The A2 Milk Company Ltd (ASX:A2M) share price traded 8% higher today following the release of its 2020 half-year financial report.
For context, the broader Australian share market or S&P/ASX 200 (ASX: XJO) was trading at 6687, down 0.31%.
Who is the A2 Milk Company?
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.
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Key Results – A2 Milk
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Source: A2 Milk Company Ltd announcements; author calculations, NZD millions unless otherwise stated.
As can be seen above, total A2 sales came in at $804.95 million, up $194 million.
Looking into the specific drivers of sales, The A2 Milk Company pointed to the strong growth in its infant formulas, which accounted for $659 million during the period (82% of all sales).
In China, a key marketplace for A2’s products, Chinese-labelled infant nutrition products continued to grow with a 100% year-over-year increase.
Outside of this arena, A2’s milk business experienced growth of 28.7%. That includes the results from the USA, Australia and New Zealand.
A2 Milk Company’s profit was $184.93 million while on the cash flow statement, which is an important financial statement since it represents the underlying health of a business, operating cash flow was $160.55 million, up $48.25 million. The company now has some $618 million of cash in the bank.
At the gross profit margin level, the company reported a 57% margin which it said was the result of a shift to more infant formula coupled with improved pricing.
Commenting on the outlook, A2 Company expects “continued strong revenue growth” across each of its key regions, supported by increased marketing spend in China and the USA.
While the company acknowledged the potential impact of the Coronavirus concerns in China it expects its EBITDA margin to remain in the 29% to 30% range (note: the first half EBITDA margin was 32.6%).
A2 Milk Company Ltd shares were last seen trading at $16.29, giving the company a market capitalisation around $10 billion.
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