Specialty dairy company A2 Milk has posted a record profit on the back of surging demand for its infant formula.
The continued low prices are likely to put pressure on Fonterra’s forecast payout to farmers of $7 a kilo of milk solids for the season just started.
The company’s net profit for the year ended June more than doubled to $195.7 million, compared with the previous year’s $90.6m.
Its revenue rose by more than two-thirds $922m because of strong demand in Australia and China.
The company, which has been one of the hottest local stocks over the past year, said it’s pressing on with diversifying its business.
“Significant progress has been achieved in Australia, China and the USA and important emerging market opportunities are starting to materialise,” managing director Jayne Hrdlicka said.
The company produces only milk without the A1 protein, which is seen as more acceptable for those unable to handle ordinary milk.
Canterbury based Synlait Dairy produces the infant formula for A2 Milk.
A2 has just started domestic fresh milk sales in conjunction with Fonterra, and it’s also planning to invest more in marketing and sales in key markets.
The world’s number one dairy company Nestle has just started producing A2 milk products, but Ms Hrdlicka said there was no sign yet that it was hurting its own sales.
“The company remains confident that competition will ultimately expand the category over time. The combination of our strong and contemporary brand, deep know-how and intellectual property … means our business is uniquely positioned to benefit from category expansion.”
A2 Milk expected further growth in revenue, but it would spend more on marketing and product development, as well as have more staff in China to support sales, she said.
Source: Radio NZ