A2 Milk steady with growth but little profit
The A2 Milk Company is barely making a profit despite increased growth over the last financial year.
Total revenue for the alternative milk company was $111.3 million, up 17 per cent from last year.
Releasing its annual results, managing director Geoffrey Babidge said the company had experienced a ‘‘challenging’’ year, but was pleased with its performance in Australia where it has 9 per cent market share by value, and had increased milk sales by 24 per cent.
However, the company took a hit on adverse movement in the New Zealand/Australian exchange rate, lowering its net profit to $10,000, compared with $4.1m the year before. Cash in hand amounted to $16m, with no debt. Babidge remained confident about plans for the United Kingdom and Asia, where issues of distribution and awareness about the product had slowed revenue growth.
A2 milk would be launched into the United States market next year.
The company has bought itself out of its UK joint venture with Robert Wiseman Dairies following the sale of RWD to the Muller Group.
Milford Asset Management’s Mark Warminger welcomed the annual results as positive. He said the restructuring of the UK joint venture was ‘‘sensible’’.
‘‘The milk will be rebranded with new packaging and sold in one litre bottles rather than two litre. It will also be sold alongside other specialist milks, rather than with A1 milk,’’ he said.
Warminger said the most positive message to come from the result was the announcement of the US launch, which would be financed out of existing cash flow rather than by raising capital.
A2 is assuming a cash investment of US$20m to develop the US market over a three-year period.
The core market of Australia had provided revenue growth of 31 per cent over the previous year.
As well as milk, A2Platinum infant formula was selling well.
The company said it assumed a proportion of the infant formula sold in Australia was shipped on to Chinese consumers, confirming its confidence there was an opportunity in that market.