About $1.5 billion was wiped off a2 Milk's market capitalisation after the company said its first-half revenue would drop because level 4 restrictions in Melbourne had affected its unofficial "daigou" sales.
After an hour of trading, a2 Milk's shares were down $2.09 or 11.3 per cent at $16.35, taking its market cap to $12.14 billion from $13.7b.
A2 Milk, in an earnings update, said it expected first-half sales to come to $725 million to $775m, down from $805.3m in the previous corresponding period.
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The company expects to see a better second half, forecasting its annual group revenue to come in at $1.80 billion to $1.90b for the current year, up from $1.73b in 2021.
It expected group EBITDA margin for 2021 to be in the order of 31 per cent, compared with 31.7 per cent in the previous year.
The company said disruption in the daigou channel had affected sales in September "and it is currently anticipated that this will continue for the remainder of the first half of FY21".
The unofficial daigou trade channel to China represents a significant proportion of infant formula sales for a2 Milk's Australia and New Zealand (ANZ) business.
"As such we now expect ANZ revenue to be materially below plan for the first half," it said.
At its last result, the company noted that there continued to be uncertainty resulting from Covid-19 and the potential for the moderation of economic activity and that this could have various impacts, including on participants within the supply chain.
It has also previously said a number of issues being experienced relating to its infant nutrition business as a result of the pandemic.
This included the flow-on effect of pantry destocking continuing into FY21 following the strong sales uplift in 3Q20 and lower than anticipated sales to retail dangerous in Australia, due to reduced tourism from China and international student numbers.
"The performance in all other areas of our business is strong, including our liquid milk businesses in Australia and the USA. Importantly, our local China business is performing strongly, notably in Mother & Baby Stores (MBS), which we anticipate will continue," Babidge said.