a2 Milk Company Posts 10% Revenue Growth, Declares NZD 0.085 Interim Dividend
The a2 Milk Company Limited has reported solid revenue and profit growth for the half-year ending December 2024, alongside a confident dividend declaration reflecting its strengthened financial position.
- Revenue increased 10.1% to NZD 893.8 million
- Net profit rose 7.6% to NZD 91.7 million
- Interim dividend declared at NZD 0.085 per share
- Net tangible assets per share improved to NZD 1.67
- Ongoing legal proceedings remain a potential risk
Strong Half-Year Financial Performance
The a2 Milk Company Limited has delivered a robust set of interim results for the six months ended 31 December 2024, reporting a 10.1% increase in revenue to NZD 893.8 million compared to the prior corresponding period. Net profit attributable to shareholders rose 7.6% to NZD 91.7 million, underscoring steady growth in the company’s core dairy and infant formula businesses.
The company’s gross margin expanded slightly, supported by disciplined cost management despite increased marketing and administrative expenses. Operating profit before tax stood at NZD 127.3 million, with a net profit after tax of NZD 84.0 million. Earnings per share improved to 12.68 cents on a basic basis, reflecting both operational efficiency and revenue growth.
Segment and Geographic Highlights
Revenue growth was broad-based across the company’s key segments. The China and Other Asia segment, a critical market for a2 Milk’s infant formula products, maintained strong sales momentum. Australia and New Zealand also contributed significantly, with infant formula and nutritional products performing well. The USA segment and Mataura Valley Milk manufacturing operations continued to support the group’s diversified revenue streams.
Management highlighted that the majority of infant formula sales in Australia and New Zealand are ultimately consumed in China, reflecting the company’s strategic positioning in the Asia-Pacific region. The company’s investment in Synlait Milk Limited, a dairy processor, also saw a fair value gain of NZD 9.5 million during the period, adding to overall financial strength.
Balance Sheet and Dividend
The balance sheet remains solid, with net tangible assets per share increasing to NZD 1.67 from NZD 1.54 at the previous year-end. Cash and term deposits totalled over NZD 1 billion, providing ample liquidity for ongoing operations and strategic initiatives.
Reflecting confidence in future earnings, the board declared an interim dividend of NZD 0.085 per share, payable on 4 April 2025 to shareholders on record as of 21 March 2025. The dividend is fully franked, signaling strong cash flow generation and commitment to shareholder returns.
Legal Proceedings and Outlook
The company disclosed ongoing group proceedings in Australia and New Zealand alleging misleading and deceptive conduct related to disclosures made during 2020-2021. While the company denies any liability and intends to vigorously defend the claims, these proceedings represent a material uncertainty that investors should monitor closely.
Looking ahead, a2 Milk’s management remains focused on executing its growth strategy, leveraging its unique product positioning and expanding market reach. The company’s long-term incentive plans tied to earnings and revenue growth targets further align management with shareholder interests.
Bottom Line?
a2 Milk’s interim results reinforce its growth trajectory and financial resilience, but legal risks warrant close investor attention.
Questions in the middle?
- How will ongoing legal proceedings impact future earnings and share price?
- What is the outlook for infant formula demand in China amid regulatory changes?
- Will the company maintain or increase dividend payouts amid market uncertainties?
