A2 Corporation has been an exciting and welcome addition to
the NZX-50 index, Milford Asset Management portfolio manager
Mark Warminger says.
A2 reported its full year 2013 result last week and beat its
own forecasts by more than a few crates of milk.
Revenue came in at $94.3 million, beating company forecasts
by 11% and Australian operating profit, before inter-company
charges, came in at $14.9 million versus expectations of
$11.2 million, an upside surprise of 33%.
''More importantly, the growth throughout the year in
Australia accelerated as the brand and health benefits of A2
milk gained further attention.''
A2 milk contains only the A2 protein, which was the same as
naturally-occurring human milk.
''Run-of-the-mill dairy milk'' was a combination of A1 and A2
milk, Mr Warminger said. There was a growing body of research
showing the health benefits of A2 milk over normal milk and
many people who considered themselves lactose intolerant
could drink A2 milk without any issues.
''The emergence of this new milk category is helping to grow
the overall milk market in Australia that has been stagnant
A2 milk continued to gain share in Australia despite its
premium pricing, reaching 7.4% market share. Gross margins
increased to 35.7%, helped by a new plant in Sydney that had
lowered cost of production, he said.
A new plant in Western Australia would help further with its
cost structure and additional products helping drive further
In the United Kingdom, product launch had been slower than
expected but A2 products were now being sold through around
Medium-term expectations remained robust as the brand gained
recognition and a loyal following, as in Australia, Mr
The company's Platinum Infant Formula first shipment had been
dispatched to China with initial sales being expected in
The launch of the Platinum product in New Zealand and
Australia would start a month before the Chinese launch.
''A2 has grown from a niche New Zealand success story to a
truly global brand, with further growth potential through
geographic expansion and expanding its product offering.
"Future growth will be supported by a broadening array of
supportive research and literature showing the health
benefits of A2 milk.''
The company had a $20 million war chest to drive expansion,
had a strong balance sheet, was earnings positive and was
only just starting to scratch the surface in terms of
expansion opportunities, Mr Warminger said.