The A2 Milk Company Ltd (ASX: A2M) share price rose 4% after giving a pleasing FY26 result update.
A2 Milk is one of the leading infant formula businesses in the Asia Pacific region. It also sells liquid milk in Australia and the US.
FY26 update
The business noted it gave a supply chain update in April 2026 that highlighted product shortfalls of Chinese-labelled infant formula products at distributors and retailers that would “materially impact in-market product availability” during the fourth quarter of FY26.
Those predicted shortfalls were due to a number of factors including strong demand in the third quarter, freight challenges, a production backlog at supplier Synlait Milk Ltd (ASX: SM1), extended product release times and additional customs clearance requirements and testing measures.
That expected shortfall did occur and this led to a large proportion of existing users switching to alternative brands, with some users switching to a2 English-labelled products.
The contributing factors to the product availability issues have now been substantially resolved. Product flows to distributors and retailers have materially improved across Chinese label and English label products with stock levels returning to target levels.
A2 Milk is now focused on various sales and marketing initiatives to encourage Chinese label infant formula users to return while accelerating winning new customers.
FY26 result expectations
The company said that the supply chain issues materially impacted Chinese label infant formula sales in the fourth quarter of FY26, leading to Chinese label infant formula FY26 sales being down 14% compared to FY25.
However, all other A2 Milk product categories, including English label infant formula, other nutritionals and liquid milk, have “performed strongly and are up significantly on FY25”.
Based on its preliminary FY26 numbers, it expects to report figures that are in line with or slightly ahead of the guidance range that was announced in mid-April 2026.
A2 Milk now expects revenue to be $1.97 billion, up 12% year on year. This compares to April’s guidance of low to mid double-digit growth.
The EBITDA (EBITDA explained) margin is expected to be at the high end of its April guidance range of between 14% to 14.5%.
Net profit after tax (NPAT) is expected to be slightly up on the FY25 reported figure, compared to April’s guidance of “similar to down”. Underlying net profit is expected to be “up”.
Cash conversion is expected to be approximately 70%, compared to April guidance of 50%.
Final thoughts on the A2 Milk share price
The company is one of the best consumer product businesses on the ASX in terms of capturing overseas customer demand. It has rocketed almost 50% since early June, so I wouldn’t say it’s a bargain today like it was a few weeks ago.
It’s operating in a difficult environment, but I’d say it’s doing well at what it does. There are reportedly not as many Chinese babies these days as a few years ago, so it’s harder to grow sales, yet A2 Milk continues to achieve it. I’d be happy if I were a shareholder.
There are other ASX growth shares I think could be better buys for investors to deliver returns where there are market tailwinds rather than headwinds.
