Media Updates, page-1633

• Aug 22 2018 at 5:21 PM
• Updated 1 hr ago

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The a2 Milk Co boss to focus on China and US, so is UK out?

The new chief executive of The a2 Milk Company, Jayne Hrdlicka, says she is firmly focused on the big opportunities in China and the United States, leaving some question marks about the future of the business in the United Kingdom.

Ms Hrdlicka pointed out that China and the US are the two biggest consumer markets in the world where a2 has already gained traction and has "significant" opportunity to grow, after posting a surge of 116 per cent in full year 2018 net profit to $NZ195.7 million ($177.9 million).

"The US is one of the biggest consumer markets in the world, and the brand is resonating with US consumers and distribution growth is well head of expectations," she told The Australian Financial Review after revealing group sales were up 68 per cent to $NZ922 million.

"We are investing to grow distribution and to build a brand and we are far from done. We are very encouraged by all the market signals we are getting."


Investors were impressed by the result, pushing the stock up 5.1 per cent to $10.60 on Wednesday.



Revenue from the a2 Platinum formula was up nearly 84 per cent to $NZ724.2 million in the 2018 year, while milk sales climbed 13 per cent to $NZ142.4 million. Revenue from other nutritional powder, which includes adult milk powder, pregnancy powder and manuka honey powder, grew by almost 90 per cent to $NZ$56.1 million.

The $7.3 billion company did not give formal guidance but confirmed prior comments that further revenue growth from the dual-listed group was expected this year.

Brand awareness
When asked about possible capital management given the company's strong balance sheet, Ms Hrdlicka indicated that a2 was in a growth phase and she would use funds to build brand awareness in China, where it recently completed its first TV commercial, and flagged a $US22 million ($30 million) spend on marketing in the US this year – more than double what analysts from Macquarie had estimated.


"The underlying demand for our product is significant," said Ms Hrdlicka, who pointed to the 10,000 mother and baby stores in China and the doubling of US stores to 6000 sites that now carry its product.

Mr Hrdlicka said the US was a high point of the result where sales more than doubled due to increased brand awareness, while the UK was still tough to gain distribution scale.

The recent exit of the head of UK and Europe, Scott Wotherspoon, was for personal reasons and was not necessarily a precursor to a2 exiting the UK, where volume sales of a2 milk branded product increased by more than 50 per cent in 2018.

"We are six times our revenue in three years and what we have to do is keep putting our focus and effort at the big opportunities. What that means for the future [of the UK] we don't know.


"In the UK we are really proud of the team and what they have achieved ... but where we invest for growth are the two biggest consumer markets in the world, and that is China and the US. I'm five weeks into the business ... but we have to focus on where we get the biggest returns."

Ms Hrdlicka said permanent replacement for the vacant UK job has been found, but would not announce that person's name.

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