The policy of not paying a dividend has continued, investing all profits in the growth strategy.
Revenue, earnings, net profit and earnings per share all increased by more than 30% on the previous financial year.
The rate of growth slowed marginally during FY2020 when compared with the 40% increases in FY2019 over FY2018.
A2 chairman David Hearn said covid-19 had a modest positive impact on revenue and earnings and that exchange rate movements had gone in the company’s favour.
“We are fortunate to be supplying essential products that are well positioned and appealing to consumers.”
Revenue was $1.73 billion, up 33%, and more than three times the $500m revenue achieved in FY2017, four years ago.
Infant nutrition accounted for $1.42bn of the revenue, liquid milk sales were $223m and other A2 products $85m.
Earnings before interest, tax, depreciation and amortisation (Ebitda) were $550m, up 33%, and net profit after tax was $386m, up 34%.
Earnings per share were 52.39c, which on the current share price of $21 makes the price/earnings ratio about 40, one of the highest on the New Zealand Stock Exchange.
Because of the extraordinarily large number of A2 shares, around 740m, the company has the second highest market capitalisation on the board, at $15.5bn.
A 5% minority of the shareholding is held by 40,000-plus small investors with fewer than 5,000 shares ($100,000) each and 150 institutional shareholders have 100,000-plus, owning collectively 87% of the company.
However, the net tangible asset backing is only $1.28/share, or $950m.
Among those assets is A2’s 20% shareholding in Synlait, its major A2 milk and infant formula partner, on the books at $252m with a fair value loss of $56m during the year.
Synlait’s share price has lost 25% over the past year, including a low point of $4.40 mid-March and sits around $7 currently. It reports on September 28.
Investors have added 50% to the A2 share price over the past 12 months and the price dropped from $17 to $15 at the beginning of the covid-19 lockdown here and in China, followed by a strong recovery in the past five months.
The company said marketing expenditure was up 45% to $194m and that China label infant nutrition was sold in 19,000 stores.
China labelling is for in-market sales as a replacement for the daigou English label trading that has dominated A2’s revenue in the past – bulk purchasing in Australian retail stores followed by mail and courier delivery to China.
Liquid milk sales in Australia and NZ were $152m, up 14%, and US sales rose 90% to $66m through about 20,000 stores.
With regard to physical assets, A2 said it had agreed to underwrite the expansion of the manufacturing facilities of Kyvalley company, Victoria, its long-term fresh milk supply partner.
“Through this arrangement we will acquire the Kyabram milk processing facilities and fund its expansion and upgrade,” A2 said.
“Kyvalley will manage the assets under a lease and revised long-term supply agreement.”
However, this was not the major expansion of facilities anticipated by the company and investors with the $800m cash.
In NZ, speculation has centred on the Mataura Valley Milk near Gore.
Acting chief executive Geoff Babidge will be giving way to newcomer David Bortolussi early in 2021, formerly a senior executive at HanesBrands, Fosters and McKinsey.
