* Company expects FY21 rev of NZ$1.20-1.25 bln
* 'Daigou' channel pressured by excess inventory - CEO
* Company mulling potential share buyback
May 10 (Reuters) - New Zealand's a2 Milk on Monday
cut its annual sales forecast for the third time amid continued
disruptions and excess inventory in its key sales channel in
China, sending its shares to a more than 3-1/2-year low.
The company said it will review its growth strategy in the
world's second-largest economy, where it has faced significant
challenges in its "daigou" channel since the COVID-19 pandemic
The daigou channel, through which people buy products
outside China and import them informally for Chinese
consumption, has been severely hit by a drop in tourists and
international students amid the pandemic with New Zealand
closing its borders to most foreign arrivals.
"It is clear that the actions taken to address challenges in
the daigou and cross-border e-commerce channels (CBEC) will not
result in sufficient improvement in pricing, sales and inventory
levels to meet our previous guidance," Chief Executive David
A2 said its growth in China's infant nutrition market was
also being hit by a more pronounced decline in birth rates,
prompting a review of its branding and channel strategy and a
ramping up in marketing spending into fiscal 2022.
The dairy producer now expects 2021 revenue between NZ$1.20
billion and NZ$1.25 billion ($873.5 million to $909.9 million),
down from its earlier forecast of NZ$1.40 billion.
Its shares tumbled as much as 16.3% to NZ$6.05, their lowest
since Sep. 25, 2017. The company's Australia-listed stock
is among the worst performers on the benchmark index
The firm will set aside about NZ$80 million-NZ$90 million in
provisions as cover for writing off inventory, but added that
shedding excess inventory could also affect its financial
performance in the first quarter of fiscal 2022.
"Despite these short-term setbacks, we are confident in the
long-term potential for infant nutrition and other opportunities
we have in China," Bortolussi said.
A2 said while its balance sheet was strong, it was still
reviewing options to manage its capital, including a potential
($1 = 1.3738 New Zealand dollars)
(Reporting by Shashwat Awasthi in Bengaluru; Editing by Diane
Craft and Sam Holmes)