The a2 Milk Company delivered FY26 revenue growth of 12.4% to NZ$1,974.9 million, demonstrating underlying momentum in its core business despite operational challenges. Yet headline profit metrics tell a more cautious story, with reported earnings per share falling 6.0% to 28.6 cents. Stripping out temporary costs, however, underlying earnings per share grew 6.8% to 32.5 cents, suggesting the business fundamentals remain sound.
The gap between headline and underlying results reflects two distinct headwinds. The a2 Pōkeno facility, acquired to support long-term capacity, incurred substantial losses of NZ$28.3 million in net profit during the period as it operated well below capacity ahead of the planned Platinum transition from Synlait in the first half of 2027. Supply chain disruption affecting Chinese infant milk formula sales in the fourth quarter added further pressure, though management indicates these issues have since been resolved with product availability now recovered. This temporary underperformance masks stronger operational execution in other areas.
Growth momentum is evident across most categories. English label infant milk formula grew 23.2%, driven by cross-border e-commerce and offline-to-online channel expansion, with Vietnam emerging as a meaningful growth contributor. Liquid milk sales expanded 21.8%, underpinned by particularly strong USA growth of 28.6%. The other nutritionals segment delivered eye-catching 59.9% growth, supported by new product launches targeting kids and seniors. These results suggest the company is successfully diversifying revenue streams beyond its traditional China-focused infant milk formula business.
The China exposure remains a point of concern. Chinese label infant milk formula sales declined 14.0%, entirely attributable to the fourth-quarter disruption. While management commentary suggests resolution, China’s sensitivity to operational hiccups and regulatory changes means investors should monitor this segment closely. More pressing is the 26.1% drop in net cash to NZ$784.5 million. Capital investment in a2 Pōkeno and associated transition costs have materially reduced financial flexibility precisely when near-term expenses remain elevated. This tighter cash position leaves less room for strategic pivots or defensive manoeuvres if market conditions deteriorate.
Gross margin compression of 3.4 percentage points to 47.7% reflects the a2 Pōkeno underutilisation and unfavourable product mix from lower Chinese label sales. Management has flagged substantial margin recovery once the Platinum transition completes and production ramps. The dividend policy supports confidence in cash generation, with ordinary dividends increased to 21.0 cents per share and a special dividend of 41.355 cents per share, despite current headwinds. Key milestones ahead include the successful Platinum transition in 1H27 and sustained momentum in English label and liquid milk categories to offset ongoing China challenges. This announcement is price sensitive and has been flagged as material by the ASX.
View the full ASX announcement (PDF)
About The a2 Milk Company Limited (ASX: A2M)
The a2 Milk Company Limited is a dairy nutritionals company that sells A2-type protein branded milk and related products, including infant milk formula and other dairy products. The company operates across Australia, New Zealand, China, rest of Asia, and the United States, manufacturing and selling nutritional products and providing licensing services under the a2 Milk and a2 Platinum brands.
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