A2 (A2M) today posted a net profit after tax of $NZ30.4 million for 2016, compared with a net loss after tax of $NZ2.1 million a year ago.
Total revenue was $NZ352.8 million, up 127.4 per cent. Cash at hand is now 10 times higher than last year, while the company’s UK operations are now cost neutral. A2’s US business is expected to be the same within the next 12 months.
Infant nutrition products now represent more than 61 per cent of total revenue, and a higher proportion of earnings. These proportions are anticipated to increase further in FY17.
“Now that 61 per cent of our business is in more traditional nutritional products, we have been developing our strategy around broadening that,’’ said chief executive Geoff Babidge.
“We are only focused on Australia and China. We haven’t gone broader into other parts of Asia … There are broader products within infant nutrition — for example there is an opportunity to launch a product called stage 4 for older children.’’
A2 MilkTM branded whole milk powder in retail packs was launched in June 2015, building sales in Australia and China.
Mr Babidge said further opportunities to leverage the a2 MilkTM brand as a platform for a broader nutritionals portfolio in powder, liquid and/or supplement form were under review.
A2 Ice CreamTM was also launched into a number of retailers in Australia from August 2015.
In the fresh milk category the latest figures show a2 has been able to snatch just over 9 per cent of Australia’s fresh milk market, despite its relatively high price tag. That number does not include sales in Aldi and Costco supermarkets.
“We are continuing to get growth. It also gives us the opportunity to communicate more broadly that we are top payers in terms of farmgate product,’’ Mr Babidge said of the pricing crisis that has hit the local industry in the wake of the turmoil engulfing Murray Goulburn.
“In both the Sydney and Melbourne markets our share is now over 10 per cent in value.’’
This week a2 announced a new supply agreement with the Synlait Milk company for the production of a2 Platinum® infant formula.
The new supply agreement for a2 Platinum® infant formula production is for a minimum term of five years, and provides for a rolling three-year term after the first two-year period.
Mr Babidge said the new agreement would help a2 meet new regulations announced by the China Food and Drug Administration aimed at reducing the number of infant formula brands sold across the country.
The rules limit registered factories in China and offshore to producing three brands and nine different products each. From January 2018, a2’s infant formula products will need to be registered with China FDA.
“Because we have now further linked our businesses, we will one of the 3 brands that Synlait will take forward for registration in October this year. So that further enhances our position,’’ Mr Babidge said.
“The high quality state of the art facilities of Synlait will also assist. That provides reassurance to Chinese regulators.’’
A2’s long-running claim that its A2 protein-only product helps consumers “feel better” and lessen digestive discomfort is now set to be tested in court for the first time as part of the company’s legal action against rival Lion.
A2 has challenged the Japanese-owned Lion’s use of the term “A2 protein” on labels for its milk brands Pura and Dairy Farmers.
Lion said in court this week that as well as protecting its “Naturally contains A2 protein” claim, it planned to scrutinise the science behind a2’s health-related claims.
“We are very confident in prosecuting this case and quite frankly we welcome the opportunity to promote the science and benefits of a2 milk that Lion is electing to challenge,’’ Mr Babidge said.
Source: TheAustralian
Link: http://www.theaustralian.com.au/business/companies/a2-to-broaden-its-scope-after-profit-turnaround/news-story/312a63a452943d121bac69e3b8e608da
