The a2 Milk Company posted a 12.4% rise in FY26 revenue to NZ$1.975 billion, but net profit from continuing operations fell 5.8% amid supply chain disruptions in China. The company declared a $300 million special dividend and expects mid single-digit revenue growth in FY27.
- FY26 revenue up 12.4% to NZ$1.975 billion
- Net profit from continuing operations down 5.8%
- China label infant formula sales hit by 4Q supply chain disruption
- a2 Pōkeno acquisition advances supply chain transformation
- $300 million fully franked special dividend declared
Revenue Growth Overshadowed by Supply Chain Disruption
The a2 Milk Company (NZX:ATM) delivered a robust 12.4% increase in revenue for the 2026 financial year, reaching NZ$1.975 billion. However, this topline growth masked underlying challenges, with net profit after tax from continuing operations declining 5.8% to NZ$207.5 million. The profit dip primarily reflects supply chain disruptions in the fourth quarter, particularly impacting the China label infant milk formula (IMF) segment.
China label IMF sales fell 14% to NZ$544 million, a sharp reversal after a strong start to the year, as product shortages at distributors and retailers forced many consumers to switch brands. The disruption stemmed from a confluence of factors including freight bottlenecks exacerbated by geopolitical tensions, a production backlog at manufacturing partner Synlait, extended product release times due to enhanced testing, and additional customs clearance hurdles. These issues have since been resolved, with product availability significantly improved heading into FY27.
Despite the setback in China label IMF, the company’s English label IMF business grew 23.2%, driven by cross-border e-commerce and offline-to-online channels, with notable expansion in emerging markets like Vietnam where sales tripled. Liquid milk sales surged 21.8% across Australia, New Zealand and the USA, buoyed by strong consumer demand for the a2 Milk™ and a2 Milk™ Lactose Free ranges. Other Nutritionals, including fortified milk powders and paediatric supplements, posted a 59.9% increase, helped by recent product launches such as the China label kids fortified UHT milk and the a2 至奕™ paediatric supplements range.
Supply Chain Transformation Accelerated by a2 Pōkeno Acquisition
FY26 marked a milestone in a2 Milk’s supply chain strategy with the acquisition of a2 Pōkeno, a world-class integrated nutritional manufacturing facility in New Zealand. The $281 million transaction, completed in September 2025, brought two China label IMF registrations and expanded the company’s manufacturing control and capacity. Post-acquisition, the company invested NZ$51.6 million in capital upgrades and doubled the facility’s manufacturing team, progressing a multi-year $100 million transformation program on time and budget.
Looking ahead, a2 Milk plans to insource its English label a2 Platinum™ production from Synlait to a2 Pōkeno in the first half of FY27, alongside launching two new China label IMF products from the facility. This vertical integration is expected to improve margins and supply resilience, with the company forecasting a2 Pōkeno to reach EBITDA breakeven in FY27.
Capital Management and Dividend Payouts
Reflecting strong cash generation and a healthy balance sheet, the Board declared a special dividend of NZ$300 million (41.36 cents per share), fully franked and unimputed, paid in July 2026 following regulatory approval in China to rebrand infant formula products under the a2™ label. This is in addition to ordinary dividends totaling 21 cents per share for FY26, up from 20 cents the previous year, resulting in a payout ratio of approximately 74% of continuing operations NPAT.
The company closed FY26 with net cash of NZ$784.5 million, down from NZ$1.06 billion the prior year, reflecting investments in supply chain transformation and working capital build, including inventory increases of NZ$151.5 million to support new product launches and the a2 Platinum™ transition. Operating cash conversion was 68%, in line with guidance.
Sustainability and Climate Commitments
a2 Milk continued to advance its sustainability agenda, embedding climate-related initiatives into its operations and supply chain. The company is targeting net zero Scope 1 and 2 greenhouse gas emissions by 2030 and near zero Scope 3 emissions by 2040, with an interim 30% reduction in Scope 3 emissions intensity by 2030. Efforts include transitioning the a2 Pōkeno facility’s gas-fired boiler to renewable energy, expanding on-farm emissions data collection, and investing in methane reduction solutions through the AgriZeroNZ partnership and the a2™ Farm Sustainability Fund.
FY27 Outlook and Risks
For FY27, a2 Milk expects mid single-digit percentage revenue growth and an EBITDA margin around 15%, with earnings weighted to the second half as the company recovers from 4Q26 supply chain issues. Infant milk formula sales are anticipated to be broadly flat year-on-year, with gradual recovery in China label sales and improving momentum in English label offtake supported by increased marketing investment in 1H27.
Key risks to the outlook include the pace of recovery in China IMF demand, ongoing macroeconomic pressures, competitive intensity, regulatory changes, supply chain transformation execution, and geopolitical factors. The Board will provide an update on the progress of its IMF recovery plan at the Annual Meeting on 19 November 2026.
While the supply chain disruption in China weighed on FY26 results, the company’s diversified product portfolio, expanding innovation pipeline, and strengthened manufacturing control via a2 Pōkeno position it well for sustainable growth in a challenging market environment.
Bottom Line?
a2 Milk’s FY26 results highlight resilience amid supply chain challenges, with transformation investments and product innovation key to regaining momentum in FY27.
Questions in the middle?
- How quickly will a2 Milk recover China label IMF market share lost to supply disruptions?
- What impact will the insourcing of a2 Platinum™ production to a2 Pōkeno have on margins and supply reliability?
- How will evolving regulatory and geopolitical dynamics in China and globally affect a2 Milk’s growth trajectory?