A2 Milk chairman David Hearn said the sudden departure of managing director and chief executive Jayne Hrdlicka after just 18 months in the job was not performance-related and that the company would continue in much the same way as it had done under her control.
The company said earlier that Hrdlicka would leave the $2.2 million dollar job because of the "significant time and increased travel demands" involved the company's planned expansion in China and the US.
Former CEO Geoff Babidge would fill the role in the interim while a replacement was found, it said.
• A2 Milk boss Jayne Hrdlicka exits job suddenly
• A2 Milk shares fall as major Chinese competitor emerges
• A2 Milk anticipates strong revenue growth in 2020
• Big Read: A2 Milk - formula for growth
The company's share price hit a record of $18.02 in August in anticipation of a annual strong result.
True to form, the net profit leapt by 47 per cent to $287m, but the market was blindsided by a2 Milk's move to spend more on supporting growth, which sent the share price sharply lower.
The stock has since recovered some lost ground. In today's release, A2 Milk reiterated the guidance given at last month's annual meeting, that the year's earnings before interest, tax, depreciation and amortisation margins would be a stronger than previously communicated, and in the range of 29-30 per cent.
Hearn, in an interview with the Herald, said the strategy undertaken during Hrdlicka's tenure would continue.
"There is no hole in the numbers. The basic strategy is intact. It's highly supported and showing signs of working," UK-based Hearn told the Herald.
"There is nothing in the business that should alarm anybody at all," he said.
Hearn said a2 Milk would continue to target 30 per cent margins, alongside strong investment in growth.
"The basic strategy is intact and indeed it is highly supportive and is showing signs of working, so there is nothing in the business that should alarm anybody at all," he said.
"Long term, we think there is a balance between growth and margin, that we think we can achieve that to have our cake and eat it," he said.
"We are continuing to progress strong growth with big investment targeted well, but also delivering attractive margins of 30 per cent, so that's the story on the business side."
Asked if there had been investor disquiet over a2 Milk's direction, Hearn said: "I can't comment on individual investors, particularly," he said.
Hearn said it was clear the company's share price has had been "uncharacteristically soft" over the last six months but that it had bounced back.
"There was a concern among shareholders that we were not managing the bottom line (profits) as aggressively as the top line (sales)."
"As we began to suggest that there may be better numbers at the bottom of the pile, there appears to be greater acceptance for that proposition."
"I think is about the balance of the business and how its been run."
When pressed to comment on Hrdlicka's departure, Hearn said: "I'm not going to say any more than what's in the release. That's as far as I'm going."
Hearn, in a transcript of a conference call to analysts released on the NZX, said there were confidentiality provisions in relation to Hrdlicka's departure.
"And I am therefore limited as to how much I can elaborate on the details of this matter," the transcript said.
Hearn, in the transcript, said: "It is clear that the demands of the business already involve more travel than Jayne had anticipated when she joined the company," he said.
NZ Shareholders Association chief executive Michael Midgeley said it was disappointing to see that the chair of A2 invoke confidentiality provisions.
"In our view, there is likely to be more to it than travel," he said in a statement.
"Confidentiality is a very convenient excuse in these situations and may obscure other problems that shareholders have a right to know," he said.
Shares in a2 Milk closed 55c or 3.6 per cent down at $14.62, after earlier plummeting to $14.00 on the news.
Shane Solly portfolio manager at Harbour Asset Management, which has a stake in a2 Milk, said the market had over-reacted and that the core business "seems to be tracking pretty well".
Hrdlicka is based in Melbourne, a2 Milk is based in Sydney, and the job required extensive travel to the US and China.
"Clearly there was recognition that that was not sustainable for everybody," he said.
"To my mind it was better to deal with the problem now rather than let it be a bigger problem later," he said.
Hrdlicka has from time to time been at odds with the investment community.
In September 2018 - just two months into the job - Hrdlicka sold shares worth about $4.3m.
The shares were received in the automatic exercise of rights to shares in the company which she said was to cover tax obligations but the sale sent the share price sharply lower.
Hrdlicka, who last month re-elected unopposed for a second term as chair of Tennis Australia until 2022, came to a2 Milk from the Qantas subsidiary, Jetstar.
She was seen as at one stage as a possible contender to succeed for the chief executive Alan Joyce at the head of Qantas but his commitment to that role for several more years, and the emergence of more likely successors pushed her down the list.
Babidge, who is credited with rescuing the company from near failure and making it one of New Zealand's biggest listed entities, said he was pleased to back "re-energised, fit and healthy" after 16 months. Babidge said he supported the company's strategy.