After a bruising 2021, The a2 Milk Company says its 1H FY22 results were in line with expectations and should see the company deliver revenue growth in FY22.
Snapshot
- revenue down 2.5% to $660.5m on prior corresponding period (pcp), but up 24.8% on 2HFY21
- EBITDA down 45.3% on pcp to $97.6m
- NPAT down 53.3% to $56.1m pcp
- net cash $667.2m, incorporating $80m Mataura Valley Milk debt
It said market conditions were still challenging in China with the market declining in the first half due to the cumulative impact of a lower birth rate.
The birth rate fell 18.1 per cent in 2020 and a further 11.5 per cent decrease in 2021 to 10.6 million. In volume terms, the Chinese infant formula market for a2 Milk fell by five per cent in the first half.
Its market value decreased by 3.3 per cent due to the drop, an increase in competition and promotional activity, a continuation of premiumisation and a shift to higher-priced China label channels.
The company's ultra-premium China label performed above market and was in growth, while the premium segment performed below market.
The US market recorded a loss of $16.4 million with a revenue decrease of 5.2 per cent to $32.4 million. EBITDA was down 41.5 per cent pcp. The loss was due to a major club channel customer moving to a private label substitution and weak growth due to Covid restrictions easing.
While the outlook for 2H FY22 revenue has improved and is expected to be significantly higher than 2H FY21, it is not expected to translate into higher earnings with the company looking to increase brands and reinvest in its growth strategy. It also said Covid impacts on the supply chain are ongoing and a key risk for the second half.
Last year, a2MC revealed a $109 million blowout in old stock provision and that its attempts to minimise the impacts of covid on the daigou/reseller and cross border ecommerce channels (CBEC) had not effective or would have a delayed impact.
Its Asia Pacific CEO Peter Nathan resigned after being with the company for 14 years, which saw the company restructure the business into three divisions with a dedicated Greater China region CEO and two executive general managers for International and ANZ.
In FY21 it recorded a 77.6 per cent EBITDA fall to NZ$123m, with revenue down 30.3 per cent to NZ$1.21 billion. The company is facing two class actions in relation to its poor economic performance.
