Law firm Slater and Gordon filed a class action lawsuit against A2 Milk over its nine-month disclosure when it announced four earnings downgrades.
The claim, filed in the Supreme Court of Victoria, is filed on behalf of shareholders who allegedly suffered losses after acquiring a2 Milk shares on ASX and NZX between August 19, 2020 and May 9, 2021, said Slater & Gordon in a press release.
The class action alleges that A2 Milk engaged in deceptive or deceptive behavior in violation of the Corporations Act. The company is also accused of violating continuous disclosure rules by issuing four downgrades on September 28 and December 18 of last year, and on February 25 and May 10 of this year.
In May of this year, when Slater & Gordon said they were investigating a claim, A2 Milk responded in a statement to NZX, saying:
“The company believes that it has complied with all applicable disclosure obligations and denies any allegations to the contrary. The company will respond further if and when legal action is taken.”
In a statement tonight, A2 Milk said it had been informed that bankruptcy proceedings had been filed with the Supreme Court, naming the company as a defendant.
“The company denies any responsibility and will vigorously defend the proceedings,” said a2.
Slater & Gordon said on May 10, A2 reported a review of its key business in China and a blowout of more than $ 100 million in provisions for old inventory.
Latest cut in profit outlook led A2 Milk to expect annual revenue of $ 1.2 billion to $ 1.25 billion and group EBITDA margin of 11 to 12 %. Compared to August 19, 2020, forecasts indicate strong sales growth and an EBITDA margin of 30-31%.
Slater and Gordon’s Kaitlin Ferris said A2 Milk “was or should have known that the forecast for fiscal year 21 did not adequately address factors that could impact the financial performance of the company” .
It is also alleged that sales of A2 Milk in the CBEC channel would in turn be hampered by the
disruption of the daigou / reseller channel and loss of marketing activity associated with
stimulate consumer demand.
“As a result of our investigation of the decline in a2 profits throughout FY21, we
concluded that there was a solid basis for alleging that the company provided misleading information
direction and was forced to correct the market’s understanding of its financial position much earlier, ”Ms. Ferris said.
“Investors are entitled to assume that when purchasing shares of a listed company, all material information relating to its financial condition has been disclosed. The repeated downgrades of a2 during the August 2020 claim period to May 2021 took the market by surprise and revealed that A2 had faced systemic and structural issues with its distribution networks at the start of the year. “
In August, a2 Milk said its net profit fell 79.1% to $ 80.7 million in June, due to the disruption of Covid-19 and a rapidly changing infant nutrition market, especially in China.
The alternative milk and infant formula distributor’s revenue fell 30.3% to $ 1.21 billion.
Its earnings before interest, depreciation, and amortization (EBITDA) fell 77.6% to $ 123 million, including $ 109 million in stock depreciation and $ 10 million in acquisition costs of Mataura Valley Milk (MVM ).
The company’s shares closed tonight at $ 6.81. The once high-flying stock has fallen 56% in the past 52 weeks, according to data from NZX.