Profit jumps for a2 Milk on surging China sales

The a2 Milk company has delivered a 33 per cent jump in revenue across the 2019-20 financial year, powered largely by a virtual doubling in infant nutrition sales in China across a bigger retail distribution footprint.

The infant formula, nutrition and milk business, which is listed on both the New Zealand and Australian markets, reported revenue of $NZ1.73 billion ($1.57 billion), just shy of the $NZ1.75 billion market consensus figure.

Underlying net profit came in at $NZ385.8 million, up a hefty 34.1 per cent on the prior year.

a2Milk acting chief executive Geoff Babidge.Credit:Eddie Jim

A2 said it had recorded strong growth in its Chinese label infant formula products sold in the world's most populous nation, with sales more than doubling to $NZ337.7 million. This was helped by a wider distribution network, with its products now available in about 19,100 stores.

A2 received a solid revenue boost in the March quarter as consumers engaged in pantry stocking when the COVID-19 pandemic worsened, with the company describing revenue for this quarter as above expectations.

It said that some of this behaviour "unwound" in the June quarter. "However, this will remain a dynamic situation and we will continue to monitor changes in consumer behaviour moving forward," a2 told the New Zealand market this morning.

The company recorded full year EBITDA (earnings before interest, tax, depreciation and amortisation) of $NZ549.7 million, up 32.9 per cent on the previous year.

A2 Milk shares eased 0.2 per cent on Tuesday on the Australian market to close at $19.49.

More to come

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