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A2 profits, sales grow strongly - The a2 Milk Company

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A2 profits, sales grow strongly

September 6, 2012

By Sally Rae on Wed, 5 Sep 2012

Strong sales in Australia boost A2's profit. Photo supplied.
A strong trading performance in Australia for New Zealand-listed milk company A2 Corporation has provided a platform for strategic initiatives in various global markets, the company says.

The company, which was initially backed by Dunedin businessman the late Howard Paterson, has recorded group profit after tax of $4.4 million for the year ended June, just over double the $2.1 million profit in the previous corresponding period.

A2 milk comes from cows specially selected, through a DNA test, to produce A2 betacasein protein rather than A1.

Sales grew strongly in Australia, representing an increase on the previous year of 48%, managing director Geoffrey Babidge said.

Earnings before interest, tax, depreciation and amortisation (ebitda) increased 77% from $2.68 million to $4.73 million.

The company was focused on three core growth initiatives – building the beverage business in Australia and New Zealand, capturing niche shares in global milk and other dairy product markets and developing an infant formula business in prospective markets.

Discussions were progressing with Northland company Fresha Valley, the sole licensee for A2 brand milk in New Zealand, on how best to further develop it within New Zealand.

In November, the company announced the expansion of operations in the UK and Ireland through a sales and marketing joint venture with London stock exchange listed dairy company Robert Wiseman Dairies.

That brand launch, originally targeted from September, would now start from October. The UK fresh milk market was about 6.5 billion litres per year and the market opportunity for A2 fresh milk had the potential to be three-fold that of Australia, Mr Babidge said.

The company has continued to make “significant progress” in developing a market entry strategy for infant milk formula into Asia, with China a priority.

The Chinese infant formula market was worth about $US6 billion, was growing at about 12% a year and was regarded as under-supplied, the company said.

In April, A2 Corporation announced a strategic agreement with Synlait Milk Ltd in New Zealand to manufacture A2 brand nutritional powders, including milk powders and infant formulas.

Under the agreement, Synlait would source A2 milk from accredited Canterbury dairy farms and manufacture A2 brand nutritional powders at its facility in Dunsandel.

The company has been assessing alternatives for the associated sale and distribution of A2 brand infant formula in China, Mr Babidge said.

The company undertook two equity raisings during the year to support the development of the business and to broaden the institutional shareholder base.

 

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