Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


A2 Milk to use Australian cash for global expansion

A2 Milk, hit by strong kiwi, to use Australian cash for global expansion

By Jonathan Underhill

Aug. 28 (BusinessDesk) - A2 Milk Co, which markets milk with a protein variant said to have health benefits, will ramp up its expansion in the US, the UK and Asia using cash generated in its biggest market of Australia after a year in which a strong kiwi slashed the value of sales and earnings.

Profit tumbled to $10,000 in the 12 months ended June 30, from $4.1 million a year earlier, the Auckland-based company said in a statement. Sales rose 17 percent to $111 million and would have been some $14 million higher if not for the strength of the New Zealand dollar against its Australian counterpart.

A2's cash flow comes from its success in Australia, where it now claims 9 percent of the fresh milk market sold through the grocery channel. Australian sales from continuing operations climbed 16 percent to $106.9 million in the latest year, accounting for 96 percent of total revenue, while earnings rose 25 percent to $4.5 million, helping make up for losses in China and the UK. Managing director Geoffrey Babidge calls the Australian market A2's "big cash generator", which will bankroll its push into new markets.

"Our strategy is about increasing Australian profits fully funding initiatives in other markets," Babidge told BusinessDesk. "That's our core proposition."

Growth in Australian market share gave A2 confidence to launch a thickened cream product, which is performing to expectations and the range could be widened to include ice cream, he said. The company has also trialled sales of fresh Australian milk into China, in reasonably small volumes, which the company sells the milk free on board to Chinese distributors, who can reap enough of the premium in the Chinese market to make up for the increased transport costs.

A bigger opportunity will be sales of UHT milk from Australia into China, Babidge said.

A2's sales push for its Platinum brand infant formula in China was thwarted this year by changes to Chinese registration rules. New Zealand New Milk, which has been packing the product for A2, did achieve registration in July but sales of A2's products won't ramp up until its main partner, Synlait Milk, gains registration, which Babidge hopes will be in September.

"We're very much joined at the hip with Synlait," he said. That relationship "provides more certainty and longevity going forward." A2 has made only two small shipments to China of A2 Platinum, the last in April. Once Synlait gains registration shipments would start in earnest, likely in the first half of the current year.

The company sees a "big revenue opportunity" in the US market, where it plans to invest $20 million over three years. Its US push will be through a wholly owned subsidiary, with manufacture and packaging of A2 milk outsourced to contract packers. It has shortlisted two candidates.

The company has also identified sources of milk with the A2 protein variant though work still needed to be done to separate out those cows from local herds. A "very managed, regional launch" in the US is likely to be in the second half of 2015, Babidge said.

The company will also increase investment in the UK market, where it recorded a wider loss of $2.2 million in the latest year, on sales of $1.1 million. A2 had some $16 million cash on hand at the end of the year, down from $20 million at the start of the year.

The shares last traded at 65 cents and have declined 19 percent this year. The stock is rated a 'buy', based on the consensus of four analysts polled by Reuters, with a median price target of 86 cents.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Cosmetics & Pollution: Proposal To Ban Microbeads

Cosmetic products containing microbeads will be banned under a proposal announced by the Minister for the Environment today. Marine scientists have been advocating for a ban on the microplastics, which have been found to quickly enter waterways and harm marine life. More>>

ALSO:

NIWA: 2016 New Zealand’s Warmest Year On Record

Annual temperatures were above average (0.51°C to 1.20°C above the annual average) throughout the country, with very few locations observing near average temperatures (within 0.5°C of the annual average) or lower. The year 2016 was the warmest on record for New Zealand, based on NIWA’s seven-station series which begins in 1909. More>>

ALSO:

Farewell 2016: NZ Economy Flies Through 2016's Political Curveballs

Dec. 23 (BusinessDesk) - New Zealand's economy batted away some curly political curveballs of 2016 to end the year on a high note, with its twin planks of a booming construction sector and rampant tourism soon to be joined by a resurgent dairy industry. More>>

ALSO:


NZ Economy: More Growth Than Expected In 3rd Qtr

Dec. 22 (BusinessDesk) - New Zealand's economy grew at a faster pace than expected in the September quarter as a booming construction sector continued to underpin activity, spilling over into related building services, and was bolstered by tourism and transport ... More>>

  • NZ Govt - Solid growth for NZ despite fragile world economy
  • NZ Council of Trade Unions - Government needs to ensure economy raises living standards
  • KiwiRail Goes Deisel: Cans electric trains on partially electrified North Island trunkline

    Dec. 21 (BusinessDesk) – KiwiRail, the state-owned rail and freight operator, said a small fleet of electric trains on New Zealand’s North Island would be phased out over the next two years and replaced with diesel locomotives. More>>

  • KiwiRail - KiwiRail announces fleet decision on North Island line
  • Greens - Ditching electric trains massive step backwards
  • Labour - Bill English turns ‘Think Big’ into ‘Think Backwards’
  • First Union - Train drivers condemn KiwiRail’s return to “dirty diesel”
  • NZ First - KiwiRail Going Backwards for Xmas
  • NIWA: The Year's Top Science Findings

    Since 1972 NIWA has operated a Clean Air Monitoring Station at Baring Head, near Wellington... In June, Baring Head’s carbon dioxide readings officially passed 400 parts per million (ppm), a level last reached more than three million years ago. More>>

    ALSO:

    Get More From Scoop

     
     
     
     
     
     
     
     
    Business
    Search Scoop  
     
     
    Powered by Vodafone
    NZ independent news