A2 Milk looks to the US for growth after a doubling of its net profit

The a2 Milk Co. looks to the United States as the next source of significant growth after more than doubling the net profit of the year.

It was another record profit for the alternative dairy business – $ 95.7 million for the 30 June year – driven by a strong increase in baby food sales in Australia and China.

The result increased by 166 percent compared to last year's profit of $ 90.6 million, which in turn was three times the year before.

Sales were $ 922.7 million – an increase of 68 percent over the previous corresponding period – and slightly more than what it was already telegraphed to the market.

A2 said that the share of infant formula has been increased to 5.1 percent in China and 32 percent in Australia.

There was substantial physical distribution growth to around 10,000 stores in China and 6,000 stores in the US, it said.

A2 has also made its appearance in the fresh milk market in Australia, where it now accounts for 9.8 percent of the market.

Chief executive Jayne Hrdlicka, who took over the acquisition of Geoff Babidge in July, said she was happy with the company's early progress in the US.

"We are not as advanced in the United States as we are in China, and we would see the US as a place of significant future growth," she said. Herald.

She said that a2 was building "real, real" consumer support in the fresh milk market in the US.

The timing of when a2 Milk will offer a wider range of products in the US was "still open for questions".

"It is safe to say that we have two of the world's largest consumer markets in the US and China, and we have a good underlying momentum in both," she said.

Most cows contain both A1 and A2 type proteins, but a2 Milk specializes in milk containing only the A2 variety, and says that this can help people who have trouble digesting standard milk.

The early success of A2 Milk came in the form of the Australian market for fresh milk and then infant formulas, which served as a springboard for its search for China, where it remains popular in the unofficial "Daigou" trade channels.

The result – slightly above market expectations – was well received by the market, the share price was 70 cents to $ 11.83.

In March, the share price peaked at $ 14.10 for the news that the world food giant Nestle had launched a competing a2 product in China and let it tumble.

But in a conference call to analysts, Hrdlicka said that competition had no material effect on the income of a2 Milk.

Craigs Invesment Partners, head of private equity research, said Mark Lister that it seemed like the market was comfortable with the change of chief executive.

"The result has certainly added a level of comfort, and the progress they make and the transfer of leadership also seem to get the signal from investors," Lister said.

More investments in brand and market development resulted in a rapid growth of infant formulas and the expansion of the liquid milk business in each of the company's established markets, according to the company.

Sales of the A2 Platinum formula were $ 724.2 million, an increase of 84 percent over the previous year.

American business continued to grow sales in key accounts, after expansion in the Northeast and in stores with natural products.

In the UK, improvements in sales and growing distribution resulted in more revenue.

Hrdlicka said the company anticipates further revenue growth, particularly in food products in Australia and New Zealand, China and liquid milk in the United States.

The marketing expenses as a percentage of sales in 2019 are expected to be higher than in 2018, given the continued investments in the Australian market, the "phasing" of activities in the second half of China and investments to support the expansion of the American market. , she said.

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