A case of what China slowdown?
Shareholders in the A2 Milk Company (A2M) yesterday heard how their company had seen a surge in revenue in the first four months of the 2016-17 financial year contrary to the generally held market belief that the dairy sector was tanking and bound for more trouble.
And the meeting in New Zealand also heard that so long as the company continues to perform well, shareholders can expected the payment of dividends from 2017-18 onwards.
Reasons (real or spurious) have been trotted out for the loss of favour the dairy sector has found itself in among local investors – from a slowdown in China, weak demand, indifferent consumers, and the general malaise in the dairying sector.
But if that’s the case, they’ve passed A2 by, or it has been particularly nimble in guiding itself through what has certainly been tougher times than the sector has been used to for some time.
The New Zealand-based company told shareholders at the company’s annual general meeting in Sydney yesterday that revenue for the four months to October, 2016 was up 96% per cent to $NZ155.2 million (yes, that’s 96%), compared to a year earlier.
That has flowed through to earnings with profit before tax for the first hour months of the financial year up 536% to $NZ35 million (from $NZ3.5 million) and after tax profit up to $NZ22 million from $NZ3.2 million.
And chairman, David Hearn and CEO, Geoff Babidge hinted that if the improvement continued and barring any more demands for new spending, the company could start considering a dividend starting in 2017-18.
"The outstanding progress of the business over the past year has also transformed our financial position, with earnings and cash flow considerably in excess of our expectations at the start of the year. As foreshadowed, provided that these positive trends continue and also provided that there is no need for substantial additional capital expenditure, the Board currently expects to adopt a dividend policy following the completion of this financial year,” Mr Hearn told the meeting.
"Assuming continuing strong positive operating cash flow and in the absence of new significant capital demands, the Board currently expects to adopt a dividend policy following completion of the financial year,” Mr Babidge told the meeting.
The growth over the four-month period reflected the major seasonal build-up for China’s Singles Day, the November 11 holiday that is a major online shopping event.
The company also said it had strong positive operating cash flow.
A2 Milk’s biggest market is Australia and New Zealand but it is building markets in China, Asia, the UK and the US.
Chairman Hearn said A2 Milk’s priorities for the current year and beyond would be to consolidate the gains made in fiscal 2016.
The company would continue to build its market positions and brands in its chosen development markets.
The news saw the shares re-rated and up they went, rising more than 7% on the day to end at $2.11.
