A2 racks up record profit
A record profit has provided a windfall for A2 Milk shareholders.
The company made $152.7 million in the six months to December 31, an increase of more than 55 per cent.
Sales of infant formula brought in $495.5m in the half, up 45.3 per cent on the year before.
A2 Milk shares increased in value by more than a dollar to a peak of $13.94 after the result was reported, lifting the company’s market value by threequarters of a billion dollars.
That is almost back to the highest peak recorded previously, when shares hit $14.10.
Fonterra is in on the A2 act, planning to sign up 100 Waikato dairy farmers to supply A2 milk from next season, compared with only one now.
After years of disputing the science behind the health benefits of drinking A2 milk, Fonterra launched its Anchor A2 milk brand in supermarkets in mid-2018. This followed a deal between Fonterra and the A2 Milk Company.
Fonterra will also pay a premium to suppliers, similar to that paid by the other A2 milk supplier Synlait Milk in Canterbury. This premium was paid by A2 Milk, but managed by Fonterra through its payment system.
Fonterra’s initial milk pool will be based in Waikato around its Hautapu site.
Most cows carry both A1 and A2 proteins, but A2 Milk specialises in A1-free milk from specially selected cows, which it says has health benefits for people who have trouble drinking regular milk. Fonterra managing director co-operative affairs Mike of Cronin said other regions were also considered for supply. ‘‘As demand and product lines grow, we’ll look to expand the milk pool to enable more farmers to participate. Signing up New Zealand farms to significantly increase supply of high quality milk to A2 Milk is a positive step forward. It clearly shows the strength of our strategic relationship, and our shared commitment to fast-track market growth and enable farmers to create additional value from their milk.’’
A2 Milk managing director Jayne Hrdlicka said the additional farms would help support new growth areas for its company across existing and new markets. ‘‘This is the next step in what we believe will be a fruitful long-term relationship with tremendous potential.’’
Cronin said the processing site needed the ability to manufacture the specific product that was in demand, produce relatively small batches and adapt to any product demand changes.
In addition to suppliers receiving a premium for their milk, most of the value from the relationship with A2 Milk will be returned to the co-operative’s farmers through its dividend, Cronin said.
Fonterra expected to have no problems signing up farmers to supply A2 milk. Even if a herd was not entirely made up of A2 cows, they could milk these separately.
Fonterra’s supermarket A2 milk comes from a co-operativeowned farm near Palmerston North, with another property supplying during the winter.
Federated Farmers dairy chairman Chris Lewis said not many farmers had even done the genetic test to see how many cows in their herd had the double A2 gene. Farmers would be keen to sign up, he said. ‘‘Every cent counts. It will be welcome by some farmers.’’