Acquisitions on agenda as a2 Milk formulates $350m supply chain boost

For the six months to June, a2 Milk generated $893.8m in revenue, a 10.1 per cent increase from the previous corresponding period.

The a2 Milk Company is positioning itself for a $350m-plus ­transaction across the Tasman, with some pointing to manufacturing assets as its likely target, sources say.

The $6.4bn Australian-listed company has made no secret that acquisitions were on its agenda, with the group telling investors at its half-year results that it continued to progress mergers and acquisition opportunities to accel­erate China-label market access and develop nutritional manufacturing capability with the intention of making “meaningful progress” this year.

Sources suspect the assets would involve canning and blending facilities that would let a2 Milk capitalise on its China label product manufacturing.

The understanding is that a deal could be finalised within months.

For the six months to June, a2 Milk generated $893.8m in revenue, a 10.1 per cent increase from the previous corresponding period and a 7.6 per cent lift in net profit to $91.7m.

The company said its revenue growth was driven by its China and Other Asia segment, which was up 11.8 per cent, supported by the US segment, which was up 13.2 per cent and Mataura Valley Milk, up 31.9 per cent.

It lifted its revenue guidance at the time after a better-than-­expected first half.

A2 Milk sells cows milk that contains only the A2 beta-casein protein and no A1 beta-casein and is marketed as easier to digest for some individuals.

The company’s share price has recovered from 2022 lows when it was hard hit by the collapse of the lucrative Daigou market amid the pandemic.

It reached almost $20 in 2020 but fell as low as just over $4 in 2022.

Jayne Hrdlicka previously ran the company, resigning in 2019.

The business holds almost a 20 per cent share of Synlait Milk and earlier there were suggestions A2 could be interested in buying some of its assets, such as its state-of-the-art processing plant in Canterbury, New ­Zealand.

Previously, price estimates were between $NZ400m and $NZ500m and it is considered Synlait’s best asset. That was when Synlait was on its knees and its future was in the balance with too much debt.

Synlait has the exclusive rights to produce a2 Milk’s infant formula, including the China label product where Synlait holds the registration required by the Chinese government.

As part of a2 Milk’s move looking take greater control of its supply chain, it has told Synlait it is looking to remove exclusivity to produce its infant formula.

The China Label Infant Milk Formula product Synlait holds the registration to accounts for about 50 per cent of a2 Milk’s total IMF sales. A2 Milk is Synlait’s major customer.