely resolved, stock levels normalised
- Focus shifts to sales initiatives to regain China market share
Supply Chain Challenges Hit China Infant Formula Sales
The a2 Milk Company Limited (NZX:ATM, ASX:A2M) confirmed that its China label infant milk formula (IMF) business suffered materially in 4Q26 due to a confluence of supply chain issues. These included freight bottlenecks, production backlogs at Synlait, extended product release times, and heightened customs clearance and testing requirements. The disruption forced many existing users to switch to competitor brands or to the company's English label products, particularly a2 Genesis™, which itself faced limited availability due to planned downtime at the a2 Pokeno facility and evolving import regulations.
Strong Overall Revenue Growth Despite China Setback
Despite the hit to China label IMF sales, which declined approximately 14% year-on-year, a2 Milk posted preliminary unaudited FY26 revenue of about $1.97 billion, marking over 12% growth from FY25's $1.76 billion. This growth was driven by robust performances across English label IMF, other nutritional products, and liquid milk categories. The company anticipates its EBITDA margin will land at the high end of its previously announced 14.0% to 14.5% guidance range, with net profit after tax (NPAT) slightly exceeding FY25's $203 million. Underlying NPAT, which excludes losses from the a2 Pokeno plant related to production ramp-down ahead of the a2 Platinum™ transition and one-off transformation costs, is expected to improve.
Supply Chain Resolution and Market Recovery Efforts
a2 Milk reports that most supply chain constraints have now been substantially resolved. Product flows to distributors and retailers in China have materially improved, with inventory levels returning to target ranges. The company is now prioritising sales and marketing initiatives to win back former China label IMF customers and accelerate new user recruitment alongside its retail and distribution partners. These efforts will be critical in recapturing lost market share following the disruption.
Looking Ahead to Audited Results and FY27 Outlook
The company plans to release its audited FY26 results and provide commentary on FY27 outlook on 17 August 2026. Investors will be watching closely to see how the sales recovery strategies unfold and whether the supply chain improvements translate into sustained growth, particularly in the strategically important China IMF segment.
Bottom Line?
a2 Milk’s ability to rebound from significant China supply chain disruptions will be pivotal to sustaining its growth trajectory in FY27.
Questions in the middle?
- How effective will a2 Milk’s sales initiatives be in regaining lost China label IMF market share?
- What impact will the a2 Platinum™ transition have on production volumes and profitability in 1H27?
- Can supply chain stability be maintained amid evolving import regulations and external geopolitical factors?