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A2 Corporation posts strong profit growth

Media Release

21 February 2012

A2 Corporation posts strong profit growth
Global expansion accelerates

Specialist New Zealand-based milk producer A2 Corporation Limited (A2C) has confirmed its growth strategy with an almost 50 per cent increase in sales revenue and unaudited net profit after tax increasing to $3.1 million for the six months ended 31 December 2011.

Group Profit after Tax for the previous comparable half was $893,517 and $2.1 million for the financial year ended 30 June 2011. Sales revenue for the six months to December 2011 was $28.3 million, an increase of 48.7 per cent on the previous comparable half.

Chairman Cliff Cook says the result was very pleasing in the face of continuing price discounting in fresh milk in Australia.

“Whilst the Australian supermarket chains are going head to head in discounting standard milk, a2TM brand sales have continued to accelerate with no change in our pricing. The current market share by value of a2TM brand fresh milk in the grocery channel is now estimated to be 4.7 per cent.”

“Our success in Australia gives us confidence for our international expansion. The formation of a joint venture with the largest fresh milk dairy company in Britain, Robert Wiseman Dairies, is a major milestone and will open a market three times the size of Australia.”

a2TM is pure dairy milk from selected cows that produce the A2 beta casein protein rather than A1. Many people who have issues drinking standard milk find they can enjoy all of the benefits of dairy when they switch to a2TM.

Managing Director Geoffrey Babidge says a focus on effective marketing and communication and management of costs ensured that earnings before interest, tax, depreciation and amortisation (EBITDA) for the 2012 half year of $2.27 million (2010:$1.58m) grew broadly in line with sales. Settlement of a legal dispute with a former Korean licensee contributed $1.1 million, underscoring the strength of the company’s intellectual property.

“Considerable achievements were made consistent with our growth strategy to position A2C as an innovative fast moving consumer goods and ingredients company with a global focus.”

“Increasing sales in Australia demonstrate that consumers in this market understand the a2TM brand proposition and are willing to pay a significant premium over standard milk for our products.”

“We look forward to the launch of a2TM brand fresh milk in the UK later this calendar year and our further expansion into additional markets of interest in the not too distant future.”

Progress is also being advanced to introduce an a2TM brand infant formula commencing with a market in Asia.

A2C is continuing to explore opportunities with its licensee in New Zealand to build brand awareness and sales of a2TM brand milk consistent with the successful business model in Australia.

Later this month, A2C will commission its own new fresh milk processing facility in Sydney. Initially, the A$8.4 million plant will produce high quality product for the New South Wales market allowing contract processors to support growing demand in other states of Australia.

Mr Babidge says: “Consumer awareness of a2TM brand dairy products is increasing. Our recently introduced “Thank-you a2TM” media campaign, successful PR and social media activities, consumer recommendation, Health Care Professional endorsement and support from our business partners are all helping to drive further growth in sales.”

Half Year Financial summary

31 December 201131 December 2010
Trading Revenue28,33019,074
Gross Margin35%29%
Non-recurring items1,101
Cash on Hand5,4847,467
EPS (cents per share)0.570.17


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