HY Results 2019, page-119

Today's Australian
A2 Milk joins calls on Coles, Aldi to lift milk price, lifts net profit 55pc

A2 Milk chief executive Jayne Hrdlicka has called on Coles and Aldi to follow the lead of Woolworths in increasing milk prices for dairy farmers, as a2 delivered double digit revenue growth in its Australian milk business during the first half.The business reported 11.7 per cent revenue growth and a record 10.8 per cent market share in the half, up from 10.0 per cent for the same period a year ago, helping underpin a strong 55.1 per cent increase in the group’s half year net profit to $NZ152.7 million.A2 fresh milk is priced at a premium to its competitors and Ms Hrdlicka said she welcomed the move on Monday by Woolworths to add an extra 10 cents per litre, which would deliver higher milk prices to more than 450 Australian dairy farmers supplying Woolworths-branded fresh milk.READ NEXTLeifer extradition dodge a ‘fraud’RACHEL BAXENDALE“We are delighted to see increased support for farmers,” Ms Hrdlicka told The Australian this morning.“It is an important part of sustaining a healthy dairy industry for the long term. We are happy with Woolworths stepping in to ensure the dairy community thrives. And we hope the rest of the industry follows.“The dairy farmer industry needs to be supported.

”Federal Agriculture Minister David Littleproud yesterday called on shoppers to boycott Coles after the supermarket giant declined to follow Woolworths’ lead and said it would continue to sell $1-a-litre milk.A2’s China segment revenue rose to $NZ171.7m in the half, up 50.1 per cent, with EBITDA up 41.6 per cent to $NZ68.4m as a result of strong distribution and market share gains.A2 shares have been hit over the past week amid concerns over whether China can keep fuelling earnings growth for the group.

Vitamins company Blackmores yesterday posted a disappointing outlook and warned that second half earnings will be lower than its first half because of a sharp slowdown in its Chinese business.

“We are having a very different experience in China. We are investing quite a lot behind our brand which really resonates with consumers,’’ Ms Hrdlicka said.She said there was strong and healthy underlying demand in the business due to a2’s unique product and its strong brand that “speaks to consumers at an emotional level”.“All stages of our infant formula business saw strong growth in the first half and the outlook for the second half is very attractive,’’ she said.

During the first half group infant formula revenue increased 45.3 per cent to $NZ495.5 million, underpinned by an 82.6 per cent increase in China label revenue, which took its consumption market share in the country to 5.7 per cent.While A2 said this morning that group revenue growth in the second half would be broadly in line with the first half, it revealed increased investment in brand building in the second half would push its second half EBITDA margins lower.

As a result, management expects its full year EBITDA as a percentage of sales to be approximately 31 per cent to 32 per cent, compared to 35.6 per cent in the first half.This may weigh on the company’s share price when trading opens this morning.