a2 Milk’s $130M Loss on MVM Sale Raises Execution Questions
The a2 Milk Company reported record FY25 results with $1.9 billion in sales and declared its first-ever dividends, while advancing a major supply chain overhaul through a key New Zealand manufacturing acquisition and divestment.
- Record FY25 sales of NZ$1.9 billion with double-digit revenue and earnings growth
- Achieved top-4 brand status in China’s infant milk formula market
- Acquired Pokeno nutritional manufacturing facility for NZ$282 million
- Divested 75% stake in Mataura Valley Milk, expecting a NZ$130 million loss
- Declared first-ever dividends and plans a NZ$300 million special dividend
Strong Financial Performance Marks 25 Years
The a2 Milk Company has celebrated its 25th anniversary with a landmark financial performance, posting record FY25 sales of NZ$1.9 billion. The company delivered double-digit growth across revenue, EBITDA, and earnings per share, underscoring its robust market position. Notably, net profit after tax rose 21.1% to NZ$202.9 million, while EBITDA margin improved slightly to 14.4%, reflecting operational efficiency gains.
CEO David Bortolussi highlighted the company’s success in expanding its footprint, particularly in China where a2 Milk secured a top-four brand position in the infant milk formula segment. The English label infant formula business surged 17%, complemented by strong growth in liquid milk and other nutritionals across ANZ, USA, and China.
Strategic Supply Chain Transformation
Simultaneously, a2 Milk divested its 75% stake in Mataura Valley Milk (MVM) to Open Country Dairy, expecting to record a loss on sale of about NZ$130 million. The move is part of a strategic asset optimisation, allowing the company to focus on higher-growth manufacturing capabilities while maintaining ingredient supply through commercial agreements.
Capital Management and Shareholder Returns
Reflecting confidence in its transformed business model, a2 Milk declared its first-ever dividends totaling 20 cents per share for FY25, with a payout ratio around 71%. The company also announced plans for a fully franked special dividend of NZ$300 million, contingent on regulatory approvals related to the new China label products and completion of the MVM divestment.
Chair Pip Greenwood emphasized the significance of these capital moves, which provide clarity on future funding needs and underscore the company’s commitment to delivering shareholder value. The ordinary dividend policy remains intact, targeting 60-80% of normalized net profit after tax, with a focus on maintaining a strong and flexible balance sheet.
Looking Ahead
For FY26, a2 Milk projects high-single digit revenue growth and an EBITDA margin between 15% and 16%, signaling continued momentum. The company’s investment plans include a NZ$100 million multi-year capital program to expand and enhance the Pokeno facility, with an expected increase of over 100 jobs, reinforcing its commitment to operational excellence and innovation across life-stage nutrition products.
While the supply chain transformation marks a pivotal step, execution risks remain, particularly around regulatory approvals in China and the integration of new manufacturing assets. Investors will be watching closely how these developments translate into sustained growth and profitability.
Bottom Line?
a2 Milk’s bold supply chain moves and record results set the stage for growth, but regulatory hurdles loom.
Questions in the middle?
- Will regulatory approvals for China label product registrations proceed smoothly?
- How will the loss on sale of Mataura Valley Milk impact near-term earnings?
- What are the risks and timelines associated with scaling up the Pokeno manufacturing facility?
