The a2 Milk Company summarised its FY20 results as showing “strong performance across all key product segments and all core markets”. Its total revenue increased nearly a third on the previous year, with sales of infant formula products into China more than doubling.
Snapshot
- Total revenue $1.73 billion, an increase of 32.8 per cent
- EBITDA of $549.7 million, an increase of 32.9 per cent
- Net profit after tax of $385.8 million, an increase of 34.1 per cent
- Basic earnings per share (EPS) of 52.39 cents, an increase of 33.5 per cent
- EBITDA to sales margin of 31.7 per cent
- Operating cashflow of $427.4 million and a closing cash balance of $854.2 million
- Marketing investment of $194.3 million targeting opportunities in China and the US
- Group infant nutrition revenue of $1.42 billion, up 33.8 per cent
- China label infant nutrition sales more than doubling to $337.7 million and distribution expanded to ~19.1k stores
- USA milk revenue growth of 91.2 per cent and distribution expanded to ~20.3k stores
CEO Geoffrey Babidge said the robust performance showed significant resilience in the face of COVID-19. Its full year EBITDA margin of 31.7 per cent was in line with its April guidance.
Infant nutrition sales totalled $1.42 million – up 33.8 per cent. Sales in China effectively doubled to $337.7 million, while its English label products grew 21.2 per cent.
There was solid growth in its liquid milk business in Australia and the US, with sales up 29.7 per cent to $222 million. US sales almost doubled to $66.1 million and Australia increased just over 14 per cent to $152.5 million.
$194.3 million was spent on marketing in key growth markets, slightly lower than the $200 million forecast the previous year.
COVID-19 had a modest impact on revenue and earnings. It had a higher inventory ($147.3 million) compared to previous years due to business growth but also as a safety buffer given COVID-19 uncertainties.
Babidge said the company was also launching into new markets, including Hong Kong, Korea and Canada.
Despite COVID-19 impacts, the company anticipates strong revenue growth for FY21. It expects FY21 EBITDA margin to be 30-31 per cent, reflecting:
- higher raw and packaging material costs partially offset by price increases;
- increase of marketing investment;
- FX benefit of prior year not expected to be replicated; and
- 3Q20 COVID-19 benefits not replicated.
FY21 Capex is currently expected to be $50 million due to our ERP investment and capital projects supporting fresh milk processing in Australia.
