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A2 Corporation posts strong profit growth - The a2 Milk Company

Market announcements

A2 Corporation posts strong profit growth

February 21, 2012

Global expansion accelerates

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, a2™ brand sales have continued to accelerate with no change in our pricing.  The current market share by value of a2™ 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.”

a2™ 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 a2™.

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 a2™ brand proposition and are willing to pay a significant premium over standard milk for our products.”

“We look forward to the launch of a2™ 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 a2™ 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 a2™ 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 a2™ brand dairy products is increasing.  Our recently introduced “Thank-you a2™” 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.”

31 December 2011 31 December 2010
$’000 $’000
Trading Revenue 28,330 19,074
Gross Margin 35% 29%
Non-recurring items 1,101
EBITDA 3,373 1,579
NPAT 3,102 894
Cash on Hand 5,484 7,467
EPS (cents per share) 0.57 0.17
For further information please contact
Geoffrey Babidge
Managing Director
A2 Corporation Limited
+61 2 9697 7008
Or
John Draper
Senescall Akers Limited
+64 2158 1234
31 December 2011

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