'Very positive start' to the year for a2 Milk Company

The a2 Milk Company Limited ("a2MC" or "Company") has made a very positive start to the 2016 financial year with the first four months' trading performance for infant formula well ahead of plan. As a result the Company is today issuing revised earnings guidance upwards for the full year.

The Company previously advised that Group revenue was forecast to grow to $267 million and Group operating EBITDA to $12 million in the 2016 financial year. Based on current trading trends, the Company has determined it appropriate to revise its full year outlook upwards, and is now forecasting Group revenue of $285 million, and Group operating EBITDA of $22 million .

The Company will continue to monitor its performance and provide further commentary with the release of the first half trading results.

At the Company’s annual meeting of shareholders today, a2MC Managing Director & CEO Geoffrey Babidge said, "the Australian and New Zealand ("ANZ") business continues to perform exceptionally well with fresh milk growing and a2 Platinum infant formula significantly ahead of plan. The new supply and distribution arrangements in China are also yielding positive results with sales growth for infant formula exceeding expectations".

Mr Babidge said, "Infant formula is emerging as a more significant growth driver for the Company. Group revenue for a2 Platinum infant formula in the four months to 31 October 2015 totalled approximately $38 million, representing 47% of Group revenue, compared to $8.7 million over the same period last year. This compared to infant formula revenue for the 2015 full year of $41.7 million. This exceptional performance indicates the increasing appeal and growth potential for the a2 Platinum brand in both ANZ and China and additional markets in the future".

The a2 Milk launch in the USA market is progressing although sales are behind budget given delays in achieving targeted distribution. The Company has recently achieved retail weighted distribution of approximately 65% in Southern California and is on track for similar levels in Northern California. At this early stage, rate of sale is meeting retailer expectations within the specialty milk category. The business in the UK is continuing to build beyond its modest fresh milk base with the product portfolio extending into UHT milk and infant formula.

The Company recently completed a successful capital raising of $40 million which is being followed by a Share Purchase Plan currently on offer to all eligible shareholders, in Australia and New Zealand that is already oversubscribed. The new capital will be used to support a2MC’s continued growth in ANZ and its targeted international markets, and will primarily fund the increasing working capital associated with the growth in infant formula.

The dual listing of the Company on the ASX earlier in the calendar year has successfully achieved the objective of broadening investor participation. Since admission to the ASX the number of investors in Australia has increased by ~3,500, which currently represents ~40% of shares on issue.