The A2 Milk Company Ltd (ASX: A2M) share price is in focus after reporting its FY25 half-year result.
A2 Milk produces dairy products that are made with milk that’s naturally all A2-type protein, with no A1. Infant formula and liquid milk.
A2 Milk HY25 result
Here are some of the highlights from the result for the six months to 31 December 2024, with its numbers reported in New Zealand dollars:
- Revenue grew 10.1% to $893.8 million
- EBITDA grew 5% to $118.9 million
- Net profit after tax (NPAT) increased 7.6% to $91.7 million
- Interim dividend of NZ$0.085 per share
The company reported that in regional revenue terms, the China and other Asian segment grew 11.8%, ANZ fell 2.7% (because of a further decline in the Daigou channel), USA grew 13.2% and MVM external ingredient sales rose 31.9%.
In terms of the product categories, total infant formula sales increased 7.2%, with Chinese label sales growing 2% and English label sales up 13%. Liquid milk sales in ANZ grew 11.2% and in the USA liquid milk sales grew 13.4%. Other nutritional sales grew 17.3%.
Excitingly, the business gained market share in Australian liquid milk, while in the USA it improved profitability and market share.
In China, the company said it maintained its top-5 infant formula brand position, with improved brand health and it was the third-highest market share gainer in the first half of FY25.
A2 Milk said it achieved a record Chinese label infant formula market share of 5.3%, up from 4.9% in FY24. This was driven by growth in online channels despite temporary supply constraints that were resolved during the half.
This was the second consecutive half of English label infant formula sales growth.
A2 Milk explained that overall profit grew slower than sales because of approximately $8 million of additional airfreight costs to “address temporary supply constraints”. The company said this was a one-off.
Outlook for the A2 Milk share price
Excitingly, the company increased its FY25 revenue growth guidance from “mid-to-high single-digit”, to “low-to-mid double-digit” percent year on year.
It also said the EBITDA margin is expected to be “slightly up” compared to FY24. With improvement like that, it’s no wonder the A2 Milk share price is up 14% in early reaction.
It’s difficult to forecast infant formula demand, it’s not the sort of business I’d want to buy when it’s reliant on Chinese demand, which can be unpredictable and it’s hard to say where it will be in five years.
For me, there are other ASX growth shares I’d rather buy.
