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A2 Milk revenue, profit pushes higher

A2 Milk revenue, profit pushes higher in first four months of FY18

By Rebecca Howard

Nov. 21 (BusinessDesk) - A2 Milk, which markets milk with a protein variant said to have health benefits, says both revenue and net profit jumped in the first four months of the current financial year as it continues to benefit from strong demand for its infant formula.

Revenue climbed 69 percent to $262.2 million in the four months ended Oct. 30 from the same four months a year earlier, while net profit more than doubled to $52.3 million, the company told shareholders at today's annual meeting in Auckland. Group earnings before interest, taxes, depreciation and amortization were $78.4 million, up 120.8 percent on the same four months a year earlier.

The shares rose 4.1 percent to $8.16 having soared 268 percent this year. The company is the best performing stock on the benchmark S&P/NZX 50 Index this year as it benefits from increased global demand for its infant formula. The niche milk marketer migrated to the NZX's main board in late 2012 and now has a market value of $5.96 billion.

The latest increase in group revenue reflects strong growth in nutritional products in Australia, New Zealand, and China as well as positive momentum in the US and UK, it said in presentation slides published on the NZX. In China, for example, it said distribution in China Mother Baby channel now exceeds 5,800 stores and further expansion remains a key focus. It reiterated that it has launched its a2 Platinum infant formula in Hong Kong with initial distribution from November. It also recently launched Australia fresh milk into Singapore, an initiative it said is "progressing well."

Regarding the China infant formula regulatory environment after China moved to tighten regulations for sales through online grey market channels, it said recent commentary from the China State Council suggests a further one-year extension to the grace period of China cross-border e-commerce policy to the end of December 2018.

In terms of the traditional import mode, it said the company will transition from the existing China label to the new registered product in market during the second half of the financial year now that Synlait Milk obtained China Food and Drug Administration registration in September for the importation of A2MC infant formula into China from Jan. 1.

In other markets, it reported "pleasing progress" in the rate of sale for fresh milk in the UK and continued growth in the distribution footprint. The company said it is continuing to access incremental opportunities in Europe and the Middle East.

In the US, it said it is now distributing to 3,600 stores across the country, growth of 600 stores in the four months to October 2017. It reiterated it is investigating "specific new product opportunities for this market." The full-year outlook assumes marketing expenditure in the second half of the year to support expansion, it said.

Overall, the company said it expects the marketing expense to be around $30 million more in the second half of the year versus the first, driven by the timing of planned spend in China and the US.

(BusinessDesk)

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