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The A2 Milk Company Ltd - FY19 Results

Jordan Baird

Jordan Baird is the head ASR Wealth Advisers client services desk and has been with the organisation since 2017. He first started investing in his early years. While he believes that investors should leave no stone unturned he has a particular interest in trading based on broad macroeconomic trends along with specific analysis of innovative up-and-coming companies.

The A2 Milk Company Ltd (ASX: A2M) is a milk company based in New Zealand that commercialises intellectual property relating to protein-free milk. Other milk related products are also sold.

A2 -  Flat Results-1

What are the results from A2 FY19?

Today (Wednesday 21st of August 2019) A2 released its FY19 annual results. The main points are as follows:

  • Total Revenue for FY19 is NZ$1304.5 million, up by 41.4% from FY18.
  • Total EBITDA for FY19 is NZ$413.6million, up 46.1% from FY18.
  • NPAT for FY19 is NZ$287.7 million, up 47% compared with reported FY18 NPAT.
  • Basic EPS is 39.3 cents per share for FY19, up 45.4% from FY18.
  • No Dividends paid.

Specific results on company operations are as follows:

  • Infant nutrition market shares in China strengthened to 6.4% with Group infant formula revenue of NZ$1,063.8 million up 46.9% from FY18.
  • US distribution expanded to 13,100 stores with milk revenue more than doubling.
  • Australian fresh milk revenue growth of 10.7% from FY18 and a record market share of 11.2%.


What were the drivers of this result?

Substantial revenue growth across their key product segments of liquid milk, infant nutrition and other nutritional milk products drove a successful FY19 for A2 as well as significant growth across each of A2’s key markets.

In FY19, A2 directed substantial investment toward creating breadth and depth of organisational capability to support ongoing growth and resilience.

Further, results were underpinned by growing brand awareness, expanding product distribution within current markets and bolstering in-market execution in the two key markets of the US and China.


What is the outlook for A2?

The outlook for A2 is positive, with anticipated ongoing growth in revenue across all key markets, supported by increased marketing and brand investment in the key markets of the US and China.

FY20 EBITDA as a percentage of sales is expected to be broadly consistent with the 2H19 EBITDA margin of 28.2%. Therefore, in FY20, A2 expect an increased full year marketing investment of up to 12% of sales. A2 expect a gross margin percentage to be somewhat consistent with FY19.

With continued investment in organisational capability, and ongoing growth in the two major markets of the US and China, FY20 is shaping to be a good year for A2.


What is the market reaction?

The initial market reaction to A2 FY19 results is negative. The current share price is trading at A$14.14 which represents a 11.66% decrease (10:51 am AEST).




This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

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