In its half year interim results, The a2 Milk Company reported revenue slightly above its 1H20 outlook. Its earnings before interest, taxes, depreciation and amortisation (EBITDA) margin (32.6 per cent) was better than anticipated due to stronger than expected underlying gross margin.
Group infant formula nutrition revenue grew 33.1 per cent to NZ$659.2 million ($633.6 million). In China label infant formula sales doubled to NZ$146.7 million and distribution expanded to 18,300 stores. USA milk revenue more than doubled and distribution expanded to 17,500 stores.
Its total revenue was up 31.6 per cent to NZ$806.7 million. EBITDA in Q4 was NZ$263.2 million, representing a 20.5 per cent increase. Net profit after tax was up 21.1 per cent to NZ$184.9 million.
The company announced that due to the increasing scale of its infant nutrition business, the board is evaluating opportunities to develop its own manufacturing capacity and capability to complement existing supply chain relationships.
Interim CEO Geoff Babidge told The Australian Financial Review the company has benefited from Covid-19 in China with sales in the first two months of the year ahead of expectations.
He said it was impossible to know if sales were because more people were buying a2 Milk or if it was being stockpiled. Babidge said it was too early to predict the longer-term effects. While local infant formula factories were shut down, a2 Milk and its distribution partner China State Farm had continued to deliver its products to consumers.
Emergency supplies to Wuhan
The a2 Milk Company and Wiseway Logistics Australia have sent 100 tonnes of emergency supplies to Wuhan, in a special charter flight from Sydney.
Wiseway MD Florence Lee organised the flight. It was the first direct flight allowed into Wuhan since the COVID-19 virus outbreak.
The plane, donated by China Southern Airlines, took goods ranging from medical equipment and protective gloves to elastic-sided boots, as well as 12 pallets of a2 Platinum infant and toddler formula and a2 Milk powder.
Most of the donations came from members of the Australian Chinese community and a small group of corporates.
Another flight is planned for April.
A small group of corporates have rallied behind the mercy flight, including The a2 Milk Company, however most of the donations have come from mums, dads and members of the Australian Chinese community, wanting to help those hit hardest by the virus.
A2 CEO Asia Pacific Peter Nathan said: “It’s been an extraordinarily challenging time for China and we clearly want to demonstrate our sincere sympathy. We want to do whatever we can there.
A2 had committed NZ$500,000 to the University of Queensland and the Doherty Institute for Infection and Immunity to assist in the development of a vaccine. It had also donated ¥5 million (AUD$1 million) to the Shanghai Red Cross and another ¥5 million in dairy products to dispatch to front line medical teams combating Covid-19 (Food & Drink Business 12/02/2020).
The A2 Milk Company was #26 in Food & Drink Business's Australia's Top 100 Food & Drink Companies 2019 report.