It has been an unusually disappointing year for the A2 Milk Company Ltd (ASX: A2M) share price.
After being up as much as 43% year to date at one stage, the a2 Milk share price is on course to record a 2020 decline of 18.5%.
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Why has the a2 Milk share price bounced around in 2020?
Investors have been buying and then selling the company's shares this year due to impacts from the COVID-19 pandemic.
At the height of the pandemic, a2 Milk was experiencing even more insatiable demand for its infant formula than normal due to panic buying and stockpiling.
This ultimately led to the company reporting a 32.8% increase in revenue to NZ$1,730 million and a 34.1% jump in net profit after tax to NZ$385.8 million in FY 2020.
Also coming in strongly was A2 Milk Company's free cash flow. It generated operating cash flow of NZ$427.4 million, which led to it ending the period with a closing cash balance of NZ$854.2 million.
What went wrong?
However, since then, things haven't gone quite to plan for the company and the tailwinds it was experiencing quickly became headwinds.
With many pantries stocked full of infant formula, demand for its key product softened. But the biggest impact was felt in the daigou channel because of the sudden closure of international borders, which meant no Chinese tourists hitting Australian shores and sending products back to the mainland.
The weakness in this particular channel was the reason for a2 Milk's recent earnings guidance downgrade and means the former market darling is expecting to post a notable reduction in both sales and earnings in FY 2021.
Anything else?
Also weighing on investor sentiment this year was news that many of the company's executives had sold a large number of shares.
For example, the company's Chair and Non-Executive Director, David Hearn, offloaded 250,000 of the company's shares through an on market trade on 24 August for an average of NZ$20.31 per share (~A$18.57). This represents a total consideration of NZ$5,077,500 or approximately A$4,642,500.
This compares to the a2 Milk 52-week high of NZ$21.74 and today's share price of NZ$12.05.
It certainly was great timing on management's part. Mr Hearn's 250,000 shares would be worth a touch over NZ$3 million today, which is NZ$2 million less than the Chair received for them.
