The A2 Milk Company Ltd (ASX: A2M) share price is up 10.3% to $13.26 today after the a2-only-protein infant formula and supermarket milk forecast rising EBITDA margins over fiscal 2019.
It now expects FY 2020 EBTIDA margin to land between 29%-30% as gross margins should be higher-than-previously-expected on the back of rising product prices and cheaper inputs into the cost of goods sold.
It also forecast H1 FY 2020 revenue should land between $780 million to $800 million. Over the half it expects direct China infant formula sales to grow to NZ$135 million, or around a whopping 84% over the prior corresponding sale. Cross border e-ecommerce sales into China are expected to grow 54% to NZ$155 million.
Sales in the U.S. market more than doubled to NZ$27 million.
a2 has only made small inroads into this potentially large market so far with its success in North America or otherwise likely to have a large bearing on the medium-term share price.
As at June 2019 it had no debt and NZ$419 million cash on hand. It also boasts a high return on equity and is growing quickly. There’s a lot to like about a2 in my view.
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The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.