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A2 Milk first-half profit soars, company eyes future dividend payments

Wednesday 15th February 2017

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A2 Milk, which markets milk with a protein variant said to have health benefits, more than tripled its first-half profit as demand for its A2 Platinum infant formula surged in its key Australia, New Zealand and China businesses.

Net income soared to $39.4 million, or 5.37 cents per share, in the six months ended Dec. 31, 2016, from $10.1 million, or 1.5 cents per share, in the year-earlier period, the Auckland-based company said in a statement. Revenue rose 84 percent to $256.1 million. The result is ahead of the $230.7 million revenue and $26.4 million profit forecast by brokerage Forsyth Barr.

A2 Milk posted strong growth in its Australian business where it is gaining market share, with sales and earnings tracking ahead of its plan. In China, the company said increased understanding of its A2 products is helping drive consumer demand, while results in its fledgling UK and US markets also improved. The company anticipates adopting a dividend policy after its 2017 full year results.

"The half-year results show continued progress against the company's objective of building a global brand based on the health and digestive benefits of nutritional products containing only the A2 beta casein protein - free of the A1 protein," said managing director Geoffrey Babidge. "This has involved continuing to grow the established positions in fresh milk and infant formula in Australia while also investing in the key international growth initiatives in China, the United States and the United Kingdom."

While fresh milk and infant formula generate most of the company's current revenue and earnings, a2 said it's continuing to broaden its product range and will launch additional nutritional products over the next 12 months.

In the Australian and New Zealand markets, earnings before interest, tax, depreciation and amortisation more than doubled to $70.4 million from $34.5 million a year earlier. In its China and other Asian markets, ebitda soared to $13.7 million from $1.2 million. Meanwhile, its UK and USA markets narrowed their loss to $7.7 million from $8.1 million.

A2 shares last traded at $2.57, and have jumped 40 percent in the past 12 months.

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