A2 Milk reports 41.4% growth in revenues boosted by performance in China

NEW ZEALAND – The milk and infant formula products company, A2 Milk reported a 41.4% growth in full year revenue to US$830.2 million (NZD1.3 billion), on strong results in China.

During the most recent twelve months period ending 30th June, the company’s net profit rose by nearly half (47%) to US$$183.7 million (NZD287.7 million), compared with the previous year’s US$124.78 million (NZD195.7m).

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The company said its results were underpinned by growing brand awareness, expanding product distribution and strengthening in-market execution in Greater China and the US.

The company, which according to an RZN report has been one of the hottest local stocks over the past year, said it will continue investing in diversifying its business.

“This year we focused on playing to our strengths and sharpening our strategic thinking,” managing director Jayne Hrdlicka said.

During the year, A2 extended a partnership with China State Farm Holding Shanghai to sell powdered infant formula in China, which contributed to a 73.6% growth in revenues in its China segment.

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In the US segment business, revenues were up 160.7% while in Australia its fresh milk revenue grew 10.7%, leading to its market share reaching a record of 11.2%.

In February, A2 Milk signed an agreement with Kroger and Albertsons/Safeway, to expand its sales as part of the company’s plan of achieving national distribution in the US.

“The company delivered record financial and market share results for 2019. This was enabled by strong revenue growth across our key product segments of liquid milk, infant nutrition and other nutritional milk products, and across each of our key regions.

“Pleasingly, our results were underpinned by growing brand awareness, expanding product distribution and strengthening in-market execution in our two most important regions of Greater China and the US,” the company said in a statement.

However, the company has revealed that it will exit its UK liquid milk operations citing that the UK opportunity is “not of sufficient scale when compared to the significant growth potential in Greater China and the US”.

A2 stressed that the decision does not preclude it from pursuing UK or European markets at some stage in the future for liquid milk or other nutritional products.

Going forward, the company said it views its core markets – Australia, New Zealand, Greater China and the US – as its most significant growth opportunities in the medium term.

New market opportunities included Vietnam, Korea and Hong Kong where A2 Milk was focusing on milk powder products in Vietnam, testing fresh milk in Singapore and Korea, and infant formula in Hong Kong.

Ms Hrdlicka said the priorities for the coming year would be to get the most out of its existing products and markets, broaden its product range, and look for new markets.

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