A2 Milk share price on watch amid stronger than expected FY23 results

How did this infant formula company perform in FY 2023?

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The A2 Milk Company Ltd (ASX: A2M) share price will be one to watch on Monday.

That's because the infant formula company has just released its FY 2023 results.

A2 Milk share price on watch amid strong growth

  • Revenue up 10.1% to NZ$1.59 billion
  • Earnings before interest, tax, depreciation, and amortisation (EBITDA) up 11.8% to NZ$219.3 million
  • EBITDA margin 13.8%
  • Net interest income increased to NZ$21.6 million
  • Net profit after tax up 26.9% to NZ$155.6 million
  • Cash balance NZ$757.2 million

What happened in FY 2023?

For the 12 months ended 30 June, A2 Milk reported revenue growth of 10.1% to NZ$1,592.9 million. This reflects strong growth in the China & Other Asia segment (+37.9%), which offset a sharp decline in ANZ sales (-30.2%). The latter was driven by a change in distribution strategy. Elsewhere, US sales were up 27.1% and MVM sales rose 9.2% year on year.

Management notes that the company was the top-three share gainer in China's infant milk formula (IMF) market overall with a record market share. Particularly in China label IMF in mother and baby stores (MBS) and domestic online (DOL) channels. This saw China label sales exceeding English label sales for the first time in FY 2023, supported by growth in lower-tier cities.

In respect to earnings, A2 Milk reported an 11.8% increase in EBITDA to NZ$219.3 million and a 26.9% jump in net profit after tax to NZ$155.6 million. This reflects higher revenue, net interest income of NZ$21.6 million, and gross margin improvements, which offset an increase in marketing investment by 13.1%.

How does this compare to expectations?

The good news for the A2 Milk share price today is that this result has come in ahead of what one leading broker was expecting.

Bell Potter was expecting sales of NZ$1,587.3 million, EBITDA of NZ$215.4 million, and adjusted net profit after tax of NZ$147.5 million.

Management commentary

A2 Milk's managing director and CEO, David Bortolussi, was pleased with the company's performance in a difficult market. He said:

I'm proud of what our 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.

Achieving re-registration of our China label IMF product recently was critical to maintaining access to the important domestic market and we look forward to launching our new product in the coming months. The Daigou market in English label IMF declined sharply again this year by almost 40% and we have pivoted further to the more controlled channels which have performed better and where we continue to gain share.

We have re-invested more in our brand again this year driving further gains in China brand health metrics and supporting future sales growth. The China IMF market has become increasingly challenging as a result of lower birth rates and increased competitive intensity. Notwithstanding, we are well positioned to continue to invest and grow share in FY24 to emerge in a stronger position when the market recovers.


Management advised that despite an expected double-digit decline in the China IMF market in FY 2024, the company expects to increase market share and achieve low single-digit revenue growth and an EBITDA margin broadly in line with FY 2023.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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