The A2 Milk Company Ltd (ASX: A2M) share price will be one to watch today after reporting its FY19 result.

The a2 Milk Company is one of Australia and New Zealand’s largest infant formula producers and the leader in a2-only protein based dairy products. It has operations in New Zealand, Australia, USA and China thanks to key supply and distribution agreements.

A2 Milk’s FY19 Result

A2 Milk’s total revenue increased by 41.4% to NZ$1.3 billion. The result was driven by record market share in each of the regions that it operates in. Infant nutrition market share grew to 6.4% in China whilst Australian fresh milk revenue growth of 10.7% was achieved with a market share of 11.2%.

Australia and New Zealand revenue increased by 28.3% to NZ$842.7 million, Asian revenue jumped by 73.6% to NZ$405.7 million, USA revenue jumped 160.7% to NZ$34.6 million and UK revenue rose by 12.7% to NZ$21.6 million.

Looking at the overall product segments, liquid milk revenue went up 22.8% to NZ$174.9 million, infant nutrition revenue increased by 46.9% to NZ$1.06 billion and other nutritional revenue rose by 17.3% to NZ$65.8 million.

Looking at the above numbers, it seems it was a solid revenue performance across the board, which helped EBITDA (click here to learn what EBITDA means).

Total EBITDA rose by 46.1% to NZ$413.6 million, which rose by a faster percentage than revenue showing that A2 Milk continues to benefit from stronger economies of scale. The EBITDA margin improved to 31.7% from 30.7%.

A2 Milk reported that its net profit increased by 47% to $287.7 million. Market consensus for this result was for a net profit of NZ$296.2 million, so it seems that the market’s expectations were a little too high.

During the year A2 Milk decided to increase its investment in Synlait Milk Ltd (ASX: SM1) to 17.4% of the company. It also impressively increased its cash position by 61% to NZ$464.8 million over six months.

Is A2 Milk A Buy?

A2 Milk said it’s going to keep investing in marketing and its organisational capability to support its continued growth.

However, this investment may lead to a lower EBITDA margin even with the continuing growth in its various markets.

It was also a negative that A2 Milk decided to exit its UK liquid milk operations, although it may pursue European growth in the future. Exiting markets means it wasn’t able to break into the market properly.

A2 Milk continues to grow strongly, but at the pre-open share price of $16 I don’t think I would want to buy shares, I’d rather think about the shares in the free report below instead.

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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).

At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.