A2Milk has already emerged as a beneficiary of the COVID-19 pandemic and lockdowns in that the slide in sales missed it.
Yesterday the company it more flesh on that suggestion with a further update of its performance so far this year and an upgrade to its guidance for the year to June.
The company’s share price hit an all-time high of $19.23 last week and has climbed about 30% in 2020 compared to a 23 percent drop for the wider market.
Yesterday the shares rose 1.6% to $18.62, well under that high.
The company said the upgrades were due shoppers stockpiling products during the COVID-19 crisis.
That supports the analysis of the record 8.2% surge in retail sales in March revealed in a preliminary report from the Australian Bureau of Statistics yesterday.
The NZ based dual-listed company said in the update that particularly strong sales of infant nutrition products in China and Australia had helped deliver a better-than-expected revenue result for the three months to March 31.
“We are now able to confirm that our revenue for the three months to 31 March 2020 (3Q20) was above expectations. This primarily reflected the impact of changes in consumer purchase behaviour arising from the COVID-19 situation and included an increase in pantry stocking of our products particularly via online and reseller channels, CEO Geoff Babbage said in the statement.
“We are unable to estimate the timing and extent to which pantry stocking may unwind.
“In addition, our China segment revenue, transacted in US dollars, was favourably impacted by a significant depreciation of the New Zealand dollar to the US dollar in the quarter,” he said.
As a result a2 has subsequently upped its full-year core earnings margin to between 31% and 32%, from the previous range of 29% to 30% it had forecast in February.
That was helped by overheads that are tracking lower than previously expected due to travel restrictions and some planned recruitment, particularly in China, being put on hold.
Revenue for FY20 is expected to be in the range of $NZ1.7 billion to $NZ1.75 billion ($A1.61 billion to $A1.65 billion), up sharply from $NZ1.3 billion in FY19.
The company did however note it was unlikely the revenue surge will be sustained as the “unprecedented” circumstances begin to unwind.
That’s a warning that revenue growth is expected to slow into 2020-21.
“Overall for FY20, we anticipate ongoing revenue growth across our key regions supported by increased levels of marketing investment in China and the USA as well as, to the extent practicable in the current circumstances, the ongoing development of our organisational capability to support the execution of our strategy,” Mr. Babbage said yesterday.
A2 is still searching for a permanent successor to former chief executive Jayne Hrdlicka, who stepped down in December. Ex CEO Geoff Babbage is holding the fort.
