Source: A2 Milk/LinkedIn
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  • The A2 Milk Company (A2M) sees the infant formula market in China continuing to be a challenge, with a 3.3 per cent drop in value, following China’s lower birth rate
  • Revenue for the first half dropped 2.5 per cent to NZ$660.5 million (A$615 million), compared to the prior corresponding period but was up 24.8 per cent on the second half of 2021
  • The company has seen a slight increase in Australia’s fresh milk market, with an 0.2 per cent jump to NZ$87.1 million (A$81 million)
  • Additionally, Bessie Lee will retire from the board effective 28 February 2022, a year after joining A2M
  • On the market, A2M is up 9.68 per cent and trading at $5.76 per share

The A2 Milk Company (A2M) has seen the infant formula market in China continuing to be a challenge, with a 3.3 per cent drop in value.

This market continues to be impacted by China’s lower birth rate. Following an 18.1 per cent decrease in births in 2020, there was a further 11.5 per cent decrease in the Chinese IMF market value in 2021 to 10.6 million (A$9.88 million).

Revenue for the first half was down 2.5 per cent to NZ$660.5 million (A$615 million), compared to the prior corresponding period, but was up 24.8 per cent in the second half of 2021.

A2M’s earnings before interest, taxes, depreciation, and amortisation dropped 45.3 per cent of NZ$97.6 million (A$90 million) and a net profit after tax was NZ$56.1 million (A$53 million), a fall of 53.3 per cent on this time last year.

The company has seen a slight increase in Australia’s fresh milk market, with an 0.2 per cent jump to NZ$87.1 million (A$81 million), due to the COVID-19 pandemic and increasing prices.

The a2 Milk business achieved a new high-value share of 12.4 per cent at the end of December, compared to 12.2 per cent at the end of June. Additionally, three milk products achieved a ranking in the top ten products in the dairy category in grocery.

Managing Director and CEO David Bortolussi said despite the challenging market conditions in China and COVID-19 volatility, A2M is making “good progress stabilising the business”.

“Our first half result is in line with expectations, placing the company in a strong position to continue executing our strategy and deliver revenue growth in FY22.”

“The growth strategy we announced in October last year to respond to a rapidly changing China market has been completed and implementation is underway with good early progress across a range of initiatives. We remain confident in the long-term China infant milk formula market, and we are growing share in our China label business in-store and online with strong consumer offtake and share growth.”

A2M’s sales outlook for FY22 has improved but is not expected to translate into higher earnings as it significantly increases brand reinvestment consistent with the growth strategy.

Additionally, Bessie Lee will retire from the board effective 28 February 2022, a year after joining A2M.

“Bessie has made a valuable contribution to the board since she joined us in February 2021 particularly in relation to the China market, digital marketing and ecommerce,” Chair David Hearn said.

“We are grateful that she agreed to remain on the board until an appropriate additional director could be appointed, and that Bessie will also continue to be available to the board as an advisor as required.”

Sandra Yu has been appointed as an independent non-executive director of the company, effective March 1.

Ms Yu is a highly regarded company director and an experienced global executive in consumer goods industries, and importantly in the infant milk formula market in China.

On the market this morning, A2M was up 8.68 per cent and is trading at $5.76 per share at 12:00 pm AEDT.

A2M by the numbers
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