A2 doubles profit, cites strong Aussie sales

NZX alternative listed A2 Corp has more than doubled its after tax profit and increased revenue by 48% as the company's fresh milk continues to sell strongly in Australia.

The company says group profit after tax was $4.4 million for the year to June 30, up 108% from $2.1 million the previous year.

A2, which claims its fresh milk has a health benefit from a protein variant, also achieved sales of $62.4 million, 48% higher than the 2011 year.

Managing director Geoffrey Babidge told NBR ONLINE the positive result continues what was started last year.

"It reflects the strong growth we're seeing in Australia, but also our strategic growth plans such as launching A2 milk in the UK and our infant formula strategy for China."

The company has a supply deal with Synlait Milk to provide its infant formula, the first of which is expected to be produced in December.

In the UK and Ireland, A2 plans to start selling milk in October through a sales and marketing joint venture with large fresh milk dairy company Robert Wiseman Dairies.

The company says the market for fresh milk in the UK is about 6.5 billion litres a year, and sales of A2 could triple what is achieves in Australia.

Mr Babidge estimates A2 has a 6% share of fresh milk sales in Australia.

To meet the demand for its milk in Australia, it opened a new facility in Sydney last month.

Getting the product on New Zealand shelves, however, remains a problem.

"Sales of A2 milk in New Zealand are quite small," Mr Babidge says.

"Under previous management, the company issued a number of non-exclusive licenses for the product.

"Fresha Valley has the only non-exclusive license now, and we've been discussing with them how we can increase the distribution."

The New Zealand market, however, is unlikely to feature strongly in the company's future strategy.

"Growing the Australian market and developing the UK and Ireland market, and infant formula into China, are the key priorities. But we would like to do more in fresh milk in New Zealand," Mr Babidge says.

A2 shares (NZX: ATM) were up 4.4% to 48 cents this morning, while shares have surged 100% this year.