Infant formula sales drive a2 Milk Company to revise full year outlook

18-Nov-2015 - Last updated on 19-Nov-2015 at 08:33 GMT

The a2 Milk Company (a2MC) has revised its full year outlook on the back of booming demand for a2 Platinum infant formula.

a2MC announced yesterday it was revising its earnings forecast on the back the "exceptional performance" of its a2 Platinum range in the four months ended October 31.

It previously forecast revenue of NZ$267m (US$174m) and operating EBITDA of NZ$12m (US$7.8m) for the 2016 financial year, which began July 1.

"Based on current trading trends," a2MC is now forecasting revenue of NZ$285m (US$186m) and operating EBITDA of NZ$22m (US$14.4m).

In a statement, Geoffrey Babidge, managing director and CEO, a2MC, said a2 Platinum is "emerging as a more significant growth driver for the Company."

At NZ$38m (US$24.8m), a2 Platinum accounted for 47% of the company's total sales in the first four months of FY 2016.

This, Babidge said, is up from NZ$8.7m (US$5.7m) in the first four months of FY 2015, and falls only slightly short of the NZ$41.7m (US$27.2m) reported for full FY 2015.

"This exceptional performance indicates the increasing appeal and growth potential for the a2 Platinum brand in both ANZ and China and additional markets in the future," said Babidge.

Stateside launch

Meanwhile, the US launch of a2 Milk is "progressing," the company added.

a2 Milk is rich in A2 beta casein protein, but contains no A1 beta casein protein, which has been linked to digestive discomfort. In Australia, a2 Milk controls a 9% value share of the country's fresh milk market.

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Cartons of a2 Milk hit shelves in California in April.

Sales of a2 Milk in California are "behind budget given delays in achieving targeted distribution" but "rate of sale is meeting retailer expectations within the specialty milk category," it said.

Freedom Foods

Freedom Foods meanwhile announced the sale of its remaining 10.4% interest in a2MC for AU$64m (US$45.8m) - the equivalent of AU$0.85 per share.

Last month, Freedom Foods sold a chunk of its 17.8% stake in a2MC, just months after its failed joint bid with Dean Foods to acquire a2MC.

It said then, however, it intended to maintain a "strategic stake" in a2MC.

"However, recent significant share price appreciation in a2MC has led the Group to form the view that the opportunity cost arising from the market value of the funds now employed in the holding would now be better utilized by being applied to activities and businesses in respect of which the Group has either 100% ownership or significant ownership and control interests," Freedom Foods said yesterday.