a2 Milk on track to keep momentum

Damian Foster.
Damian Foster.
Strong growth and increasing market share gains in key regions have a2 Milk on track to continue its momentum during third-quarter trading, Forsyth Barr broker Damian Foster said.

In China, its infant formula market share value rose from 5.4% to 6%, while in Australia and New Zealand that product's value share rose from 35.7% to 36.8%.

China distribution outlets rose by 1350 to a total 13,600, while US liquid milk distributors rose by 300 to 12,700 for the period, a2 Milk said in a NZX investor presentation yesterday.

''Infant formula, liquid milk and other nutritional product performance remains strong,'' Mr Foster said.

Group revenue accelerated a little in its third quarter, with sales for the nine months through March 31 being up 42%.

However, it said second-half sales should be broadly in line with the first as it pumps money into marketing and building organisational capacity.

Group revenue was $938million, reflecting continued sales growth in nutritional products and liquid milk, the company said.

The company's shares eased 2.3% to trade around $16.37 yesterday, but were up almost 40% on a year ago.

In New Zealand and Australia, its market share for a2 branded fresh milk was around 11% as of March 24, up from 10.8% in December, according to rolling 12-month data from the Aztec Australian Grocery Weighted Scan. Its a2 Platinum infant formula value market share lifted to 36.8% from 35.75% in the same period.

a2 Milk said the Kantar market tracking of large Chinese cities showed its infant formula consumption value share increased to 6% as of March, up from 5.4% in December.

While a2 Milk is expecting second-half group revenue growth to be broadly in line with the first, it reiterated its second-half earnings before interest, tax, depreciation and amortisation (ebitda) margins will be lower.

Full-year ebitda as a percentage of sales will be 31% to 32% due to marketing investment, investment in organisational capability and the weaker Australian dollar versus the New Zealand dollar.

Revenue lifted 41% on the year in the first-half to $613.1million, while ebitda was up 53% at $218.4million.



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