The A2 Milk Company Ltd (ASX: A2M) share price has jumped 16% after the company revealed a relatively strong FY24 half-year result.
A2 Milk is a large dairy product business, which specialises in infant formula and liquid milk.
FY24 half-year result
Here are some of the numbers from the six months to 31 December 2023:
- Revenue rose by 3.7% to $812.1 million
- EBITDA increased by 5% to $113.2 million
- Net profit after tax (NPAT) grew by 15.6% to $85.3 million
- Earnings per share (EPS) improved by 18.6% to 11.8 cents
- Closing net cash of $792.1 million (up $34.9 million)
Breakdown
Looking at the result geographically, the business reported Chinese and other Asian revenue grew by 16.5%, ANZ revenue fell 24.1% (due to a “change in distribution strategy”), USA revenue grew 8.6% and MVM (its manufacturing division) saw revenue fall 4.7%.
A2 Milk also revealed how its categories performed, with total infant formula revenue up 1.5%, Chinese label infant formula revenue up 10.4% and English label infant formula down 6.9%.
Liquid milk in ANZ saw revenue growth of 1.5% and USA experienced 7% growth. ‘Other nutritionals’ revenue rose 48.5% and ingredients (MVM) saw a revenue decline of 4.7%.
The company spoke of improved profitability for the US business, and it has started distribution of a2 Platinum infant formula thanks to the US FDA, with selected retailers in-store and online.
A2 Milk managed to achieve the infant formula growth in China, despite a double-digit decline in the Chinese infant formula market, thanks to market share gains. It has achieved a top-5 China infant formula position, with ‘brand health’ reaching new highs supported by record levels of marketing.
The company noted that it has launched its new GB-registered Chinese label infant formula product “successfully”, with the transition “ahead of plan”. The English label infant formula sales stabilised compared to the FY23 second half, after several periods of decline.
Guidance upgrade
FY24 revenue growth guidance has increased from “low” to “low-to-mid” single digits in percentage terms compared to FY23.
The EBITDA margin is expected to be “broadly in line” with FY23.
Final thoughts on the A2 Milk share price
It’s good to see the business is doing well and displaying strong brand characteristics.
Is it a buy? I don’t know what’s going to happen next in the Chinese market, so it’s hard to say. Will the Chinese market keep falling or will it stabilise? If it can stabilise (or even grow) then there could be better times ahead. But, I’d feel better if A2 Milk can keep growing in the US and other Asian countries. There are plenty of other ASX growth shares I’d rather buy first where the outlook is clearer.
