A trebling of profit by A2 Milk to more than $90million resulted in the dual-listed alternative dairy company's shares hitting a record high this week.
A2 Milk has been the NZX50's top performer so far this year, and its share price has risen by more than 130% in the past year. An 8% rise since Wednesday pushed the share price up to a record $5.57 yesterday.
Total revenue rose 48% to $439.3million during the year to June and reported earnings before interest, tax, depreciation and amortisation (ebitda) were up 159% at $141.2million. After-tax profit was up 198% at $90.6million from $30.4million last year.
Forsyth Barr broker Lyn Howe said infant formula sales had surged from 61% of total sales to 72%, although fresh milk sales had been weaker.
``Despite operating cash flows of $100million, no dividend was announced.
``However, the company has indicated it will establish an on-market buy-back of up to $40million over the next 12 months, and remained open to consider the merits of a special dividend,'' Mrs Howe said.
Direct sales into China had surged 133% to $89million, driving ebitda growth of more than 260% to $33million.
Craigs Investment Partners broker Peter McIntyre said ``stellar growth'' in infant formula sales drove 72% of total revenues.
``Overall, this was another a strong result from A2 Milk across the board, with all metrics ahead of our second-half expectation.''
A2 had an operating cash flow of $100 million and cash balance of $121million.
``The stronger cash balance in part reflected A2 Milk's lower inventory position, despite a much larger sales base now.''
The share jump would support increased spending on advertising and promotion, while management looked to build a stronger China direct business as well as supporting its ``informal `daigou' sales channels'', where shopping agents bought products to send back to clients in China.
In Australia and New Zealand, margins had increased and there was a shift towards infant formula.
Mrs Howe said A2's rise in sales was largely on the back of a 78% rise in infant formula sales and a 26% increase in the grocery and pharmacy share by value.
A2 Milk offered no formal guidance yesterday, other than to say there would be ``continued growth'', particularly from infant formula and milk powder sales in Australia and China, she said.
The implementation of China Food and Drug Administration regulations from December 2017 might present ``some challenges'' to products labelled in English.
There was also an update to come on the cross-border e-commerce registration process, which could affect A2 Milk's direct sales into China, Mrs Howe said.
