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A2 more than triples 1H net profit as sales jump 56%

Tuesday 21st February 2012

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A2 Corporation, the NZAX-listed alternative milk company, said first-half net profit more than tripled, boosted by a legal settlement, as sales jumped 56 percent.

Net profit rose to $3.1 million in the six months ended Dec. 31, including a $1.1 million settlement of a legal dispute with a former Korean licensee, compared with $900,000 in the same six months of 2010, it said in a statement.

Sales rose to $30.1 million from $19.3 million with the vast majority of revenue in Australia where the company said it now has 4.7 percent of fresh milk in the grocery category.

Chairman Cliff Cook said the company's results were very pleasing in the face of price discounting of fresh milk in Australia.

“While the Australian supermarket chains are going head-to-head in discounting standard milk, a2 brand sales have continued to accelerate with no change in our pricing,” Cook said.

Managing director Geoffrey Babidge said the growth is “consistent with our growth strategy to position a2 as an innovative, fast-moving consumer goods and ingredients company with a global focus.”

Rising Australian sales “demonstrate that consumers in this market understand the a2 brand proposition and are willing to pay a significant premium over standard milk for our products,” Babidge said.

A2 claims its milk is healthier than traditional A1-type milk although those claims haven't been backed by scientific evidence.

The company plans to launch in Britain later this calendar year and is looking at expanding into other markets “in the not too distant future.”

It is working on introducing an a2 branded infant formula in a market in Asia, he said.

It is also “continuing to explore opportunities” with its New Zealand licensee to build brand awareness and sales “consistent with the successful business model in Australia.” New Zealand sales were just $1.7 million of which just $3,598 was to external customers. New Zealand sales to external customers were reported as $214,417 for the six months ended December 2010.

A2 will commission its own A$8.4 million fresh milk processing facility in Sydney later this month and initially it will supply the New South Wales market while existing contract processors will support growing demand in other states of Australia, the company said.

A2 didn't declare a dividend. Its shares are up 1 cent at 26 cents, down from their high at 30 cents last November but up from the 11 cent low in March last year.


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