A2 Milk reports $1.6 bn in sales despite soft performance in China
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Specialty dairy company A2 Milk’s full-year profit is up by a third, driven by strong growth in its China section, despite challenging market conditions.
Though it was expecting growth in the Chinese market to slow next year.
Key numbers for the year ended June compared with a year ago:
- net profit $155.6m vs $114.7m
- revenue $1.59b vs $1.45b
- underlying earnings $219m vs $196m
- no dividend vs no dividend but a maximum $150m share buyback.
Chief executive David Bortolussi said sales from the company’s China label infant milk formula (IMF) exceeded its sales in English-speaking countries for the first time, with the total sales for infant milk formula totaling more than $1.1 billion.
“I’m proud of what our team has achieved this year, growing sales by 10 percent while the core China IMF market declined by 14 percent is a remarkable achievement,” he said.
“The China IMF market has become increasingly challenging as a result of lower birth rates and increased competitive intensity.
“Notwithstanding, we are well-positioned to continue to invest and grow share in FY24 to emerge in a stronger position when the market recovers.”
Bortolussi said achieving reregistration of the company’s China label IMF product was critical to maintaining access to the company’s domestic market.
Bortolussi expected to see a double-digit decline in the Chinese infant milk formula market in the 2024 financial year, but said the company expected to achieve “low single-digit group revenue growth”.
“This is due to volume declines driven by the rolling impact of fewer newborns in recent years on later-stage IMF products, and a lower number of newborns expected in CY23 due to the lagged impact of Covid-19 prior to an expected increase in CY24,” he said.
“The company will continue to execute its growth strategy in FY24, focusing on growing share in China IMF as well as commercialising opportunities in adjacent categories and new markets.”
A2 expected to continue to gain market share in IMF, with growth dependent on the extent of market share gains in a declining market, he said.
Questions & Answers
Q.What were A2 Milk's key financial results for the year ended June compared to the previous year?
What were A2 Milk's key financial results for the year ended June compared to the previous year?
Net profit rose from $114.7m to $155.6m, and revenue increased from $1.45b to $1.59b. Underlying earnings also grew from $196m to $219m.
Q.How significant was the performance of A2 Milk's China label infant milk formula this year?
How significant was the performance of A2 Milk's China label infant milk formula this year?
Sales from the company’s China label infant milk formula exceeded its sales in English-speaking countries for the first time. Total sales for infant milk formula were over $1.1 billion.
Q.Why does A2 Milk expect a double-digit decline in the Chinese infant milk formula market for the next financial year?
Why does A2 Milk expect a double-digit decline in the Chinese infant milk formula market for the next financial year?
This is due to volume declines from fewer newborns in recent years affecting later-stage products and a lower number of newborns expected in CY23, linked to the lagged impact of Covid-19.
Q.What is A2 Milk's strategy for growth in the upcoming financial year?
What is A2 Milk's strategy for growth in the upcoming financial year?
The company plans to continue gaining market share in China IMF. It will also focus on commercialising opportunities in adjacent categories and entering new markets, aiming for low single-digit group revenue growth.
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