The A2 Milk Company Ltd (ASX: A2M) share price is having a tough end to the week.
In morning trade, the infant formula company's shares are down 3.5% to $5.93.
Image source: Getty Images
Why is the A2 Milk share price falling?
Investors have been selling down the A2 Milk share price today following the release of a trading update at the company's annual general meeting.
At the meeting, management revealed that its "underlying business performance is on track and broadly consistent with guidance."
Though, it is facing both tailwinds and headwinds from the weaker New Zealand dollar. The company advised:
Volatility in currency has the potential to impact the shape of the reported results. The recent relative weakness of the NZD has had the effect of inflating both revenue and cost of doing business (including hedge losses). In addition, increased interest rates in Australia and New Zealand have improved the Company's return on term deposits (interest income).
What is expected in FY 2023?
Management advised that should currencies remain at prevailing levels, full year reported revenue is likely to increase to low double-digit growth compared to its previous guidance of high single-digit growth. It also reiterated its guidance that first half growth is expected to be significantly higher than its second half growth.
As for EBITDA, management expects this to remain broadly in line with plan despite the stronger revenue. It also notes that its US infant formula expansion is not expected to have a material impact in FY 2023.
A2 Milk's EBITDA margin is expected to be similar to the prior year compared to its previous guidance of a modest improvement.
Anything else?
In other news, this morning A2 Milk revealed that its chair, David Hearn, will be stepping down in 12 months.
The company revealed that it has spent significant time considering the best replacement for the chair. After that due consideration, it came to the unanimous conclusion that current board member Pip Greenwood has both the skills and the experience to take over from Hearn at that time.
Mr Hearn commented:
Whilst I recognise that we have had some turbulent times recently, it is an extraordinary experience to play a part in the development of this amazing business. I consider it a personal privilege to serve as your Chair and I want to take this opportunity to thank you for your support both for the Company and me personally.
Not only will Pip bring her excellent skills to the role, but importantly this plan also represents a balanced blend of Board refreshment together with continuity, which we believe is absolutely appropriate after a period of significant change at both Board and Executive Leadership Team levels within the business.
