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ASX drops, a2 Milk earnings expected lower

milk being poured from a glass jug into a single glass

The S&P/ASX 200 closed 1% lower on Friday at 7221.70, despite US futures climbing after the US announced Russian and American officials had agreed to meet next week in Europe for talks over Ukraine. On a weekly basis, the ASX 200 has gained for three consecutive weekly closes.

Markets had sunk overnight with tension escalating between Russia and Ukraine and investors moving to buy safe-haven assets. Tech and health care sectors led the initial decline on the ASX, while energy stocks gained despite oil prices slipping with an eye toward supply increases if Iran does a deal on its nuclear program. Gold was trading just below $US1900 an ounce having topped that level for the first time since June. Bitcoin is lower, trading around $US40,528. The Australian dollar has strengthened against the US dollar to around US72c.

Locally, insurer QBE, posted a $US750 million ($1.04 billion) full-year profit despite a tide of natural disasters. Shares dropped more than 8%.

Shares in consumer finance business humm rose 6% and closed 4% higher on a deal to sell its buy now, pay later business to Latitude Financial for $35 million cash and 150 million Latitude shares equal to an aggregate payment of $335 million.

A2 Milk (AU: A2M; NZ: ATM) is scheduled to report half-year earnings on Monday 21 February.

After reporting a near 80% plunge in annual profit in August, the company said it planned to double down on the supply of its products to its top consumer, China. Covid-19 has severely disrupted the infant formula and fresh milk company, causing logistical challenges between Australia and China.

Estimates place a2 Milk’s earnings at NZ$60 million, which would represent a 50% decrease on 1H21 earnings, which were down 35% from the prior year also.

In October, Reuters reported that a2 Milk said Australian law firm Slater and Gordon had filed a class action lawsuit against the dairy company on behalf of investors who bought its shares over nine months during which it posted multiple earnings downgrades. The New Zealand-based company has denied any liabilities and said it would “vigorously” defend the proceedings.

Shares have fallen by almost 50% in the past 12 months.


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