A2 Milk result: Net profit leaps 21% on China sales

A2 Milk chief executive Geoff Babidge. Photo / NZ Herald

A2MILK

A2 Milk said its net profit jumped by 21.1 per cent to $184.9 million in the first half to December 31.

The company's earnings before interest, tax depreciation and amortisation (EBITDA) came to $263.2m, up 20.5 per cent.

Analysts had expected a2 Milk's EBITDA to come in at around $247m.

The alternative milk company's total revenue lifted by 31.6 per cent to $806.7m, compared with its own guidance of $780 to $800m for the half.

Group infant nutrition revenue came to $659.2m, up 33.1 per cent.

There was strong growth in China label infant nutrition, with sales doubling to $146.7m.

A2 Milk said it was unable to quantify the impact, either positively or negatively, of the coronavirus outbreak in China.

For the full 2020 year, the company said it anticipated continued strong revenue growth across its key regions supported by increased marketing investment in China and in the US.

"Globally, there is uncertainty around the potential impact to supply chains and consumer demand in China resulting from Covid-19 and we continue to monitor the situation closely," the company said.

"Given the essential nature of our products for many Chinese families, demand is strong, particularly through online and reseller channels, with revenue for the first two months of 2H20 above expectations," a2 Milk said.

"However, this is a dynamic situation and at this stage, we are unable to quantify the impact, either positively or negatively, for the full year," it said.

Notwithstanding this uncertainty, full-year EBITDA margin was still anticipated to be in the range of 29-30 per cent - unchanged from its previous guidance.

A2 Milk added that the board "considered it appropriate" to target EBITDA margin of 30 per cent in the medium term.

The company said that given the Covid-19 situation, it was assessing the level of discretionary marketing investment deployed in China for the remainder of the year.

The company's share price rallied by 77c, or 5.5 per cent, to $16.55, in the minutes following the result.