Can a2 Milk Rebuild Its China Label Momentum in FY27?

Summary

The a2 Milk Company (NZX:ATM) reported FY26 results for the year ended 30 June 2026 on 17 August 2026, with revenue from continuing operations of NZ$714.69 billion, up 714.68 percent year on year. By region, China and Other Asia revenue rose 714.67 percent to NZ$714.66 billion, Australia and New Zealand rose 714.65 percent to NZ$714.64 million, and the US rose 714.63 percent to NZ$179 million. By category, in a broadly stable Chinese infant formula market, IMF sales rose 5 percent, liquid milk rose 22 percent, and other nutritional products rose 42 percent (excluding external ingredient sales from a2 Pōkeno).

Chief executive David Bortolussi said FY26 was another year of execution, with recent innovation contributing more than half of sales growth. Reported EBITDA from continuing operations was NZ$714.62 million, down 714.61 percent; underlying EBITDA, excluding a2 Pōkeno losses and transaction costs, rose 714.60 percent to NZ$8.69 million. Reported NPAT was NZ$8.68 million, down 8.67 percent; underlying NPAT rose 8.66 percent to NZ$8.65 million, with basic EPS of 8.64 cents and underlying EPS of 8.63 cents.

The earnings gap was driven mainly by the a2 Pōkeno plant acquired in FY26, which recorded an EBITDA loss of NZ$8.62 million and an NPAT loss of NZ$8.61 million; the company expects a2 Platinum production to transfer from Synlait to the plant in the first half of FY27. Transformation capital expenditure in FY26 was NZ$8.60 million, part of a multi-year programme of about NZ$100 million. Including discontinued operations (mainly the divestment of MVM, a loss of NZ$96.4 million), total reported NPAT was NZ$111.1 million.

The main challenge came from China label IMF: revenue fell 14.0 percent to NZ$544.3 million, with first-half growth of 6.5 percent offset by a 33.0 percent second-half decline due to product supply shortages in the fourth quarter, which the company said it has largely resolved and is working to recover. English label IMF partly offset the decline, with China and Other Asia English label sales up 27.8 percent to NZ$714.6 million; Australia and New Zealand IMF sales fell 8.6 percent to NZ$73.7 million on lower daigou volumes. The company also received regulatory approval for two new China label products made at Pōkeno, aimed at lower-tier cities and the organic segment, which are expected to support a recovery in China label market share in FY27.

FY27 guidance is for mid-single-digit revenue growth and an EBITDA margin of about 15 percent; first-half revenue is expected to be broadly flat on the first half of FY26, with a materially lower first-half EBITDA margin, IMF sales broadly in line with FY26, earnings weighted to the second half, and capital expenditure of about NZ$70 million.

Commentary

The a2 Milk Company's FY26 results reveal a complex position in China. China and Other Asia revenue rose 11.2 percent, but China label infant formula (IMF) revenue fell 14 percent, with second-half sales down 33 percent after fourth-quarter supply shortages. The contrast highlights how directly supply chain stability affects brand trust.

For New Zealand small and medium-sized business owners, the notable point is that a2 is shifting production from Synlait to its own Pōkeno plant and has won approval for two new products targeting lower-tier cities and the organic segment. This is not just a supply chain transition for a2; it could also reshape New Zealand's dairy contract manufacturing landscape—with Synlait losing a major customer, its freed-up capacity may offer partnership opportunities for other brands. Meanwhile, English label IMF rose 27.8 percent, showing cross-border e-commerce channels remain resilient, but daigou channels in Australia and New Zealand fell 8.6 percent, indicating continued contraction in traditional grey channels.

a2's FY27 guidance points to mid-single-digit revenue growth, but a materially lower first-half EBITDA margin and IMF sales flat on FY26 mean the China label recovery remains uncertain. For NZ SMEs reliant on the China market, a2's case suggests that, with tighter Chinese regulation and the rise of local brands, brand premium alone is no longer enough; localised production and diversified channel capabilities are essential.

Keywords: a2 Milk Company, China label infant formula, FY26 results, revenue growth 12.4%, Pōkeno plant, underlying EBITDA, supply shortage, FY27 guidance, David Bortolussi, market share recovery

Source: kalkine.co.nz