A2 Milk upgrades annual earnings forecast on fast infant formula sales

Tuesday 17th November 2015

A2 Milk Co, which rejected a takeover from its cornerstone shareholder earlier this year, raised its forecast revenue and earnings for the current year as sales of infant formula across Australasia and in China track ahead of expectations.

The Auckland based, Sydney headquartered company expects earnings before interest, tax, depreciation and amortisation of $22 million on revenue of $285 million in the year ending June 30, 2016, according to presentation slides published on the NZX for today's annual meeting. That's an improvement on the previous forecast for earnings of $12 million on sales of $267 million, and up from ebitda of $4 million on revenue of $154 million in 2015.

The shares climbed 9.9 percent to 98 cents, and have jumped 31 percent in the past week on reports of growing demand for infant formula.

The company today said its a2 Platinum branded infant formula generated sales of $38 million in the four months ended Oct. 31, or about 47 percent of group revenue, and are tracking ahead of plan in Australia, New Zealand and China. That compares to annual infant formula sales of $41.7 million in the 2015 financial year.

A2 is in the process of raising $43 million of new capital through an institutional placement and share purchase, with the funds largely earmarked for working capital needed to drive sales of infant formula.

The company said it expects the performance of its loss-making UK business to improve, with a monthly breakeven plan expected by the first half of 2017. Its North American beachhead is running behind schedule in terms of sales due to a delay in reaching its targeted distribution channels.

BusinessDesk.co.nz

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