A2 says FY earnings flat, sees growth in 2016
A2 says FY earnings flat, sees growth in 2016; pooh-poohs takeover bid
By Paul McBeth
July 20
(BusinessDesk) - A2 Milk Co, which markets milk with a
protein variant said to have health benefits, says annual
earnings were flat and are set to triple in 2016 with sales
expected to rise faster than forecast. Separately, the
company has told its suitors to try again after an initial
offer wasn't compelling and drew out rival
bidders.
Earnings before interest, tax, depreciation
and amortisation was unchanged at $4 million in the 12
months ended June 30, and are forecast to rise to $12
million in 2016, ahead of plan, the Auckland-based company
said in a statement. Annual revenue rose 39 percent to $154
million, and A2 raised its 2016 sales target to $267 million
from a previous forecast of $230 million due to growth in
infant formula sales in Australasia and China, new product
launches in Australia and New Zealand and the company's
launch into North America.
"The company considers that
its budget has been prepared on a prudent basis and could
reasonably expect performance to exceed budget projections
if current trading conditions and trends in infant formula
are sustained throughout the course of FY16," it said. "The
A2 Milk Co continues to perform strongly, ahead of plan, in
its core ANZ business which is delivering significantly
increased profits and cash flow."
Last month, A2 said
its cornerstone shareholder ASX-listed Freedom Foods Group
and US food and beverage firm Dean Foods were eyeing a
takeover of the company, stipulating a planned capital raise
didn't go ahead.
A2 today said the offer put forward
wasn't compelling, and the board wouldn't be in a position
to recommend it to shareholders if a formal bid was
made.
"The board has advised Freedom/Dean Foods that it is willing to have a discussion in relation to the EOI (expression of interest) subject to agreement on appropriate confidentiality and related undertakings customary in situations of this nature," it said. "The board has also received other confidential enquiries indicating potential interest in the company, and is in the course of evaluating these."
A2 shares last traded at 77 cents, and have climbed 33 percent this year.
The company said it plans to fund its growth from cash flows in the first instance, and has short-term debt facilities in place to support working capital needs.
A2's Australia and New Zealand segment
accounted for the bulk of earnings in the 2015 year,
generating a 58 percent increase in Ebitda to $30 million on
a 39 percent gain in sales to $149 million. The region is
forecast to post earnings of $40 million in 2016 on sales of
$216 million.
Across China and Asia, A2's sales were
flat at $3 million, while it reported an Ebitda loss of $4
million, compared to a loss of $3 million in 2014. The
segment is forecast to breakeven on sales of $13 million in
2016.
The US and UK units doubled sales to $2 million,
while trebling the Ebitda loss to $12 million in 2015. The
two units are forecast to generate sales of $38 million for
an Ebitda loss of $16 million in 2016. A2's corporate
segment reported an Ebitda loss of $10 million in 2015, up
from $8 million a year earlier, and expects that to widen to
$12 million next year.
A2 said it repositioned its
brand into the premium specialty category in the UK and
downsized to a one litre package from two litres, which has
improved margins. The company plans to introduce UHT milk
and infant formula in the short to medium term in the
UK.
"Following the changes implemented during FY15, the company is forecasting a reduced funding contribution to the business in FY16," it said.
(BusinessDesk)