A2 milk | A2 Milk makes positive start to the year

The a2 Milk Company has made a positive start to the year, with first-quarter sales expected to be marginally ahead of plan because of foreign exchange gains driven by the depreciation of the New Zealand dollar

CEO David Bortolussi warned that because of the currency impact on the cost of sales and the cost of doing business, September-quarter earnings for the baby formula and fresh milk group are still expected to be in line with his plan.

“Consistent with the company’s outlook statement on 29 August 2022, in addition to trading upside and downside, other business and industry risks include, but are not limited to, COVID-19 impacts on supply chain, SAMR registration process timing, and volume impact of price increases,” Mr Bortolussi said.

Earlier in September, a2 Milk’s manufacturing partner, Synlait Milk, received a renewal of existing GB registration from the State Administration for Market Regulation (SAMR) its China label infant milk formula product.

This allows Synlait to manufacture a2 Milk’s registered China label product until February 21 when a transition to the new GB standard is required. The pair is working towards a new complex registration – although the timing of this is still uncertain.

Mr Bortolussi’s overarching strategic priority is to innovate faster in the China label business, which is restricted now given it only has one registration with Chinese authorities.

The CEO said on Friday other impacts on this year’s performance include cross border trade, changes in the regulatory environment, and commodity prices.

“These risks could materially impact expected revenue and earnings outcomes,” he said in an ASX statement.

A2 Milk also flagged on Friday it will start its $NZ150 million ($133.6 million) on-market buyback on October 5, one that may run for up to 12 months.

The company may acquire up to 37,180,621 ordinary shares through the NZX and ASX at the prevailing market price from time to time in that period.

Throughout the buyback period, a2 Milk will continue to assess market conditions, its prevailing share price, available investment opportunities which will help determine the timing, volume and pricing of any share purchases.

“The company reserves the right to suspend without notice or vary or terminate the buyback programme at any time,” Mr Bortolussi said in a statement.

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