At time of writing, The a2 Milk Company [ASX:A2M] shares are at $10.70, continuing its upward climb after yesterday’s respectable 5% increase from $10.05 to $10.60 per share.
The New Zealand-founded dairy company, which produces, markets and sells dairy products free from the A1 protein — which can cause digestive discomfort — announced their FY18 results on the ASX yesterday morning.
It appears the pleasing figures outlined in the report have resulted in this steady increase in a2 Milk’s share price.
Growth from every corner for a2 Milk
A commentary report accompanying the FY18 results presentation highlights the various positive gains for a2.
Total revenue for the company sits at $922.7 million, which is a 68% increase from last year’s results.
Net profit after tax increased by a staggering 116% in this financial year, reaching $195.7 million. EBITDA is also comfortably higher at $283 million, a 101% increase.
What’s of particular interest is the strengthening of shares in their infant formula sector — up 5.1% in China and 32% in Australia.
This is reflective of what occurred back in June, when a2 was reporting success in China with its multi-channel infant formula strategy.
Part of this strategy involved a new brand campaign with live streaming events and TV segments, maintaining the relevance of a2 milk across Asia.
As of now, the company notes in the FY18 report that approximately 10,000 Chinese pharmacies and food stores are distributers of a2 products. There are also around 6,000 US stores currently stocking a2 formula.
Sales of a2 Platinum infant formula grew substantially in FY18 in Australia and China, clocking a sales revenue increase of 84%.
While there was an increase in investment spending for these new marketing initiatives by about $40 million, the strong cash position seems to counteract these additional costs. Cash on hand was recorded at $340.5 million at FY18 close, compared with $121 million the previous year.
Anything on the horizon?
This year saw the launching of three new a2 products — a Stage 4 infant milk powder, a pregnancy formula, and a milk powder blended with Manuka honey (sounds delicious!). This Manuka honey product is the first to be launched with Fonterra’s assistance.
The company also confirmed they were ‘establishing a strategic relationship with Fonterra Cooperative Group Limited and an exclusive distribution agreement with Yuhan Corporation for the South Korea market’.
Progress does not look to be slowing down. Managing Director and CEP Jayne Hrdlicka states:
‘significant progress has been made in Australia, China and the USA and important emerging market opportunities are starting to materialise.
‘The Company has continued to invest…in the strength of the organisation, as we build capability and capacity to deliver on growth against our core opportunities’.
It isn’t hard to see why a2 Milk shares are responding so well.
For Markets & Money
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