A2 Milk's share price dropped by more than 20 per cent this morning despite the alternative milk company reporting a 70 per cent cent increase in revenue for the nine months to March 31.

The company, in an announcement to the NZX, said it was anticipating revenue in a range of $900 million to $920m for the 12 months ended June 30.

The mid-point of the new sales guidance is 4 per cent down from the consensus of market expectations of $947m.

By mid-morning the stock was at $10.25, down more than 20 per cent or $2.60 from Tuesday's close, putting downward pressure on the NZX50 index, which fell by more than 2 per cent.


A2 Milk said its group revenue came to $660 million in the nine months to March 31, up 70 per cent on the previous corresponding period, reflecting continued sales growth in both nutritional products and liquid milk.

The company said its revenue guidance for the year took into account the planned transition to new infant formula packaging during the fourth quarter.

"Gross margin percentage for the full year is expected to remain broadly consistent with the first half, given the benefit of throughput efficiencies and currency movements," a2 Milk said in a statement to the NZX.

The group's total marketing investment is now expected to be in the range of $82m to $87m for the full year, given higher expenditure primarily in the US and China businesses in second half compared to the first half.

Harbour Asset Management senior research analyst Oyvinn Rimer said several other high-growth stocks - particularly ones like a2 Milk that trade on high price earnings multiples - had seen their share prices drop over the last six months after issuing guidances that failed to match optimistic market expectations.

"When they don't meet market expectations, they get a caning by the market," he said.

Even after today's fall, a2 Milk has had a spectacular run; the stock traded this time last year at just $3.56.

A2 Milk, which this year became New Zealand's biggest company by market capitalisation, last year reported net income of $90.6 million for the 12 months to June, up from $30.4m a year earlier.


Revenue in that year rose 56 per cent to $549.5m.