"The company believes that it has complied with all applicable disclosure obligations and denies any claim to the contrary. The company will respond further if and when any legal proceedings are commenced."
In a statement this evening, a2 Milk said it had been notified that group proceedings have been filed in the Supreme Court, naming the Company as the defendant.
"The Company denies any liability and will vigorously defend the proceeding," a2 said.
Slater & Gordon said that on May 10, a2 flagged a review of its key China business and a blowout of more than $100 million in provisions for old stock.
The latest cut to its earnings outlook resulted in a2 Milk expecting full-year sales of $1.2 billion-$1.25 billion and a group EBITDA margin of 11-12 per cent. That compared to August 19, 2020, guidance for strong sales growth and an EBITDA margin of 30-31 per cent.
Slater and Gordon's Kaitlin Ferris said a2 Milk "was or ought to have been aware that the full-year FY21 guidance did not adequately consider factors likely to impact the Company's financial performance".
It is also alleged that a2 Milk's sales in the CBEC channel would in turn be impeded by the
disruption to the daigou/reseller channel and the loss of associated marketing activity to
stimulate consumer demand.
"As a result of our investigation following a2's profit downgrades throughout FY21, we
concluded that there was a strong basis to allege that the company provided misleading
guidance and was obliged to correct the market's understanding of its financial position at a much earlier time," Ms Ferris said.
"Investors are entitled to assume that when they purchase shares in a listed company, all of the material information relevant to its financial position has been disclosed. The repeated downgrades by a2 during the August 2020 to May 2021 claim period caught the market by surprise and revealed that a2 had been facing systemic and structural issues with its distribution networks at an early stage of the financial year."
In August a2 Milk said its net profit dropped by 79.1 per cent to $80.7 million in the June year, driven by Covid-19 disruption and a rapidly changing infant nutrition market, particularly in China.
The alternative milk and infant formula marketer's revenue fell by 30.3 per cent to $1.21 billion.
Its earnings before interest tax depreciation and amortisation (EBITDA) fell by 77.6 per cent to $123 million, inclusive of $109m in stock write-downs and $10m in Mataura Valley Milk (MVM) acquisition costs.
The company's shares closed tonight at $6.81. The once high-flying stock is down 56 per cent over the past 52 weeks, according to NZX data.
