A2 annual sales climb 68%, pipping guidance; expects to maintain margin despite higher costs in 2019

Thursday 12th July 2018

A2 Milk Co lifted annual sales 68 percent, just beating the guidance given in May, and said it expects to maintain an earnings margin of about 30 percent in the coming year even with increased spending.

The Auckland-based, Sydney-headquartered company said revenue was $922 million in the year ended June 30, up from $549.5 million a year earlier, and just beating the $900 million-to-$920 million forecast in May. Earnings before interest, tax, depreciation and amortisation was about 30 percent of sales, implying ebitda of some $277 million and up from $143 million in the June 2017 year.

A2 had previously said that sales growth was in both nutritional products and liquid milk and that its focus was on gross margin.

Today, the milk marketing firm said it anticipated "further growth in revenue particularly in respect of nutritional products" and planned to lift its marketing spend as a percentage of sales, and take on more staff in China and head office. It also expects one-off costs from the transition of incoming chief executive Jayne Hrdlicka, who starts on July 16.

Even with those added costs, the company expects the ebitda margin to remain at about 30 percent in the 2019 financial year.

A2 disappointed investors with its May forecast when it said first-half gross margin of 49.8 percent was likely to carry through into the second half as expansion plans in the US and China led to higher marketing costs.

The shares last traded at $11.77 and have jumped 46 percent so far this year, making it the biggest local company on the exchange with a market value of $8.49 billion.

(BusinessDesk)

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