Highlights

• The a2 Milk Company (ASX:A2M) said China infant formula supply constraints have largely been resolved.

• Preliminary FY26 revenue is expected to reach approximately NZ$1.97 billion, up more than 12% year-on-year.

• EBITDA margin is expected at the upper end of previously issued guidance, while cash conversion exceeded expectations.

• The company will release its audited FY26 results and FY27 outlook on 17 August 2026.

The a2 Milk Company (ASX:A2M) has provided investors with an update on its China infant milk formula (IMF) supply chain and preliminary FY26 financial performance, indicating that product availability has largely returned to normal following disruptions experienced during the fourth quarter of the financial year. The announcement also included updated expectations for FY26 earnings, suggesting that the company expects to report results in line with, or slightly ahead of, its previously issued guidance despite temporary sales pressures in its China-labelled infant formula business.

On 7 July 2026, shares of The a2 Milk Company (ASX:A2M) were trading at A$7.59, down 1.56% during the session. The market reaction followed the company's operational update, with investors continuing to assess the impact of earlier supply disruptions alongside improving financial guidance.

China Supply Chain Challenges Impacted Fourth-Quarter Sales

The latest update follows the company's earlier announcement in April 2026, when management disclosed that product shortages were affecting the availability of China-labelled infant milk formula across distributors and retailers.

According to the company, multiple factors contributed to the disruption. These included stronger-than-expected demand during the preceding quarter, freight constraints, production backlogs at manufacturing partner Synlait, extended product release timelines and additional customs clearance requirements in China.

As a result, China-labelled infant formula products experienced reduced availability during the fourth quarter of FY26. Management stated that the shortages prompted many existing customers to temporarily switch to alternative infant formula brands, while some consumers instead purchased the company's English-labelled products.

The impact on English-labelled products was comparatively limited and mainly affected the a2 Genesis™ range because of scheduled production downtime at the company's Pokeno manufacturing facility together with revised importation requirements into China.

Product Availability Returns to Target Levels

Management confirmed that the operational issues responsible for the earlier shortages have now been substantially resolved.

Product flows across both China-labelled and English-labelled infant formula have improved materially, allowing distributor and retailer inventory levels to return to targeted levels.

With production and logistics now stabilised, the company has shifted its focus from managing supply constraints toward rebuilding market demand. Current priorities include encouraging former China-labelled infant formula customers to return while continuing efforts to attract new users through retail and distribution partners.

For consumer companies operating in highly competitive infant nutrition markets, restoring product availability is often regarded as an important step before marketing initiatives can effectively rebuild market share.

China Label Sales Declined While Other Categories Expanded

Although supply conditions have improved, the disruption materially affected FY26 sales performance within the company's China-labelled infant formula business.

Management indicated that China-labelled infant milk formula sales declined by approximately 14% compared with FY25.

However, the company also reported that all other major product categories delivered year-on-year growth. English-labelled infant formula, Other Nutritionals and Liquid Milk products all recorded significant increases compared with the previous financial year.

This diversified performance helped offset part of the weakness experienced within China-labelled infant formula and supported overall group revenue growth during FY26.

The contrasting performance across product categories illustrates the importance of the company's broader portfolio in balancing temporary disruptions affecting individual markets.

Preliminary FY26 Financial Performance Remains Within Guidance

Despite the operational challenges experienced during the fourth quarter, The a2 Milk Company expects its FY26 financial performance to remain consistent with, or slightly exceed, the guidance issued in April.

Based on preliminary unaudited results, management expects FY26 revenue of approximately NZ$1.97 billion, representing growth of more than 12% compared with FY25.

The company also expects its EBITDA margin to be at the upper end of the previously guided range of 14.0% to 14.5%, indicating that profitability remained resilient despite lower China-labelled infant formula sales.

Reported net profit after tax (NPAT) is expected to be slightly higher than FY25, while underlying NPAT is also forecast to increase after adjusting for temporary production-related losses and one-off transformation costs associated with the Pokeno facility transition.

Another notable outcome was cash conversion, which is expected to reach approximately 70%, exceeding the previous guidance of around 50%.

These preliminary figures remain subject to completion of the external audit before the release of the company's full-year financial statements.

Focus Turns to FY27 Recovery

With product availability now largely restored, management has outlined several commercial priorities heading into FY27.

The company intends to work closely with retail and distribution partners across China to encourage customers who temporarily switched brands during the supply shortage to return to the a2™ product portfolio.

Alongside customer retention initiatives, the business will continue expanding recruitment of new consumers while maintaining growth across English-labelled infant formula and other nutrition categories.

Management is expected to provide more detailed commentary regarding FY27 trading conditions when audited FY26 results are released on 17 August 2026.

Investors are likely to monitor whether improved product availability translates into stronger sales recovery during the early months of the new financial year.

Share Performance Reflects Market Assessment

The a2 Milk Company's share performance remains closely linked to developments in its China infant nutrition business, which continues to represent one of its largest growth markets.

Following the latest announcement, shares traded at A$7.59, representing a 1.56% decline on the day. While the market responded to confirmation that fourth-quarter sales had been affected by supply shortages, investors also received encouraging updates regarding improved inventory levels and financial performance that remained broadly within guidance.

Future share performance is likely to depend on the pace of customer recovery in China, continued growth across other product categories and the company's FY27 outlook scheduled for release alongside full-year results.

Upcoming Results Will Provide Greater Detail

The company has confirmed that its audited FY26 financial results and FY27 outlook will be released on 17 August 2026.

That announcement is expected to include detailed financial statements, management commentary on operating performance, updated strategic priorities and guidance for the new financial year.

Investors will also look for additional information regarding recovery in China-labelled infant formula sales, progress at the Pokeno manufacturing facility and broader demand trends across key international markets.

The upcoming results announcement represents the next major corporate milestone following the current operational update.

Conclusion

The a2 Milk Company (ASX:A2M) has reported that the supply chain challenges affecting its China infant milk formula business during the final quarter of FY26 have largely been resolved, allowing product availability to return to targeted levels. Although China-labelled infant formula sales declined because of temporary shortages, growth across other product categories supported preliminary FY26 revenue of approximately NZ$1.97 billion and financial performance that is expected to meet or slightly exceed previous guidance. With recovery initiatives now underway in China and audited FY26 results scheduled for release in August, investors will continue monitoring customer retention, earnings performance and the company's outlook for FY27.