Infant milk formula exporter A2 expects lower profits - and the US war on Iran is only partially to blame
Monday, 13 April 2026
A2 Milk expects lower profitability thanks to a cluster of supply chain problems that are largely not caused by US President Donald Trump’s war in Iran.
The NZX sharemarket-listed company continued to grow revenue, but has told shareholders to expect that revenue growth to be low to mid double-digit percent, not the mid double-digit growth it has been forecasting for its current financial year.
And its pre-tax earnings would land somewhere in the 14% to 14.5% range, rather than 15.5% to 16%, and net profit after tax was now expected to come in below the level it delivered in its 2025 financial year.
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David Bortolussi, A2’s managing director and chief executive officer, said the company was struggling to meet demand for its infant formula in key markets, primarily China.
Demand was high for A2 infant formula, partly as a result of recalls earlier this year by rival Nestlé, after contamination by a toxin called cereulide made babies sick in countries including the UK and US.
While A2 infant formula had no contamination issues, the sickness scare led to a rush for its products, which left suppliers in China without the stocks they wanted.
In addition, China has been subjecting infant formula to more testing as a result of the scare over contamination with cereulide, which is a toxin that can cause gastrointestinal illness.
“Emerging standards relevant to ingredient suppliers and infant milk formula manufacturers in relation to enhanced cereulide testing measures are extending quality assurance release times and impacting product availability,” Bortolussi told A2 shareholders.
“Additional clearance requirements and testing measures, including higher inspection and sampling rates for the industry, are extending clearance release times and impacting product availability,” he said.
A2 however was suffering from manufacturing and inventory “challenges” in New Zealand, which it blamed partially on supplier Synlait, with which it had a long-running disagreement that saw A2 diversify its roster of suppliers.
There remained a significant backlog of unfilled purchase orders from Synlait with less capacity to catch up following the sale of its North Island assets, Bortolussi told shareholders.
However, Bortolussi said Synlait was back up to “target levels”.
The war in the Middle East, which was started by the US without any consultation with its traditional allies like Europe, the UK, Australia and New Zealand, had made the problem worse, however.
Bortolussi said the availability and cost of additional air freight required to accelerate product shipments to China was being indirectly impacted by the Middle East conflict, with variability in capacity allocations for sea freight.
A2 also warned of continued uncertainty that could see further changes to its forecasts.
That included further delays in freight.
Monday saw the US vow to blockade the Strait of Hormuz, a move it may hope will force China and India, which are dependent on oil that transits the strait, to put pressure on Iran to make a deal to end the war.
In a post on Truth Social, Trump said: “Effective immediately, the United States Navy, the Finest in the World, will begin the process of BLOCKADING any and all Ships trying to enter, or leave, the Strait of Hormuz.
“The Blockade will begin shortly. Other Countries will be involved with this Blockade. Iran will not be allowed to profit off this Illegal Act of EXTORTION.”
Iran had been cutting deals to allow some ships, including those shipping oil to China, to pass through the strait.