a2 Milk Surges with 10% Revenue Growth and First Ever Dividend

Strong Financial Performance

The a2 Milk Company (ASX: A2M) has delivered a compelling first half for FY25, reporting a 10.1% increase in revenue to NZ$893.8 million. This growth was broad-based, with notable strength in the China & Other Asia segment, which rose 11.8%, and the USA segment, up 13.2%. Despite a 2.7% decline in the ANZ region, largely due to ongoing challenges in the Daigou channel, the company’s overall momentum remains robust.

EBITDA grew 5.0% to NZ$118.9 million, maintaining a healthy margin of 13.3%, even after absorbing approximately NZ$8 million in incremental airfreight costs to mitigate temporary supply constraints. Net profit after tax attributable to shareholders rose 7.6% to NZ$91.7 million, with earnings per share climbing 7.4% to 12.7 cents.

Market Share Gains and Innovation Drive Growth

In China, a2 Milk has solidified its position as a top-five infant milk formula (IMF) brand, achieving a record 5.3% market share for China label IMF products, up from 4.9% in FY24. This gain was particularly impressive given the broader market contraction of 6%. The company’s English label IMF segment also posted double-digit revenue growth of 13%, benefiting from a market recovery and strong post Double-11 demand.

Innovation remains a cornerstone of a2 Milk’s strategy. The launch of a2 Genesis™, a super-premium English label IMF product targeting the rapidly expanding human milk oligosaccharide (HMO) segment, highlights the company’s commitment to product differentiation. Additionally, the expansion of fortified milk powder offerings aimed at seniors and children reflects a strategic diversification beyond infant nutrition.

Strategic Initiatives and Supply Chain Transformation

The company is advancing its supply chain transformation with the commencement of China-based production of fortified milk powder products using a2 Milk® sourced from Mataura Valley Milk (MVM). This move is expected to enhance supply reliability and cost efficiency. What's more, a2 Milk has submitted a US FDA application for long-term approval of its IMF products, signaling intent to deepen its footprint in the lucrative US market.

Partnerships also feature prominently in a2 Milk’s growth blueprint, exemplified by the agreement to establish a Global R&D centre in China in collaboration with China State Farm. This facility is poised to accelerate innovation tailored to local consumer preferences and regulatory requirements.

Dividend Declaration and Outlook

Marking a milestone, a2 Milk declared its first-ever interim dividend of 8.5 cents per share, fully imputed and franked, representing approximately 67% of NPAT. This move signals management’s confidence in the company’s cash flow generation and long-term prospects.

Looking ahead, the company has upgraded its FY25 revenue growth guidance from mid to high single digits to low to mid double digits, with expectations of a slight improvement in EBITDA margin compared to FY24. CEO David Bortolussi emphasized the company’s focus on securing additional China label IMF registrations and advancing nutritional manufacturing capabilities as critical to sustaining growth.

While the Daigou channel continues to diminish in importance, now representing less than 5% of IMF sales, the company’s pivot to e-commerce and direct channels appears to be paying dividends. The sustained marketing investment has also driven record brand health metrics, underpinning the company’s competitive positioning.