ASX 200 drops, A2 Milk sinks, Appen plummets

The ASX 200 dropped today as reporting season continued.

The S&P/ASX 200 Index (ASX: XJO) fell by 0.5% to 7,491 points.

Here are some of the highlights from the ASX:

share price dropping

Image source: Getty Images

A2 Milk Company Ltd (ASX: A2M)

The A2 Milk share price fell around 12% after the infant nutrition business released its FY21 result. It was one of the worst performers in the ASX 200.

It reported that its revenue dropped by 30.3% to $1.21 billion. Earnings before interest, tax, depreciation and amortisation (EBITDA) fell 77.6% to $123 million – that included $109 million of stock write-downs and $10 million of Mataura Valley Milk (MVM) acquisition costs.

This led to net profit after tax (NPAT) dropping 79.1% to $80.7 million.

A2 Milk disclosed that actions taken in the fourth quarter of FY21 to address excess inventory are proving effective with channel inventory levels reducing, product freshness improving and market pricing increasing. Rebalancing of channel inventory is expected to continue in the first quarter of FY22.

The ASX 200 share's board and management are confident in the underlying fundamentals of the business and that the growth opportunity in core markets remains strong. A2 Milk said that the long-term outlook is positive, with opportunities for product innovation, category expansion and new markets, supported by a "healthy brand" and strong balance sheet.

Chinese label infant nutrition is expected to show sales growth in FY22, while the English label is targeting a stabilisation of sales in FY22 but a "wide range of outcomes is possible".

Appen Ltd (ASX: APX)

The Appen share price dropped around 22% after the tech business announced its FY21 half-year result. It was the worst performer in the ASX 200.

It reported that global revenue was down 2% to $196.6 million because of lower global services revenue as global customers allocated resources to new, non-advertising projects in the first half of 2021. But markets revenue increased by 31.5% to $47.8 million, driven by China, new Enterprise customer wins and product-led growth.

Underlying EBITDA fell 14.3% to $27.7 million. Appen explained that this was due to higher costs relating to growth investments.

The underlying net profit after tax dropped 35% to $12.5 million and statutory net profit plunged 55.1% to $6.7 million.

It also announced the acquisition of Quadrant for US$25 million upfront and an extra US$20 million of Appen shares if it achieves certain milestones. Quadrant was described as a global leader of mobile location and point of interest data, extending Appen's product offering.

In terms of the outlook, it reduced its EBITDA guidance by $2 million to a range of between $81 million to $88 million. The reduction was due to the planned investment in Quadrant's product and market expansion. Full year underlying EBITDA is expected to be at the low end of this range due to ad-related project impacts.

Year to date revenue and orders in hand for delivery in FY21 is approximately $360 million as at August 2021. This is 10% above the August 2020 guidance of $328 million which was 79% of full year 2020 revenue.

Blackmores Limited (ASX: BKL)

The Blackmores share price rose around 15% today after the release of its FY21 result. It was the best performer in the ASX 200.

Blackmores reported that group revenue increased by 1.3% to $575.9 million. Its gross profit increased by 4.6% to $301 million, with the gross profit margin increasing 1.6 percentage points to 52.3%.

Underlying earnings before interest and tax (EBIT) increased 51.7% to $47.6 million, with a 2.7 percentage point increase of the underlying EBIT margin to 8.3%. Underlying net profit soared 61.2% to $25.4 million. Statutory net profit rose by 89.4% to $28.6 million.

Blackmores achieved $28 million of annualised gross cost saving benefits in FY21 through strong delivery against business improvement programs.

Management said the business was continuing to execute on its strategic game plan, including reducing costs and improving efficiency, along with targeted investment in growth opportunities across key markets and profit margin uplift initiatives.

The Blackmores board declared a final dividend of 42 cents per share.

Within the result, international revenue increased by 17.7% and underlying EBIT rose 49.5%. China segment revenue went up 27.8% and underlying EBIT rose from $0.2 million to $14.3 million. Blackmores says the outlook remains positive for its international and China segments with strong sales growth for these segments.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Appen Ltd. The Motley Fool Australia owns shares of and has recommended Appen Ltd and Blackmores Limited. The Motley Fool Australia has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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