a2MC eyes own processing plant, more Chinese labels
The a2 Milk Company (a2MC) says securing more China label registrations and developing its own nutritional manufacturing capability are high on its agenda.
However, a2C has delivered a strong result for the 2023 financial year – on the back of success in the China infant formula market. It recorded double digit growth in revenue and earnings for the year ending June 30, 2023. Revenue jumped 10.1% to $1.6 billion.
China and ‘Other Asia’ segments sales rose 38%. Infant milk formula (IMF) sales were up 8.4% with China label sales up 27.8%. EBITDA was up 11.8% to $219.3 million and net profit rose 26% to $145m.
Mataura Valley Milk (MVM) sales were up 9.2%, however the processor reported an EBITDA loss of $26.5 million, compared to a reported loss of $18.8 million in FY22. The MVM plant, which started processing milk in August 2018, was built by the China Animal Husbandry Group: a2MC bought a 75% stake in the company in July 2021 with CAHG retaining 25% share.
In its annual results last week, a2C noted that MVM’s net sales for the last financial year reached $114m. It recorded an EBITDA loss of $26.5m, about $4m higher than the previous year.
The company says MVM’s slightly higher EBITDA loss was due to the timing of sales in a volatile commodity and foreign exchange environment; reduced demand from third-party customers in China; increased investment in capability; significant product development trials; and investment to support future nutritional powder production.
“Accelerating MVM’s path to profitability by FY26 or earlier is a key strategic priority for the company,” says a2C.
a2C managing director David Bortolussi says MVM has also commenced an on-farm methane inhibitor feasibility study, via a research agreement with Lincoln University.
Bortolussi says MVM is also developing a sustainable packaging roadmap.
Commenting on a2C’s annual results, Bortolussi says he’s proud of what the team has achieved this year.
“Growing sales by 10% while the core China IMF market declined by 14% is a remarkable achievement.
“Our China label IMF sales exceeded English-label sales for the first time, and our total IMF sales were over $1.1 billion, making us a top-3 share gainer in the market overall.”
Bortolussi says the Daigou market in English-label IMF declined sharply again this year by almost 40% and a2C has pivoted to more controlled channels.
