The a2 Milk Company Limited Analysis

Overview

The a2 Milk Company Limited was founded in February 2000 on a simple, yet profound, discovery that different cows produce different milk proteins that behave differently in people's bodies.

Milk that is naturally rich in the A2 beta-casein protein (and free from all A1 beta-casein protein) has been found by many to be easier to digest.

The a2 Milk Company single-mindedly pioneers scientific understanding, operational know-how and commercialisation of premium a2 Milk brand products around the world. Today, we have a range of products available in Australia, New Zealand, UK, USA and China.

The a2 Milk Company Limited listed on the NZAX market in April 2004 and completed capital raising and transferred the listing to the NZX Main board in 2012. The company was dual listed on the ASX in March 2015.

For more information visit: www.aboutthea2milkcompany.com

Performance

The following information was extracted from The a2 Milk Company Limited's Half Year report, released 17 February 2025:

Revenue grew 10.1% to $893.8 million, driven by continued growth in the China & Other Asia segment up 11.8%, supported by the USA segment up 13.2% and Mataura Valley Milk (MVM) up 31.9%, partly offset by a 2.7% decrease in the ANZ segment due to a further decline in the Daigou channel.

Total IMF sales grew 7.2% led by English label which was up 13.0% driven by performance within the CBEC and O2O6 channels supported by English label market growth, whilst China label sales were 2.0% higher, impacted by temporary supply constraints that were resolved during the half. Liquid milk sales grew 12.1%, with ANZ up 11.2% and USA up 13.4% driven by growth in the core portfolio and recent innovation. Other nutritional sales, which mainly consist of non-IMF powdered a2 Milk® products, continued to grow, up 17.3%, whilst Ingredients (MVM only) grew 31.9% mainly due to higher GDT7 market pricing and increased milk supply.

Gross margin percentage8 of 44.8% was 1.9ppts lower than 1H24, primarily due to the impact of airfreight used to expedite shipments in order to limit the impact of 1Q25 IMF supply constraints, plus the remaining $5.1 million of accelerated depreciation related to the MVM coal-fired boiler following the successful commissioning of a high pressure electrode boiler on site. Distribution costs were slightly higher, consistent with higher sales, however lower as a percentage of revenue reflecting continued improvement in USA distribution costs due to a sustained focus on reducing customer cost to serve.

Marketing investment increased 6.7% to $145.9 million, consistent with the Company’s growth strategy to primarily support its China market ambitions. Spend as a percentage of net revenue was slightly lower for the period (16.3% versus 16.9% in prior year) which was in part due to timing with some investment deferred to 2H25 due to the impact of 1Q25 supply constraints, plus cycling of higher investment in 1H24 to support the launch and transition of the upgraded GB registered China label IMF product, a2 至初®.

Disclaimer: This section is provided as general information only. It is not intended as a substitute for legal or professional advice to company directors and officers or investors. NZX Limited disclaims any liability arising from the use of this information.