In early trading on the NZX the shares sold up to $15, a $2.20 gain after bullish comments at the annual meeting in Auckland on Tuesday.
A2 expects revenue for the six months ended December 31 to be in the $780-$800 million range, up from $613m at the same time last year, managing director Jayne Hrdlicka said.
The Ebitda trading margin won’t match the 35% of that period but will be in the 31% to 32% range, above the 28% or so expected in late August when the 2019 full year result was released.
A2’s second-half margin then was 28.2% so the gains are significant, given the lift in revenues.
Margins in the June 30 full-year are expected at about 29% to 30%, Hrdlicka said.
The company is achieving good momentum in the core Australia market and the growth markets, China and the United States.
First-half highlights include:
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Chinese label infant nutrition sales expected at about $135m, up 84% on previous year.
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Cross-border e-commerce sales expected at about $155m, up 54%.
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Australia/New Zealand English-label infant nutrition sales about $350m, up 9%.
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US sales expected to more than double to $27m.
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Australia fresh milk sales expected at $75m, up 12%.
Hrdlicka said the higher first-half margins compared to the second-half of this year will be from increased cost of goods, increased marketing and capability spend in the second-half. The full-year marketing investment is expected to be about $200m.
The US result will be excellent.
A2 finished the 2019 year with 13,100 stores there and the December 31 figure will be about 2000 stores higher. Major chains Walmart and Safeway have committed to more distribution and products.
The key consumer group has been identified and the in-store sales growth rate to these people is at double-digit percentages.
The business is seeing major change in the Daigou sales channel in Australia, where personal shoppers buy product from retail stores or directly from A2 for on-sale to China. It has expanded well beyond personal shoppers.
“Australian resellers are now more sophisticated, using a combination of web-based selling tools and commission-based selling, tapping into e-commerce networks and other channel pathways into China,’’ Hrdlicka said.
The business will continue to improve that engagement.
“We have a long history of working well in these channels and we will not take our eye off that ball.”
While the reseller channel is performing well it is only a small part of the total market opportunity and A2 needs to ensure it executes effectively across the Chinese Mother and Baby stores and the cross-border channels.
Channels outside what is sourced directly from Australia made up 90% of the total infant nutrition category value and A2 is significantly under-developed in most of them.
A2 hads relatively low brand awareness but a very loyal consumer following and research shows there is a significant opportunity to accelerate brand scale by step-changing brand awareness, she said.
