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A2 Milk back in black

NZ NewswireNZ Newswire 23/08/2016 Jonathan Underhill

A2 Milk, which markets milk based on the supposed health benefits of the A2 milk protein, has returned to full-year profit and a 127 per cent jump in revenue, driven by infant formula sales in Australia and China.

Profit was $30.4 million in the 12 months ended June 30, from a loss of $2.1m a year earlier. Earnings before interest, tax, depreciation and amortisation rose to $54.6m, just above the $52m-to-$54m forecast it gave in June, from $4.8 m.

Sales climbed to $352.8m, within its guidance range, from $154.8m a year earlier.

The company sank into the red in the previous year as it invested in offshore expansion to drive sales of its A2 Platinum infant formula.

The shares dipped to a six-month low in June amid concerns about increased food safety rules in China and the emergence of rivals in the Australian market selling milk based on the same A2 milk protein claims. Since then the stock has resumed its ascent after the company forecast a surge in sales, bringing its five-year gains to more than 1000 percent.

A2 said it expects continued growth in the 2017 financial year, in particular from infant formula and milk powders in Australia and China and improved momentum in the US business.

It plans to give firmer guidance for 2017 at its annual meeting in November.

In the latest year the company recorded "exceptional growth" in sales of its A2 Platinum infant formula, which jumped 414 per cent to $214.4m. Fresh milk sales in Australia rose 4 per cent, it said.

Infant formula has become the boom product for A2, making up 61 per cent of revenue in 2016 and projected to account for a larger share of sales in the 2017 year.

For FY16, infant nutrition products represented 61 per cent of total revenue, and a higher proportion of earnings.

In the US, progress is behind the company's schedule, which it attributed to delays in achieving distribution with a number of larger retailers.

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