A2 Milk rallied 8% as the embattled company returned to double-digit growth

A2 Milk FY22 key results

• Revenue up 19.8% to NZ $1,446.2 million
• Underlying EBITDA up 59% to NZ $196.2 million
• Net profit after tax up 42.3% to NZ $114.7 million
• Earnings per share up 51.8% to 16.49c
• Operating cash flow reached NZ $204 million
• NZ $150 million on-market share buyback

A2 Milk FY22 annual report highlights

• Market shares

The highlight for a2 Milk Co Ltd this year were the record market shares achieved in China, Australia, and the US thanks to a 36.3% increase in marketing and brand awareness.

In terms of the generated revenue, the operating revenue from China and other Asian country soared by 24.5% to $726 million while the US saw a surprising 30% increase in revenue.

English label infant formula also achieved a sales growth of 11.6% and all markets are seeing strong momentum across domestic mother and baby stores and e-commerce channels.

FY23 outlook

Moving forward, A2 Milk is anticipating high single-digit revenue growth in FY 2023, thanks mainly to its solid market penetration in the global milk product market. However, management is expecting its gross margin to be relatively flat as the cost of goods is pushed higher by increasing milk, ingredient, and packaging costs under the global inflation headwinds.

Meanwhile, the marketing investment related to its branding initiatives is expected to increase following the company’s expansive branding strategy for the previous years. Nevertheless, the company is still looking for a modest improvement in both EBITDA growth and EBITDA margin in FY 2023.

A2 technical analysis

The A2 share price skyrocketed by more than 8% after the rosy report despite the ASX being covered in red today.

Even after today’s gains, the A2 Milk share price has lost five percent year to date in 2022 and eight percent in 52 weeks. The good news is the price has managed to break through the moving trajectory which is likely to introduce a new round of rising targeting the March high ($5.44). On the other hand, any recent slip will be supported by the level of $5.24 before retesting its 20-day moving average.