“If they do, in fact, deliver on the second half guidance, which was very strong, then expectations don’t appear particularly stretched,” Forsyth Barr senior analyst Matt Montgomerie said.
“The big swing factor on Monday will be the English label revenue growth that they deliver in the second half, so time will tell.”
Aside from its financial performance, there is the matter of what a2 Milk chooses to do with its cash mountain, estimated to be worth about $1 billion.
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English label formula, usually marketed through cross-border e-commerce channels, is cheaper than China label product, which uses more expensive ingredients and is sold in the more conventional mother and baby stores in the PRC.
Recent results from Danone and Friesland Campina, which both have a big presence in China, have shown strong revenue growth over the six-month period.
“A2 Milk benefited in the first half from a swing back in the market towards English label, which will in turn also benefit their margins,” Montgomerie said.
“It feels like, at a broader level, the shift towards English label persisted through the six-month period and should continue to do so in the near term.”
The company, which began purely as a marketer, has branched out into manufacturing through its majority-owned Mataura Valley Milk (MVM) facility in Southland.
The dual-listed a2 Milk has long said it wants to build on its existing supply chain, so any news on that front, and on how it plans to spend the $1b, will be eagerly digested by the market.
“But if they do announce something on the supply chain, then that’s a significant step change in the context of their business,” Montgomerie said.
Chinese label infant formula from a2 Milk is more expensive than the company’s English label product. Photo / Supplied
“That has a number of potential flow-on effects and new products, capital management opportunities, implications for possible implications for Synlait and even MVM for that matter.
“All eyes will be on English label growth in the second half and then what the guidance is for 2026.”
Early this year, a2 Milk launched a “super-premium” English label product, a2 Genesis, targeting the rapidly growing HMO (human milk oligosaccharides) formulation segment.
HMOs are complex sugars naturally found in breast milk that are now being added to some infant formulas to mimic the benefits of breastfeeding.
Montgomerie said the impact of the new Genesis product will be relatively negligible, but how it progresses from here will be a key talking point.
Last month, a2 Milk’s sole supplier of infant formula, Synlait, reported “challenges” at its flagship plant at Dunsandel in Canterbury.
Synlait is just under 20% owned by a2 Milk and 65% by China’s Bright Dairy.
The company’s manufacturing issues came as a surprise to the market but were not expected to have an impact on a2 Milk because of timing issues.
However, it may raise some questions for a2 Milk in the current financial year.
Meanwhile, China has introduced a nationwide childcare subsidy programme to support families and encourage childbirth.
The programme will offer families 3600 yuan ($841) per year for each child under the age of 3, which is expected to benefit more than 20 million families a year.
A2 Milk’s China label formula retails for around 360 yuan per tin.
Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.