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A2 Corporation Announces Half-Year Results

A2 Corporation Announces Half-Year Results

Auckland, NZ, 1 December 2006 - A2 Corporation Ltd ("Company") (NZAX: ATM) today announced a Group pre-tax consolidated loss for the half year ended 30 September 2006 of $1,945k (2005 - $226k).

Group consolidated operating revenue increased by 404 percent to $3,494k (last year $694k) largely as a result of the inclusion of A2 Australia Pty Ltd ("A2A").
This result includes the losses incurred by the business of A2A which was acquired on 25 April 2006. Operational expenditure included losses arising from foreign exchange translations ($129k), marketing and promotional costs ($141k), interest expense ($12k).

The Company's losses, while not unexpected, are expected to diminish as a result of the re-structuring of the business and growth in revenues. As part of the restructuring, supply chain relationships have been re-negotiated, key partnerships entered into and sales volumes lifted through re-branding and expansion into additional supermarkets. Australian a2 milk(tm) can now be found across most states and in more than 1,000 leading retail stores such as Coles, Woolworths, Bilo, Metcash and Drakes. Key freight and distribution savings have been, or are about to be achieved, and will provide a return to profitability for the Australian business in the near term. This business now has an extremely positive outlook, albeit there are always attendant or unforeseen risks.

Also included in the results are the trading losses of our USA-based associate, A2 Milk Company LLC ("A2MC LLC"), amounting to $226k (last year Nil). This loss was predominantly market development activities in the USA which will form an important part of our "take it to market" strategy in that region. A commercialisation strategy has now been finalised. A2MC LLC is in discussions with prospective partners in the USA with the aim of bringing a2 milk(tm) to the market in 2007.

The Group Statement of Financial Position includes that of A2A on a consolidated basis. The Group now has net assets of $1,795k compared to a net deficit of approximately $450k on 30 September 2005.

On 17 November, the Company also announced the appointment of Anthony Lawler as the new joint Chief Executive as part of a strategic move which will see a stronger FMCG focus being applied to the Group's global sales of premium milk products.
Anthony brings a wealth of FMCG experience in the functional foods and nutraceutical industries. As indicated in the 2006 Annual Report, it is likely that another capital raising will be launched in the first half of 2007 with proceeds being used to boost A2C's market penetration in key global territories such as Australia, Asia and the USA.

Reports for Industry and Geographical Segments
In the half year period under review, the Group operated in New Zealand, Australia and the USA; and in two forms of business being the licensing of intellectual property pertaining to the production and marketing of a2 milk(tm), and the procurement, production and sale of a2 milk(tm).

ENDS

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