The A2 Milk Company Ltd (ASX: A2M) share price was out of form in February.
Over the course of the month, the infant formula company's shares dropped approximately 5.5%.
Though, as you can see below, the A2 Milk share price remains up a solid 20% over the last 12 months despite this decline.
Why did the A2 Milk share price tumble in February?
Investors were selling down A2 Milk shares last month following the release of the company's half-year results.
For the six months ended 31 December, A2 Milk reported an 18.6% increase in revenue to NZ$783.3 million and a 10.5% lift in EBITDA to NZ$107.8 million.
Interestingly, this result was largely ahead of expectations. Bell Potter commented:
A2M reported 1H23 underlying NPAT ahead of our expectations at NZ$73.8m. Key operating statistics of the result included: Operating results: Revenue of NZ$783.3m was up +19% YOY (vs. BPe NZ$799.3m). EBITDA of NZ$107.8m was up +10% YOY (vs BPe of $98.0m). EBITDA ex-MVM was NZ$121.2m (vs. BPe of NZ$110.5m). Underlying NPAT of NZ$73.8m was up +24% YOY (vs. BPe of $64.1m).
So, why the selling?
There could be a couple of potential reasons for the A2 Milk share price weakness.
The first is the aforementioned strong gains its shares had already made. It's possible that some investors were betting on the company upgrading its guidance with this result, but that didn't happen.
In addition, there may be concerns over the state of the Chinese infant formula market following management's comments. A2 Milk's CEO, David Bortolussi, said:
We are in good shape heading into an increasingly challenging period with the rolling impact of the decline in the birth rate and a market wide transition of China label product to the new GB standard.
Some investors may fear that the next couple of years could be volatile and have been locking in gains and taking a bit of profit off the table.
