a2 Milk Company Ltd (a2m) Share Price Jumps As Profit Lifts

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The a2 Milk Company Ltd (ASX: A2M) share price bounced higher on Wednesday morning after the infant formula and dairy business reported its full-year results.

a2 Milk Company is the name behind the popular a2 protein-only dairy products, such as the Platinum range of goods sold in Australia, New Zealand, China and the USA.

In an ASX filing, a2 Milk Company released its 2018 report showing a 68% increase in revenue and a profit of $NZ196 million, up 115% over the prior year’s result.

“The Company’s financial results maintained a very strong trajectory, with a revenue increase of 68% and with operating earnings up by 101%,” CEO Jayne Hrdlicka said.

Analysts surveyed by Bloomberg had been expecting a profit of $192 million. Therefore, a2 Milk Company’s result appears to be a modest beat on expectations.

New Supply 

The a2 Milk branded infant formula can now be found in 10,000 Chinese stores and 6,000 in the USA, the company said. As with Bellamy’s Australia Ltd (ASX: BAL) and Blackmores Limited (ASX: BKL), a2 Milk’s key growth markets are the emerging markets of Asia, particularly China.

“Significant progress has been achieved in Australia, China and the USA and important emerging market opportunities are starting to materialise,” Hrdlicka added.

Hrdlicka also noted the increased supply agreement with Synlait Milk Ltd (ASX: SM1) and new agreements with Fonterra (ASX: FSF) and Yuhan Corporation.

Unsurprisingly, a2 Milk forecast “further growth” for its nutritional products in ANZ and China, and more sales from Liquid Milk in the USA.

Consistent with its push into China, the company expects to continue investing in its Chinese operations and staff, a market where hundreds of millions of people are expected to grow wealthier in coming decades and enter the middle classes.

a2 Milk Company shares were trading 5% higher on Wednesday morning according to Google Finance.

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Owen Raszkiewicz

Owen is the Founder of Rask Australia, Lead Investment Analyst for Rask Invest and head educator at Rask Education.