Margins have improved as the business builds scale and increases infant formula sales as a proportion of total sales.
A2’s fresh milk business in the core Australian market now has a record 10.8% share of total grocery sales and milk sales in the US have doubled from previous low levels as the number of stores selling A2 milk increases to more than 10,000.
In the six months ended December 31, A2 had revenue of $613 million, up 41% on the corresponding period a year earlier. Operating earnings (Ebitda) rose 52% to $218.4m and the after-tax profit jumped 55% to $152.7m.
At balance date the company had a cash balance of $287.9m, helped by operating cashflow for the period of $112.3m. The group has no borrowings.
Of the revenue, $495.5m came from infant formula, an increase of 45% on a year earlier. It was driven by market share gains in China and Australia.
Liquid milk sales, largely in Australia and the US, rose 20% to $83.4m.
Managing director Jayne Hrdlicka said US data indicates the brand development there is similar to A2’s fresh milk experience in Australia. Consumers are trading up from conventional milk and showing high levels of loyalty once they’ve tried the product.
The group made big revenue and earnings gains in China on advances in distribution and market share. Infant formula sales rose 83% and market-share in major cities rose to 5.7% on the latest 12-month data, from 4.4% in the prior year and 5.1% at the end of June.
Because of the high demand for A2 Platinum infant formula, inventory levels at $72.8m at balance date, were lower than targeted levels and the business is taking steps to build inventories to be able to adjust more quickly to demand changes, Hrdlicka said.
Following the strong first-half result and encouraged by the market share gains in China, A2 will spend twice as much in the second-half to boost brand awareness. The full-year brand spend in the US will be US$27m.
She expects second-half revenue growth to continue at current levels but the market-spend means margins will be lower than in the first-half.
