Wednesday , June 26 2019
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2 Milk turns to annual loss on increased costs; no action on takeover bid

A2 Milk, the specialty milk marketing company, turned to an annual loss despite a hike in revenue as it invests in offshore expansion and absorbed costs from its ASX listing.

The net loss after tax was $2.09 million for the year ended June 30, compared to a $10,000 profit the year earlier, the Auckland-based company said in a statement. Revenue rose 40 percent to $155 million, while earnings before interest, tax, depreciation, amortisation and one-time costs rose 35 percent to $4.18 million, following a record performance in Australia and New Zealand. Non-recurring ASX listing costs were $1.68 million.

Managing director Geoffrey Babidge said the company’s growth initiatives were continuing to progress, with the results evident in this year’s trading results.

“The Australian business continued to perform strongly and returned a record result for the region. The growth in A2 Platinum infant formula in Australia and New Zealand and China was exceptional and provides a potentially significant earnings contributor for the future,” he said.

Within two years of launch, infant formula has become 27 percent of total turnover, achieving revenue of $41.7 million in Australia, New Zealand and China during the year.

The company is pleased with the start of sales in the US milk market and the re-positioning during the year of its product offering in the UK market.

On the basis of this year’s performance and assuming trends in infant formula are sustained, the company expects 2016 revenue to increase 72 percent to $267 million, and Ebitda to increase 150 percent to $12 million.

There has been no word from Australian-based Freedom Foods and US-based Dean Foods since their expression of interest in taking over the company, which was rejected by the board.

“We have had no further communication with either Freedom Foods Group or Dean Foods since we advised that the proposal in the expression of interest was not compelling,” Babidge said.

A2 deferred a planned June capital raising following the expression of interest.  Freedom Foods, which is effectively controlled by the Perich family who are major suppliers of A2 milk, holds a 19.1 percent blocking stake.

The company’s shares slipped 2.6 percent to 75 cents, and have gained 33 percent so far this year. Analysts covering the stock have target prices of $1 and more.