By David Winning
SYDNEY–A2 Milk achieved its annual revenue guidance, but offered a cautious outlook as the Chinese market for infant formula becomes increasingly challenging and daigou–surrogate shopping–sales stay weak.
A2 Milk said its revenue rose by 10% to 1.59 billion New Zealand dollars (US$943.7 million) in the 12 months through June, in line with guidance. China label infant milk formula sales rose by 28%, bucking the trend in English label sales which were down by 6.1%.
Annual net profit rose 27% to NZ$155.6 million, from NZ$122.6 million. Earnings before interest, tax, depreciation and amortization–or Ebitda–rose 12% to NZ$219.3 million.
Directors of the company did not declare a final dividend.
“Our China label IMF sales exceeded English label sales for the first time, and our total IMF sales were over NZ$1.1 billion making us a top-3 share gainer in the market overall,” said Chief Executive David Bortolussi.
Looking ahead, a2 Milk said it expected a double-digit decline in the China IMF market in FY 2024.
Still, it told investors that it expected to increase market share and achieve low single-digit revenue growth in FY 2024 and an Ebitda margin broadly in line with FY 2023.
“The Daigou market in English label IMF declined sharply again this year by almost 40% and we have pivoted further to the more controlled channels which have performed better and where we continue to gain share,” Bortolussi said. “The China IMF market has become increasingly challenging as a result of lower birth rates and increased competitive intensity.”
In a research note earlier this month, analysts at Forsyth Barr had predicted a solid annual result ahead of a challenging fiscal 2024 as macro trends weaken and data point to soft daigou sales. The investment bank highlighted consensus revenue and Ebitda expectations for fiscal 2024 were NZ$1.75 billion and NZ$259 million, respectively.
Write to David Winning at david.winning@wsj.com
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