The A2 Milk Company Ltd (ASX: A2M) share price is starting the week with a bang.
In morning trade, the infant formula company's shares are up 12% to $5.67.
This follows the release of its half-year results today.
A2 Milk share price jumps on half-year results
- Revenue up 3.7% to NZ$812.1 million
- Earnings before interest, tax, depreciation, and amortisation (EBITDA) up 5% to NZ$113.2 million
- Net profit after tax up 15.6% to NZ$85.3 million
- Cash balance increased 12% to NZ$792.1 million
What happened during the half?
For the six months ended 31 December, A2 Milk reported a 3.7% lift in revenue to NZ$812.1 million.
Management advised that this was driven by continued growth in the China & Other Asia segment (up 16.5%), partially offset by a 24.1% decrease in the ANZ segment due largely to a change in distribution strategy. Elsewhere, USA revenue increased by 8.6% and MVM decreased by 4.7%.
Infant milk formula (IMF) sales grew 1.5% with China label up 10.4% and English label down 6.9%. Liquid milk sales also grew modestly, with ANZ sales up 1.5% and USA sales up 7.0%. Other nutritional sales grew by 48.5% and ingredients sales (MVM) decreased by 4.7%.
A2 Milk's gross margin came in at 46.7%, which was 0.2ppts higher than FY 2023 but 0.9ppts lower than the prior corresponding period. This was primarily due to higher input costs, foreign exchange movements, and the adverse impact of sales mix, which offset price increases and cost savings.
Nevertheless, the company's EBITDA increased by 5% to NZ$113.2 million. This reflects increased revenue, lower administrative and other expenses, and higher net interest income.
But despite the company reporting a 12% increase in its cash balance to NZ$792.1 million, it will not be paying a dividend. Management advised that it has decided to continue to prioritise investment in growth opportunities and balance sheet strength, ahead of returning capital to shareholders.
Outlook
Management warned that China IMF market conditions remain challenging with a double-digit decline in market value still expected in FY 2024.
Nevertheless, A2 Milk's revenue growth guidance for FY 2024 has improved since its prior outlook statement. It expects revenue growth of low to mid single-digit percent for the year. It also expects its margins to be largely in line with what was recorded in FY 2023.
The A2 Milk share price is still down 12% over the last 12 months despite today's gain.
