A2 Milk chief executive David Bortolussi. Photo: Supplied
Infant formula maker A2 Milk declared its first ever dividend as it lifted its bottom line on strong English label sales, offsetting supply constraints in the China label market.
Key numbers for the six months ended December compared with a year ago:
- Net profit $91.7m vs $85.3m
- Revenue $893.8m vs $812.1m
- Underlying profit $118.9m vs $113.2m
- Interim dividend 8.5 cents per share vs none
Infant formula maker A2 Milk's share price surged after its results beat market expectations and declared its maiden dividend.
The company's share price rose nearly 18 percent in mid-afternoon trading to $7.75 a share, lifting its market value by more than $800m to over $5.6b.
Its infant milk formula (IMF) sales grew by 7.2 percent, led by its English label, which was up 13 percent, while China label sales were 2 percent higher, which the company put down to temporary supply constraints that were resolved in the first half.
"Execution of our growth strategy has resulted in another period of strong operational and financial performance," chief executive David Bortolussi said.
"We are pleased to declare our first ever dividend, recognising the substantial progress we have made as a business and rewarding our shareholders for their continued support," he said.
The company said there was some improvement in the total China IMF market, with the number of newborns increasing for the first time since 2016.
A2 Milk expected the increase due to a catch-up in Covid-related postponed pregnancies and 2024 being the year of the dragon in the Chinese calendar, which was typically associated with higher births.
The company continued to expect a longer-term modest decline in births.
A2 Milk's margins were slightly lower due to air freight costs as the company tried to limit the impact of supply constraints.
Despite the overall China IMF market decline, the company was rewarded with a strong English label performance in the China and wider Asian market.
English label IMF sales in Asia rose 22.7 percent, which the company said reflected a further shift in the China IMF market from China label to English label.
Its US revenue rose by 13.2 percent, while the Australian and New Zealand market saw a 2.7 percent fall in revenue, primarily due to a further decline in the Daigou channel.
A2 Milk's other business, Mataura Valley Milk, benefited from higher global dairy trade auction pricing and higher milk volumes.
Looking ahead, it expected revenue growth of low to mid double-digit percent, up from the previous estimate of mid to high single-digit percent.
Its gross margin was also expected to rise, as well as marketing expenses, while administrative expenses were estimated to fall.
