Formula sales drive a2 Milk profit sharply higher

Xu Jun, Chairman China State Farms Holdings Shanghai (distributor of A2 milk products in China) and Geoff Babidge Chief Executive Officer of A2 Corporation. Photo / Chris Miller

Alternative milk company a2 Milk said exceptional growth in its infant formula sales had driven its net profit to $30.4 million in the year to June from a $2.1m loss a year earlier.

Total revenue came to $352.8 million - an increase of 127.4 per cent over the previous corresponding period.

The company - which uses A2 beta casein protein-type milk to the exclusion of the more mainstream A1 protein equivalent - said there had been continued growth in the Australia and New Zealand market, and in China.

"The Australia and New Zealand business achieved exceptional growth in a2 Platinum infant formula products, with continued steady volume growth in a2 Milk™ branded fresh milk and initial sales of a2 Milk™ branded whole milk powder," a2 Milk said in a statement.

Sales of a2 "Platinum" infant formula in China grew strongly, and the China and other Asia business delivered positive operating earnings for the first time since the company entered the China market.

The United Kingdom business delivered an improved financial performance as it continued to transition from a fresh milk focus to a broader portfolio strategy, while the focus for the US business remained on investment to grow distribution, consumer awareness and demand for a2 Milk.

The company increased its overall investment in international growth and brand development from $15.2m in the 2015 financial year to $20.5m, in line with the strategy of expansion into target markets and product categories with significant growth potential.

"The 2016 financial year brought significant progress in our evolution from a branded dairy products company to one increasingly focused on a broader nutrition platform," managing director Geoffrey Babidge said.

Babidge said the company had provided increased funding and support for relevant scientific research, and to develop and enhance its portfolio of brand assets and intellectual property.

There was further progress in research around the digestive and potential health benefits of products containing A2 beta casein protein-type to the exclusion of the A1 protein equivalent.