A2 Milk laps up revenue increase amid struggling market

Written on the 16 May 2018 by Paris Faint

A2 Milk laps up revenue increase amid struggling market

The a2 Milk Company (ASX: A2M) has defied a downtrodden milk industry to increase its revenue margin by more than two thirds in its latest trading update.

While many Aussie and New Zealand dairy producers struggle as the price of milk continues to diminish, a2 looks on track to turn a significant profit.

For the nine months ended 31 March, a2 increased its revenue by 67 per cent to hit NZ$660 million and at the full year the company is forecast to hit at least NZ$900 million.

The dairy company puts its strong performance down to continued sales growth in its nutritional products and liquid milk divisions.

Seasonal sales from key Chinese selling events also weighted positively on the company's bottom line.

In February, a2 more than doubled its 1H18 profit to NZ$98.47 million, largely due to the strong performance in its infant formula business and higher liquid milk sales in core markets.

It lifted its revenue by 70 per cent to hit NZ$434.7 million and struck a deal with international dairy company Fonterra to produce new products and expand into new markets.

During 4Q18, the company will transition to new infant formula packaging which has been accounted for in relation to its full year forecast.

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Author: Paris Faint

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