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COVID-19 stockpiling drives a2 Milk sales

Dairy giant a2 Milk Company has reported strong revenue growth across all key regions in a trading update on Wednesday and has upgraded its full year outlook following a surge in sales amid COVID-19 stockpiling since it released its interim FY20 results in late February.

“We are now able to confirm that our revenue for the three months to 31 March 2020 (3Q20) was above expectations. This primarily reflected the impact of changes in consumer purchase behaviour arising from the COVID-19 situation and included an increase in pantry stocking of our products particularly via online and reseller channels. We are unable to estimate the timing and extent to which pantry stocking may unwind,” said a2 Milk in a statement.

The dairy giant said that its revenue in China was “favourably impacted” as the New Zealand dollar depreciated to the US dollar during the quarter. Overhead costs were also lower than previously expected, with travel and planned recruitment in China delayed.

While a2 Milk said the COVID-19 situation means the outlook for revenue and earnings is uncertain, it foresees revenue for FY20 in the range of $NZ1.7 billion to $NZ1.75 billion ($A1.61 billion to $A1.65 billion), up from $NZ1.3 billion in FY19.

“Overall for FY20, we anticipate ongoing revenue growth across our key regions supported by increased levels of marketing investment in China and the USA as well as, to the extent practicable in the current circumstances, the ongoing development of our organisational capability to support the execution of our strategy,” said a2 Milk.

The dairy giant said that Its full year EBITDA margin is anticipated to surpass what was advised in February, in the range of 31 per cent to 32 per cent.

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