A2 FY profit slips on cost of setting up UK joint venture, sales jump 51 percent as Australian shines

Thursday 29th August 2013

A2 Corp, which markets milk products with a protein variant claimed to have health benefits, reported a 6.5 percent decline in annual profit as the cost of setting up its UK joint venture ate into the bottom line, while sales in Australia continued to climb.

Net profit fell to $4.12 million, or 0.66 cents per share, in the 12 months ended June 30 from $4.41 million, or 0.74 cents, a year earlier, as the Sydney-based company took a $3.72 million charge in sharing the loss from setting up its British joint venture. Operating earnings before interest, tax, depreciation and amortisation more than doubled to $10.6 million, missing the forecast EBITDA of $11.2 million before intercompany charges.

Sales climbed 51 percent to $94.3 million, the bulk of which come from A2's Australian business, which the company estimates has grabbed about 7.4 percent of grocery market share.

"The board is delighted with the continuing standout performance of the Australian business and encouraged with the development of the new initiatives in the UK and China," managing director Geoff Babidge said. "The prospects of the company's business units are in aggregate consistent with the revenue projections contained in the 2012 private placement memorandum with additional product and market opportunities being pursued."

The board didn't declare a dividend, and is considering whether to dual list the stock on the Australian Securities Exchange.

The shares fell 1.4 percent to 73 cents yesterday, and have climbed 36 percent this year, valuing the company at $467.8 million.

This month A2 agreed to simply its arrangements with cornerstone shareholder Freedom Foods Group, ending the Australian company's anti-dilution rights in exchange for 400,000 shares, and giving Freedom Foods until March 31 next year to pay up its partly paid shares.

A2's Australian business boosted sales 48 percent to $92.5 million, and reported an 8.1 percent fall in segment profit to $3.63 million. The UK unit contributed a segment loss of $207,000.

The New Zealand unit boosted sales 54 percent to $2.22 million, while segment profit jumped to $6.63 million from $1.23 million a year earlier. A2 is in talks with the sole non-exclusive licensee, whose licence ends in May 2017, for its branded milk in New Zealand as it seeks to become more active in the local market.

A2 made its first shipment of infant formula into China in June, and expects to being selling to consumers from November.

BusinessDesk.co.nz

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