Australian Dairy Nutritionals Group has cut its net loss by 40% in the half-year to December 2025, driven by a remarkable 431% revenue jump in its nutritional powders segment amid expanding Chinese distribution.
- Net loss reduced by 40% to $1.22 million
- Nutritional powders revenue up 431%, led by China expansion
- Dairy farms revenue down 44% due to planned lease exit
- Total expenses down 7%, corporate costs stable
- Completed $0.54 million entitlement offer, maintains going concern
Half-Year Financial Performance
Australian Dairy Nutritionals Group (ASX: AHF) reported a significant improvement in its financial results for the half-year ended 31 December 2025. The company narrowed its net loss by 40% to $1.22 million, compared to a $2.04 million loss in the prior corresponding period. This progress reflects the company’s strategic pivot towards its nutritional powders segment, which has become the primary growth engine.
Total revenue rose 14% to $3.2 million, underpinned by a staggering 431% increase in nutritional powders revenue to $2.14 million. This surge was largely driven by expanded distribution of the Future brand in China, particularly through the O2O (online-to-offline) channel via the M2C shopping app. Distribution now spans seven Chinese provinces, with plans to reach 1,000 retail outlets by the end of the financial year.
Segment Dynamics and Challenges
While the nutritional powders segment flourished, the dairy farms segment saw a 44% revenue decline to $1.68 million, primarily due to the planned exit from the lease of the Brucknell North farm. The company indicated this was an expected and strategic move, with current milk production from its 100% organic farm sufficient to meet processing facility needs at full capacity.
Expenses across the group fell 7% to $5.04 million, with corporate costs remaining largely flat despite inflationary pressures. Notably, nutritional powders expenses increased by only 21%, a favourable outcome given the revenue growth, reflecting improved operational efficiency.
However, the company faced regulatory headwinds in Vietnam during Q2 FY26, where sudden changes to packaging regulations led to stock returns and delayed shipments. Management expects shipments with revised packaging to resume by the end of Q3 FY26.
Capital Position and Going Concern
Australian Dairy Nutritionals ended the half with $0.81 million in cash and cash equivalents, down from $2.69 million at June 2025. The group raised $0.54 million through an entitlement offer completed in February 2026 and retains the option to place additional shares from the offer shortfall. Despite accumulated losses exceeding $60 million and ongoing cash outflows, the board remains confident in the company’s ability to continue as a going concern, supported by growth prospects in China and recent capital raising.
The independent auditor’s review highlighted a material uncertainty regarding going concern, reflecting the company’s loss-making position and cash burn. Nonetheless, the board’s outlook is cautiously optimistic, forecasting positive earnings before interest and tax (EBIT) and cash flow for the full financial year 2027.
Market Outlook and Strategic Focus
Market conditions in China remain supportive, with the infant milk formula (IMF) English label and A2 protein segments growing by 12.1% and 13% respectively in FY26 H1. The O2O channel, a key focus for Australian Dairy Nutritionals, was the fastest-growing IMF channel, expanding by 20.9%. Despite a 17% decline in China’s birth rates in 2025, rising marriage rates and government policies aimed at stabilising birth rates provide a more favourable outlook for 2026.
The company continues to prioritise expanding its Future brand footprint in China, aiming to deepen provincial penetration and increase retail presence. This strategic emphasis on nutritional powders aligns with the broader industry trend towards premiumisation and health-focused dairy nutrition products.
Bottom Line?
Australian Dairy Nutritionals’ turnaround hinges on sustained growth in China and navigating regulatory hurdles in Vietnam as it eyes profitability in FY27.
Questions in the middle?
- How will regulatory changes in Vietnam impact nutritional powders sales recovery?
- What is the timeline and scale for expanding Future brand distribution across China?
- Can the company maintain cost discipline while scaling operations to achieve profitability?