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The investors of The a2 Milk Company Limited (ASX: a2M) get rewarded for believing in the company and its science as the infant formula company declared record financial results for the first half of Fiscal 2019.
The results highlight brought forward as massive as 55.1% rise in NPAT, 41% growth in Revenue, and 52.7% increase in EBITDA for 1H FY19 compared to the previous corresponding period. This took the stock price to shoot up near to its 52-week high of $13.780, currently up by 9.319% to trade at $13.490 on 20 February 2019 (1:13 PM AEST).
a2M achieved total revenue of NZ$613.1 million, up 41.0% on 1H FY18, delivering EBITDA growth of 52.7% to NZ$218.4 million for the half year ended 31st December 2018. This reflects the strong sales growth across all the segments of the company that was fueled up by the companyâs increased investment in the brand, market development and organisational capability.
The companyâs stronger distribution footprint in China has paid off by taking the China label infant formula sales up by massive 82.6% with a key market position in China, representing a consumption market share of 5.7%. Moreover, in the United States, the companyâs sales momentum continued with outstanding sales growth of 114.1% in the half year reportedly underpinned by increased investment in brand awareness and a stronger distribution base.
On the segmental front, the company posted 45.3% growth in infant formula sales of NZ$495.5 million achieved during 1H FY19, 20.2% improvement in liquid milk business to deliver NZ$83.4 million revenue, and a significant growth of 40.4% in other nutritional products of the company primarily driven by milk powders and supported by new products launched towards the end of FY18. a2 Platinum® infant formula continued as a significant growth brand in grocery, pharmacy and Daigou channels across Australia and New Zealand as it stands as the market brand leader with 35.7% value share, up from 32.0% at the end of FY18.
1H FY19 Net profit after tax of the company was accounted to NZ$152.7 million, up 55.1% compared to the previous corresponding period. This has resulted in the delivery of more than 50% rise in basic earnings per share (EPS) that was reported to 20.9 cents for the first half of FY19, up 52.9% on 1H FY18. It is because the business continued to be the highest brand advertiser within both the milk and infant formula categories with growing brand awareness and loyalty benefitting the portfolio as a whole.
Following the renewal of an agreement with China State Farm, the company stated that it is on track to appoint a CEO for Greater China who will lead the business through its next phase of growth in the region.
Outlook:
The company expects its full-year FY19 EBITDA as a percentage of sales to be approximately 31-32% driven by the continued investment in building organisational capability and marketing investment getting almost doubled in 2H19 compared to 1H19.
On the back of solid performance of 1HFY19, the company plans reinvest the benefits of scale in accelerating its marketing activities predominantly in China and the US. Following the renewal of the agreement with China State Farm, the company stated that it is on track to appoint a CEO for Greater China who will lead the business through its next phase of growth in the region.
Further, the company expects the Group revenue growth rate in the second half to continue broadly in line with the first half. The increased investment in brand building in 2H19 is expected to support revenue growth in FY20 and beyond.
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