TLDR:
The a2 Milk Company (a2MC) has updated its FY25 revenue guidance, expecting higher growth than previously forecast. Additionally, the company has introduced its first-ever dividend policy, targeting a payout of 60-80% of normalised net profit after tax (NPAT). The inaugural interim dividend is expected in February 2025.
A Snapshot of a2MC’s FY25 Guidance
a2 Milk has revised its revenue growth expectations for FY25, now anticipating mid to high single-digit growth, up from the earlier guidance of mid-single digits. This adjustment reflects stronger-than-expected trading performance, driven by:
- Higher MVM external ingredient sales: Benefiting from favorable Global Dairy Trade prices and currency impacts.
- Improved English Label IMF and Liquid Milk sales: Both categories slightly outperforming initial forecasts.
The company has maintained its EBITDA margin outlook, forecasting a flat performance compared to FY24. The first half of FY25 (1H25) is expected to experience a dip, while the second half (2H25) is poised for growth.
Introducing Dividends: A New Era for Shareholders
In a milestone announcement, a2MC revealed its inaugural dividend policy, aiming to share its success directly with shareholders.
- Payout ratio: 60-80% of normalised NPAT.
- First dividend: Expected in February 2025, at the lower end of the range (60%).
- Frequency: Dividends to be declared semi-annually (February and August).
Board Chair Pip Greenwood highlighted the progress made in creating a resilient business, adding that this policy reflects a2MC’s strong balance sheet and long-term sustainability goals.
What Does This Mean for Investors?
- Steady Revenue Growth: The updated guidance showcases a2MC’s ability to adapt and capitalize on favorable market conditions, signaling resilience and growth.
- Dividend Appeal: The new policy positions a2MC as an attractive option for income-focused investors, offering predictable returns.
- Cash Flow Strategy: While dividends are a priority, the company also emphasizes reinvesting in supply chain improvements, growth opportunities, and potential special dividends over time.
Why It Matters
The introduction of a dividend policy marks a shift for a2MC, aligning with its refreshed growth strategy launched in 2021. By balancing shareholder rewards and reinvestment, the company is setting a foundation for long-term stability while retaining agility in a dynamic market.
For investors, a2MC’s combination of steady growth and a clear capital return strategy offers a compelling case for confidence in its future. Keep an eye on February 2025—dividends are coming!
