Baby formula fuels a2 Milk's profit growth

Soaring sales of infant formula, particularly to Chinese consumers, has helped a2 Milk almost quadruple its half year profit.

Strong demand for infant formula, especially in China, has helped dairy processor a2 Milk Company make a larger profit in six months than it did last financial year.

The company's net profit of $NZ39.4 million ($A36.9 million) in the half year to December 31 was up from $NZ10.1 million in the same period a year earlier, and compares to a $NZ30.4 million profit in the 2015/16 financial year.

The profit growth reflects an outstanding performance in Australia, New Zealand and China, driven mainly by demand for a2 Platinum milk formula, the company said.

Revenue in China more than quadrupled from a year ago, and rose 62 per cent in Australia, though the growth rate partly reflected inventory shortages in the prior corresponding period.

Sales aso increased in the UK, and a2 Milk widened its distribution in the US.

Managing director Geoffrey Babidge said the outstanding aspect of the company's half year performance was the continuing growth in a2 Platinum infant formula in Australia and China.

"The growth is driven predominantly by the growing recognition and trust of the a2 brand amongst Chinese consumers," he said.

The company expects infant formula sales in the second half of the financial year to be materially higher than a year ago, but lower than sales in the first half, given the timing of major selling events in China.

a2 Milk did not declare a half year dividend but expects to adopt a dividend policy after the completion of the 2016/17 financial year.

Its shares were up 5.5 cents at $2.47 at 1230 AEDT.


* Half year net profit of $NZ39.4m, up from $NZ10.1m

* Revenue up 84pct to $NZ256.1m

* No interim dividend

2 min read
Published 15 February 2017 at 12:46pm
Source: AAP