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FIRST CUT: A2 Milk reports another hefty lift in revenue

FIRST CUT: A2 Milk reports another hefty lift in revenue, net profit

By Rebecca Howard

Aug. 21 (BusinessDesk) - A2 Milk reported another strong lift in annual revenue and net profit as a massive marketing push helped it make further inroads in its core China and the US markets.

Net profit in the year ended June 30 rose 47 percent to $287.7 million on total revenue of $1.3 billion, up 41.4 percent on the year.

Earnings before interest, tax, deprecation and amortisation were up 46.1 percent at $413.6 million at a margin of 31.7 percent. A2's gross margin widened to 54.7 percent from 50.3 percent, as higher prices were partially offset by currency movements – notably a weaker Australian dollar.

"Our results were underpinned by growing brand awareness, expanding product distribution and strengthening in-market execution in our two most important regions of Greater China and the US," said chief executive Jayne Hrdlicka. This was supported by an 83.7 percent lift in marketing spending to $135.3 million, primarily increases in advertising spend in China and the US.

In China, its infant nutrition market share strengthened to 6.4 percent with group infant formula revenue of $1.06 billion, up 46.9 percent. Its US milk revenue more than doubled and distribution expanded to 13,100 stores. Its Australian fresh milk revenue lifted 10.7 percent and it now has a record market share of 11.2 percent.

Looking ahead, A2 said its full-year ebitda as a percentage of sales is expected to be broadly consistent with the 28.2 percent it recorded in the second half of the 2019 financial year.

This will reflect a further increase in full-year marketing investment to around 12 percent of sales and continued investment in organisational capability to support future growth. It expects gross margin to be broadly consistent with the 2019 financial year.

The shares last traded at $16.85 and have gained 52 percent so far this year.



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