Revenue up, profit down: a2

The balance sheet of a2 Milk Company took a beating in the year ended June, with the company blaming the high New Zealand dollar and costs associated with its joint venture in the United Kingdom.

Revenue was up 17.3% to $111.3 million in the period, from $94.9 million in the previous corresponding period.

However, the operating profit plunged 86.1% to $720,000 from $5.2 million in the previous period and the reported profit fell to $10,000 from $4.1 million. The profit was also hurt by a reduced amount received from associates, down 63% to $1.4 million.

In a six-page filing to the NZX, managing director Geoffrey Babidge and chairman Cliff Cook barely touched on the financial result, instead focusing on the future.

The appreciation of the kiwi to the Australian dollar reduced revenue by about $14 millon and operating earnings by about $2.7 million on the previous period. The trading result included:Operating profit before licence fees for the Australian market of $18.7 million.

Operating loss for the United Kingdom and China markets of $7.53 million.

Employee share scheme expenses (non cash) of $1.2 million.

Other corporate costs of $6.8 million.

Income tax charge of $710,000.

Mr Babidge said the continued strong performance in Australia funded the development of the growth in China and the UK, consistent with the strategic agenda and the supporting corporate resources.

The board continued to be pleased with the performance of the Australian business and its potential for further growth and it remained confident in the plans for Asia and the UK.

Slower build in distribution and awareness, rather than the core a2 Milk product proposition, contributed to slower revenue growth in China and the UK markets.

The potential for growth remained significant, he said.

''The company has progressed its planning for its fourth global growth initiative - the launch of a2 Milk into the United States fresh milk market starting during calendar 2015.''

Advances in the science concerning the benefits of dairy products free from A1 beta casein protein had been reported in international publications in during the past year, Mr Babidge said.

They supported the position that a2 Milk made dairy nutrition accessible to many consumers who limited or avoided their intake of dairy.

In addition, a2 Milk Company's research and development programme continued to improve efficiencies in proprietary process and had contributed to the filing of additional patents.

''The company has made significant progress in developing a new global brand vision which will be progressively implemented during the coming year.''


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