Image source: Pixabay

Highlights

  • A2 Milk is listed on ASX and NZX under the ticker code A2M and ATM, respectively
  • In FY23, A2M’s revenue climbed 10.1% YoY to NZD 1,592.9 million, driven by significant growth in China and other Asia segments
  • In 2023-24, milk production is forecasted to increase by 1% to reach 8.2 billion litres amid higher milk yields

The A2 Milk Company Limited (ASX: A2M) is a dual-listed company based in New Zealand which sells branded products which are made with milk naturally containing the A2-type protein. A2M’s revenue jumped 10.1% YoY to NZD 1,592.9 million, and EBITDA went up 11.8% YoY to NZD 218.3 million in the financial year 2023 (FY23). Growth in China and other Asia segments supported the jump in its sales revenue.

Recent business update

Through a recent business update, the company informed that it had sent a written notice to Synlait Milk Limited for cancelling the exclusive supply and manufacturing rights held by them for the manufacturing stages 1 to 3 of A2M’s existing infant milk formula products.

Through an ASX filing dated 18 October 2023, the company announced that its annual general meeting is scheduled for 16 November 2023.

Outlook

In FY24, the company expects low single-digit growth in revenue and anticipates its EBITDA and gross margin to align with FY23.

Operational cash conversion is forecasted to increase in FY24, in comparison to FY23, underpinned by the decrease in inventory cover.

Growth prospects

The consumer staples sector may witness revenue growth because of an uptrend in retail trade and resilient consumer spending. As per data shared by the Australian Bureau of Statistics (ABS), in August 2023, the retail trade increased by 0.2% month-over-month and by 1.5% over the previous corresponding period. On a seasonally adjusted basis, the retail turnover stood at AUD 35.43 billion.

In the September quarter, the full-year food inflation eased to 4.8%. During the reported period, the prices were lower across all food categories.

In 2023-24, milk production is forecasted to increase by 1% to reach 8.2 billion litres amid higher milk yields.

Key challenges

In the June 2023 quarter, the private new capital expenditure for retail trade dropped by 8% QoQ and 4.7% over the previous corresponding period.

In 2023-24, the farmgate milk prices are forecasted to decline to 71.4 cents per litre. However, on a historical basis, farmgate milk prices are anticipated to remain elevated.

Share performance of A2M

A2M shares closed 1.52% down at AUD 3.88 apiece on 26 October 2023. With this, A2M’s share price recorded a fall of 26.37% in the last 12 months and a drop of 28.28% in the past six months.

The 52-week high of A2M is AUD 7.14 apiece, recorded on 17 January 2023, while the 52-week low is AUD 3.94 apiece, recorded on 25 October 2023.

 

Note 1: Past performance is neither an Indicator nor a guarantee of future performance.

 

Note 2: The reference date for all price data, currency, is 26 October 2023. The reference data in this report has been partly sourced from REFINITIV.