What to expect from A2 Milk Company this Australian reporting season?

When will a2M report its latest earnings?

The a2 Milk Company, founded in New Zealand in 2000 and dual-listed on the ASX and NZX, is set to release its 1H24 financial results for the half-year ended 31 December 2023 on Monday, 19 February 2024.

a2M's branded milk is unique, coming from cows selected to produce only the A2 protein type, devoid of the A1 protein, which is alleged to be harmful.

Key financials

• Expected revenues of NZ$777.39 million
• Anticipated EBITA of NZ$99.8 million
• Projected EPS of 9.8c

a2Milk's strategic comeback

The advent of COVID-19 saw a2Milk's sales surge due to panic buying, only to face a dramatic downturn as international border closures impacted the daigou/reseller channel it relied upon. Since then, management has diligently worked to stabilise the business, addressing excess stock and enhancing its leadership team.

These efforts led to a reported 10.1% increase in revenue to NZ$1.59 billion in FY2023, with NPAT rising by 11.8% to NZ$219.3 million. The company's basic earnings per share (EPS) also saw a significant rise of 28.7% to 21.2 cents.

a2Milk's leadership celebrates historic gains

David Bortolussi, a2Milk Company’s Managing Director and CEO, commented on the achievements:

• “I’m proud of what our team has achieved this year, growing sales by 10% while the core China IMF market declined by 14% is a remarkable achievement.
• “Our China label IMF sales exceeded English label sales for the first time, and our total IMF sales were over $1.1 billion, making us a top-3 share gainer in the market overall.
• “Achieving re-registration of our China label IMF product recently was critical to maintaining access to the important domestic market, and we look forward to launching our new product in the coming months.
• “The Daigou market in English label IMF declined sharply again this year by almost 40%, and we have pivoted further to the more controlled channels, which have performed better and where we continue to gain share.

a2Milk's market share projections

Within its FY23 earnings report, a2Milk stated that despite an anticipated double-digit decline in the China IMF market in FY24, it aims to increase market share and achieve low single-digit Group revenue growth in FY24, with an EBITDA margin broadly in line with FY23.

In mid-January, the company received positive news: China’s National Bureau of Statistics (NBS) reported 9.02 million newborns (-6% YoY), surpassing the 8.5 million forecasted in 2023. A recent broker report suggested that the number of babies born in China could increase by approximately 2% to around 9.2 million, driven by a 4% increase in marriage registrations, couples resuming family planning postponed by the pandemic, and a desire to have children in the popular Year of the Dragon.

a2M's revenue 2014 to present

a2M technical analysis

From its bull market high of $20.05 in June 2020, the a2M share price plummeted over 80% to a low of $3.70 in late 2023. At this low, it seems to have formed a rounded bottom on the weekly chart, leading to a rally in mid-January that pushed the a2M share price back above $5.00 for the first time in six months.

Above the current price of $5.16, there is horizontal resistance at around $5.25, marked by two lows in mid-2021 and a high of $5.27 in August 2023. If the a2 Milk share price can breach the $5.25 resistance, it could pave the way towards $6.00.

Beyond $6.00, more formidable horizontal resistance lies ahead of approximately $7.50, a level the a2M share price has not surpassed in almost three years. However, overcoming this hurdle is likely a story for 2025.

A2M weekly chart

• _{Source: TradingView. The figures stated are as of 8 February 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}