a2 Milk Company Boosts FY26 Revenue Forecast on Strong IMF Sales
The a2 Milk Company has raised its FY26 revenue guidance, citing stronger-than-expected performance in key product categories and favourable currency movements. The company anticipates solid earnings growth and robust cash flow conversion.
- Upgraded FY26 revenue guidance to low double-digit growth
- Stronger Infant Milk Formula and liquid milk sales driving results
- EBITDA margin expected between 15% and 16%
- NPAT forecasted to slightly increase over FY25
- Capital expenditure planned at $60–80 million
Upgraded Revenue Outlook
The a2 Milk Company has revised its FY26 revenue guidance upwards, now expecting low double-digit growth compared to the previous year. This upgrade reflects stronger-than-anticipated trading in its Infant Milk Formula (IMF), Other Nutritionals, and Liquid Milk product categories. The company’s previous guidance had forecasted high single-digit growth, making this a notable positive adjustment.
Currency Impact and Earnings Expectations
Currency movements, particularly the depreciation of the New Zealand dollar, are expected to inflate both sales and expenses. However, the company notes that the net effect on earnings before interest, tax, depreciation, and amortisation (EBITDA), after accounting for hedge losses, should be minimal. The EBITDA margin is projected to be in the range of 15% to 16%, indicating stable profitability despite currency fluctuations.
Segment Performance and Growth Drivers
Within the IMF category, English label products are expected to outperform China label products significantly, suggesting a shift or strengthening in market dynamics. The first half of FY26 is anticipated to deliver stronger revenue growth compared to the second half, hinting at possible seasonal or market-driven factors influencing sales momentum.
Financial Health and Investment Plans
The company forecasts a slight increase in net profit after tax (NPAT) compared to FY25’s reported $203 million, alongside a healthy cash conversion rate of 80% to 90%. Capital expenditure is planned between $60 million and $80 million, signaling ongoing investment in capacity or innovation. Depreciation and amortisation expenses are expected to be between $20 million and $24 million, while interest income is projected to decline due to lower market rates and net transaction cash outflows.
Looking Ahead
As a2 Milk Company continues to navigate currency headwinds and evolving market preferences, its upgraded guidance reflects confidence in its core product lines and operational resilience. Investors will be watching closely how the company executes on its capital plans and manages margin pressures in the coming quarters.
Bottom Line?
a2 Milk’s upgraded guidance signals robust growth but leaves currency and market dynamics as key watchpoints.
Questions in the middle?
- How will currency fluctuations impact actual EBITDA and cash flow throughout FY26?
- What factors are driving the stronger performance of English label IMF compared to China label?
- How will the planned capital expenditure translate into future growth or efficiency gains?
