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a2 Milk's net profit surges nearly 200pc, flags buyback

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A2 Milk Company has announced an on-market buyback of up to a $40 million over the next 12 months. supplied
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by Carrie LaFrenz
The A2 Milk Company's net profit surged nearly 200 per cent to $NZ90.6 million in the 2017 fiscal year with profits and revenue up strongly due to booming demand for its a2 Platinum baby formula both in Australia and China.
The New Zealand company also announced on-market buyback of up to a $40 million over the next 12 months. In addition, the board said it remains open to consider a special dividend in light of progress on the buyback and future market conditions. No dividend was declared today
Managing Director Geoffrey Babidge said the company's continued growth reflects increasing consumer acceptance of the a2 brand and the benefits of dairy-based products free from the A1 beta casein protein type.
"We are the fastest growing brand by value in Australia," he said to analysts. "This was clearly an exceptional performance for FY17.

"China is a key focus on how we are taking this business forward. Our direct sales continue to grow."

Group revenue was up more than 55 per cent to $NZ549.5 million with group a2 Platinum infant formula revenue up 84 per cent and sales to China more than doubling.
A2 said in February that it expected sales in the second half would be lower than those of the first, but by April it upgraded full year sales guidance, and by June it said group revenue was tipped to be about $NZ545 million for the year - up $NZ20 million on the previous update - bolstered by Chinese demand for baby formula.
Citi analyst Sam Teeger was tipping full year revenue of $NZ555 million, 2 per cent above guidance. He was expecting EBITDA of $NZ125 million, or 5 per cent below consensus.
Mr Babidge said he is very focused on continuing to grow the company.

"This company is a growth company," he said. "We are about new product development, particularly in the infant nutrition space. We are about broadening the nutritional products space. We are also about growing our footprint."
A number of product launches are planned for the new financial year, including the launch of a2 Platinum Stage 4 infant formula for children three years and above in August 2017, as well as an extension to the milk powder range.
Since the start of the year, shares in the infant formula and milk group have risen 114 per cent and it's the fourth best performer in the S&P/ASX 200 over the past 12 months.
The NZ group was founded by scientist Corran McLachlan in 2000 after identifying the fact that cows produce different types of milk proteins. The company has continuously looked to distance itself from issues faced by rival Bellamy's Australia in China.


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