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AU earnings: a2 Milk - from a milky path to profits



Sip on financial insights as a2 Milk's anticipated FY23 earnings report comes to light. Explore the company's resilient journey, revenue projections, and market dynamics.

Source: Bloomberg
 Tony Sycamore | Market Analyst, Australia | Publication date: Thursday 17 August 2023 09:58

When will a2M report its latest earnings?

Established in the verdant landscapes of New Zealand in 2000, the a2 Milk (a2M) company stands as a dual-listed entity on the ASX and NZSX. Differentiating itself from traditional cow's milk, a2M's distinctive brand stems from a unique selection of cows that exclusively produce the A2 protein type, omitting the A1 protein, which has raised concerns.

Mark your calendars for Monday, August 21st, 2023, at 9 am AEST, as a2M is poised to unveil its FY2023 earnings report, inviting a glimpse into its financial performance and strategic outlook.

Navigating uncharted waters: A2M's remarkable journey

Recent years have witnessed a tale of exceptional evolution for A2M. With the advent of COVID-19, a surge in sales rode the waves of panic buying. However, fortunes took a sharp turn as international borders shuttered, bringing the daigou/reseller channel to an abrupt halt, echoing the complex nature of the pandemic's impact.

Stepping into action, management orchestrated a stabilization strategy. Aiming to right the ship, they undertook measures such as inventory write-downs and fortifying the leadership team. This strategic maneuver not only led to the company's proclamation of a staggering 19.8% surge in revenue, reaching NZ$1.446.2 million in FY22, but also witnessed a remarkable leap of 42.3% in NPAT, ascending to NZ$114.7 million. Adding to this impressive trajectory was a noteworthy NZ$150 million on-market share buyback.

The saga continued into the current year, as a2M unveiled its 1H23 results. Despite a significant 12.5% slump in IMF (infant formula) demand in China, reflective of the nation's declining birth rate, the company persisted in its double-digit growth narrative.

Highlights of this chapter encompassed an impressive 18.6% surge in revenue, amounting to NZ$783.3 million, and a commendable 10.5% elevation in EBITA, rising to NZ$107.8 million.

Strategic resilience in the face of challenges

Amid the persistent challenges, including the intricate dynamics of the China IMF market characterised by diminishing birth rates, a2M stands resolute. Anchored in its proactive approach, the company projects a course marked by low double-digit revenue growth throughout FY23.

This journey is fortified by the promising expansion in the realms of China label IMF, ANZ liquid milk, and USA liquid milk sales, painting a vivid picture of strategic resilience amidst a landscape of complexity.

Events to focus on

As a pivotal moment approaches with a2M's FY2023 earnings report, astute investors are advised to keep a watchful eye on key indicators that stand to shape the company's trajectory:

  • Marriage data dynamics: Recent data concerning marriages casts a spotlight on the ongoing decline in birth rates throughout CY23. This trend holds the potential to exert headwinds on Infant Formula (IMF) demand, warranting careful consideration.
  • Steady daigou pricing: Over the course of the last nine months, daigou pricing has exhibited a remarkable stability. This consistency in pricing prompts a closer look, indicating potential insights into market dynamics and consumer behavior.
  • China label IMF's resilient surge: The remarkable performance of the China Label IMF business during 1H2023 underscores its robust position within the group. With this momentum expected to persist, the narrative of growth continues to unfold.
  • Navigating English label IMF sales: Expectations center on a guided descent in English Label IMF sales, accompanied by the unfolding story of yet-to-recovered margins. The interplay of these factors can offer valuable insights into a2M's strategic maneuvering and market positioning.


Snapshot of key financial metrics

  • Anticipated revenues: Projections point towards anticipated revenues reaching NZ$1598 million. This figure encapsulates the company's revenue-generating prowess and sets the stage for understanding its financial performance.
  • Expected EBITA: The forecasted Earnings Before Interest, Taxes, and Amortization (EBITA) is NZ$219 million. This critical indicator offers a window into a2M's operational efficiency and profitability.
  • NPAT projection: An expected Net Profit After Tax (NPAT) of NZ$147 million signifies the company's projected bottom-line earnings. This figure underlines the culmination of a2M's financial endeavors and performance during the specified period.

a2 Milk historic revenue chart


Source: TradingEconomics

a2 Milk technical analysis

Tracing back to its remarkable bull market zenith of $20.05 in June 2020, the journey of a2M's share price encountered a stark shift, plummeting by over 80% amidst the throes of the Covid-19 pandemic, reaching a nadir of $3.90 in May 2022. Following this substantial decline, the share price embarked on a nuanced trajectory.

The subsequent period witnessed the share price grappling with a substantial resistance zone in the range of $7.00 to $7.50. This challenge was followed by a retreat, as the share price retraced towards the vicinity of $5.00. Notably, this $5.00 level has served as a pivotal point, enveloping the share price in a cyclic dance over the span of the past four months.

a2 Milk weekly chart


Source: TradingView

Taking a closer look at the daily chart depicted below, it's evident that a2M's share price is currently targeting the anticipated uptrend support, which is projected to align around the range of $4.85 to $4.74. A crucial juncture lies ahead, as a sustained breach beneath the support level of $4.85/74 post its earnings report could potentially lead to revisiting the low point of May 2022, at $3.90.

Recognising the factors at play, it becomes evident that a more favorable trajectory for a2M's share price necessitates its ability to maintain stability above the support zone at $4.85/74. Unlocking a brighter outlook would involve not only holding this support but also overcoming a formidable barrier of resistance situated between $7.00 (aligned with the trend line) and $7.45/50, originating from the October 2021 high.

a2 Milk daily chart


Source: TradingView


  • TradingView: the figures stated are as of August 15, 2023. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.


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