A2 Milk on road to recovery

In its annual results, released late last month, the company announced revenue growth of 19% over the previous year to $1.45 billion.

The company’s net profit after tax was up 42.3% on last year to $114.7 million, and earnings per share were up 51.8% to 16.5 cents.

The 2021 financial year saw the company face uncertainty and volatility caused by the prolonged impacts of the Covid-19 pandemic and a changing China infant nutrition market.

This year, a2 Milk Company managing director and chief executive David Bortolussi seems largely positive about the outlook for the company, describing the 2022 financial year as a successful one, “returning to double digit growth in revenue and earnings despite significant headwinds”.

“We are pleased with the progress that has been made in stabilising the business, refreshing our strategy and improving our execution,” he says.

Bortolussi says that the company’s ‘significant increase’ in marketing investment led to further gains in brand health metrics and market share delivering strong growth in the China infant milk formula business.

“We are pleased with the transition of our English label product distribution to more transparent, performance-based and exclusive partners.”

He says the company remains committed to the Daigou channel, adding that the company has increased its direct engagement and marketing support.

“We have maintained our brand leadership position in liquid milk in Australia with increased loyalty and household penetration, and our USA milk business grew strongly during the year driven by innovation.

“Our on-market buyback of up to $150 million demonstrates effective capital management and the improved confidence we have in our strategy, execution and outlook.”

In his report to shareholders, a2 Milk Company’s chair David Hearn wrote that it was pleasing to provide a more positive update compared to last year.

“It was important for us to recognise in FY21, in light of the world changing as a result of the global pandemic, that we would need to develop new and appropriate strategies to succeed in the future, not by discarding the foundations on which we have built past success, but by building on them and developing further to remain fit for purpose in this new environment,” Hearn wrote.

He added that during the year, both the company’s board and executive leadership completed a review of market, brand, product and distribution opportunities, announcing a new growth strategy earlier in the financial year in response to changes in the infant milk formula market in China.

Hearn claimed that the 2022 result proved that the plans developed under that strategy were already gaining traction.

“This year’s performance proves that our confidence in the underlying strength of the a2 brand was well-founded,” he wrote.

“Our refreshed growth strategy, increased brand investment and a renewed inventory setting have resulted in a strong performance, improved trajectory, clear market share gains and our strongest brand health metrics recorded to date.”