Australian law firm files class action suit against The a2 Milk Company
The proceedings, filed by Slater and Gordon Lawyers, are being brought on behalf of shareholders who acquired an interest in fully paid ordinary shares in The a2 Milk Company on the Australian Securities Exchange (ASX) or NZX Main Board (NZSX) between August 19, 2020 and May 9, 2021 (inclusive).
Slater and Gordon said the class action has been filed against a2 Milk Company on behalf of investors who bought shares over a nine-month period during which the infant formula maker posted four earnings downgrades.
The class action alleges a2 Milk engaged in misleading or deceptive conduct in breach of the Corporations Act. The company is also accused of breaching continuous disclosure rules in posting four downgrades on September 28 and December 18 last year, and February 25 and May 10 of this year.
On May 10, according to Slater and Gordon, a2 Milk flagged a review of its key China business and a blowout of more than $NZ100m (US$69.3m) in provisions for old stock. The lawyers said the latest cut to a2 Milk’s outlook resulted in a2 Milk expecting full-year sales of $1.2bn-$1.25bn and a group EBITDA margin of 11-12%. This compared to August 19, 2020, guidance for strong sales growth and an EBITDA margin of 30-31%.
Slater and Gordon Class Actions Practice Group Leader 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.
“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,” 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.”
Ferris said the claim had been issued on an open class basis, and therefore covers all shareholders who purchased shares in a2 Milk between August 19, 2020 and May 9, 2021 on the ASX or NZX.
The company said it considers that it has at all times complied with its disclosure obligations, denies any liability and will vigorously defend the proceedings.
The a2 Milk Company added it remains confident in the underlying fundamentals of the business and growth potential.