A2 milk shareholders get within spitting distance of first-ever dividend

Friday, 22 November 2024

In advance of AGM, shareholders get a pledge to get a distribution in early 2025.

A2 milk shareholders can finally expect to be paid a dividend, according to a new policy introduced to the market by the company this morning.

In advance of its AGM in Auckland later today, A2, which has never paid a dividend, said it would distribute between 60% and 80% of post-tax profit, and after taking out extraordinary items. Having had to be patient since the company listed in 2012, shareholders could expect a first-ever dividend in February 2025.

Chairperson Pip Greenwood said the company had made “considerable progress in developing its operating model and creating a more resilient business.

“Given this progress and our strong balance sheet position, the board believes the time is right to introduce a dividend policy that delivers sustainable cash returns to shareholders over time.”

A2’s long-running dispute with Synlait was resolved in the year.

There would also be the possibility of special dividends if circumstances allowed, she said.

A2 Milk’s year has seen the settlement of a long-running dispute with milk processor Synlait, caused by A2’s cancellation of contract between them allowing Synlait the exclusive rights to supply its infant milk formula products in China, Australia and New Zealand.

A2 paid a one-off payment of$24.75 million to Synlait to settle the grievance but, as a 19% shareholder in Synlait, also took part in that company’s recapitalisation alongside its other major shareholder, Bright Dairy. The companies injected a combined $217.8m of capital into Synlait.

Synlait chairperson George Adams speaking in July appealing to shareholders to approve a $130 million loan to stave off liquidation.

Now the situation is resolved and the relationship between the two companies reset, but A2 will ramp up its own manufacturing and push for its own market access for infant milk formula (IMF) in China, CEO David Bortolussi said in his AGM statements released to the NZX this morning.

A2 was trading ahead of plan and had slightly increased its guidance for the year, primarily due to a significant increase in Mataura Valley Milk (MVM) ingredient sales sold for higher prices at the Global Dairy Trade. A2 was now expecting mid to high single-digit revenue growth in the year, compared to previous guidance of mid single-digit growth, it said.

Results

A2 Milk’s annual results in August revealed revenue of $1.68 billion, up 5.2% on the year prior, with a net profit after tax of $168m, up 7.7% over the 2023 financial year.

The company’s infant milk products into China represent about 70% of the company’s total sales, and 2024 had proven challenging due to a greater than expected reduction in China newborns, Bortolussi said.

During the year, the total China infant milk formula market declined by 10.7% in value, particularly in the large cities, driven not only by the decline in newborns but new standards introduced by Chinese authorities, increased competition and challenging economic conditions.

Bertolussi said the company needed to reformulate, re-register and relaunch its most popular product range, while phasing out its previous product range to meet the new standards: “I can’t explain how complicated and challenging such as transition is to manage, and our team and partners executed superbly and achieved record market share at the same time – a remarkable achievement acknowledged by many in the industry.”

Within the total China IMF market, the A2 protein segment now accounts for 18% of total market value. A2 Milk a value share of 7.3% of the infant milk market, up 1.4 percentage points for the year.