The A2 Milk Company Ltd (ASX: A2M) share price was uncharacteristically out of form in 2020.
After years of smashing the market, the infant formula and fresh milk company's shares were thumped by the market.
Over the 12 months, the a2 Milk share price lost 20% of its value.
What happened to the a2 Milk share price in 2020?
It was a very strange year for a2 Milk and its shareholders and was certainly a tale of two halves.
For the first half of the year, a2 Milk was seen as a COVID-19 winner along with Coles Group Ltd (ASX: COL) and Kogan.com Ltd (ASX: KGN).
The pandemic caused panic buying of infant formula in the ANZ region and over in China. This resulted in a surge in sales and led to the a2 Milk share price hitting an all-time high of $20.05 in July.
Unfortunately, soon after, the tailwinds it had been experiencing quickly turned into headwinds and its shares started to wobble.
When the company released its full year results in August, a few comments by management overshadowed its strong sales and profit growth. It advised of a significant increase in its inventory and warned of uncertainty resulting from COVID-19.
Soon after, a number of the company's executives decided to offload a large number of shares without explanation.
This included its chairman, its CEO, its chief growth and brand officer, and its Asia Pacific chief executive. The latter, Peter Nathan, offloaded 750,000 shares for almost NZ$15.1 million at the end of August for an average of NZ$20.12. That was 88% of his holding gone, leaving the executive with 100,000 shares. Those NZX listed shares are now trading 40% lower than his sale price at NZ$12.18.
What else is weighing on its shares?
While those events put pressure on its shares, the main damage was done in December when two weeks before the end of the half, the company downgraded its half year guidance.
After maintaining its first half revenue guidance of NZ$725 million to NZ$775 million at its November annual general meeting, on 18 December a2 Milk downgraded this to NZ$670 million. This was largely due to weakness in the daigou channel because of COVID-19 related headwinds.
Unfortunately, management isn't expecting a quick fix and also downgraded its full year guidance.
The company had previously guided to FY 2021 revenue of NZ$1.8 billion to $1.9 billion with an EBITDA margin in the order of 31%. This represents EBITDA of NZ$558 million to NZ$589 million.
However, this has now been downgraded to NZ$1.4 billion to NZ$1.55 billion with an EBITDA margin of between 26% and 29%. At the low end this would be EBITDA of NZ$364 million and at the high end it would be EBITDA of NZ$449.5 million.
As a comparison, a2 Milk reported a 32.9% increase in EBITDA to NZ$549.7 million in FY 2020.
Where next for the a2 Milk share price?
The a2 Milk share price could go either way in 2021 according to brokers.
However, where the company lands on its guidance range in FY 2021 is likely to have the biggest say in how its shares perform over the next 12 months.
As such, investors will no doubt be watching on with interest when it releases its half year results in February.
