Growth in Aussie market for A2 company

By Geoff Adams

The a2 Milk Company has experienced growth in the Australian fresh milk market of 11.3 per cent according to its recently released half-year interim report.

Liquid milk sales in Australia and the United States totalled NZ$104 million up 28.7 per cent with Australian sales accounting for $74.7 million.

Strong performance in the key product segments of infant nutrition and liquid milk, and across core markets, has seen the company make substantial gains in revenue and earnings, with infant formula up 33.1 per cent for the same period last year and growth into Chinese-labelled infant-nutrition products increasing 100 per cent to NZD $146.7 million.

Improved price yields and a shift to infant formula has seen gross margins increase to 57.2 per cent, resulting in a closing cash position of NZ$618.4 million.

Looking to the future, The a2 Milk company will continue to work with Fonterra on development of milk pools within Australia and New Zealand in an effort to build capacity and support future growth.

The a2 Milk Company is also anticipating continued strong revenue growth in 2020 across all key regions supported by increased marketing investment in China and US.

Globally the potential impact to supply chains and consumer demand in China surrounding COVID-19 (coronavirus) will continue to be monitored with the company unable to quantify any impact either positive or negative, for the full financial year.

The company has donated $480 000 each to the University of Queensland School of Chemistry and Molecular Biosciences and the Peter Doherty Institute for Infection and Immunity – a joint venture between the University of Melbourne and the Royal Melbourne Hospital – to assist in the development of a vaccine for the coronavirus.

The money will support research teams that are playing a leading role in the international effort to develop a vaccine.

The a2 Milk Company managing director Geoffrey Babidge said the company was pleased to be able to help.

“We believe that in addition to providing support on the ground for Chinese families through product donations and financial support for the local Red Cross, the most effective way for us to assist the Chinese people and the global community is to provide funds that will help independent scientific researchers develop an effective vaccine for this virus,” Mr Babidge said.

Report: At a glance

● Total revenue of NZ$806.7 million, an increase of 31.6 per cent;

● Earnings before interest, tax, depreciation and amortisation of NZ$263.2 million, an increase of 20.5 per cent;

● Net profit after tax of $184.9 million, an increase of 21.1 per cent;

● Basic earnings per share (EPS) of 25.15 cents, an increase of 20.6 per cent;

● Operating cash flow of NZ$160.6 million and a closing cash balance of $618.4 million;

● Marketing investment of NZ$84.1 million targeting opportunities in China and the US;

● Group infant nutrition revenue of NZ$659.2 million, up 33.1 per cent;

● Strong growth in China-labelled infant nutrition, with sales doubling to NZ$146.7 million and distribution expanded to 18 300 stores; and

● US milk revenue more than doubled and distribution expanded to 17 500 stores.