A2 Milk (A2M) share price rallies with A+ AGM


A2 Milk (A2M) $13.87 as at 19/11/2019


Dual listed milk product producer A2 Milk has soared today, easily the best performer in the top 200 locally as well as the top 50 in New Zealand. The rally comes on comments made at the company’s AGM in Auckland with outlook comments far surpassing the market’s expectations.

A2 has started FY20 strongly with expectations of first half revenue to hit $NZ780m to $NZ800m, hitting growth of 29% on the first half of FY19. Margins are also expected to expand to 31-32% in the half with improving price metrics as well as favourable FX moves helping lift the result. Revenue growth has been mostly driven by significant international infant formula growth, particularly in China which saw ~84% growth and now represents over 15% of the revenue make up.

The company does expect some slip in margin in the second half with packaging and input costs creeping higher while also lifting marketing spend and investing in distribution channels through China, however margins are still expected in the range of 31-32%. This compares to market consensus EBITDA margins of circa 28%, or an 11% beat at the EBITDA line if revenue expectations are met which the company is on track to do.

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