UK joint venture eats into A2 profit

THE cost of setting up a joint venture in the UK impacts on NZ dairy producer A2's profit, but sales surge in Australia.

A2 Corp, which markets milk products with a protein variant claimed to have health benefits, reported a 6.5 per cent decline in annual profit as the cost of setting up its UK joint venture ate into the bottom line.

Net profit fell to $NZ4.12 million ($A3.61 million) in the 12 months ended June 30 from $NZ4.41m a year earlier.

The Sydney-based company took a $NZ3.72m charge in sharing the loss from setting up its British joint venture.

Operating earnings before interest, tax, depreciation and amortisation more than doubled to $NZ10.6m, missing the forecast EBITDA of $NZ11.2m before intercompany charges.

Sales climbed 51 per cent to $NZ94.3m, the bulk of which come from A2's Australian business, which the company estimates has grabbed about 7.4 per cent of grocery market share.

"The board is delighted with the continuing standout performance of the Australian business and encouraged with the development of the new initiatives in the UK and China," managing director Geoff Babidge said.

"The prospects of the company's business units are in aggregate consistent with the revenue projections contained in the 2012 private placement memorandum with additional product and market opportunities being pursued."

The board didn't declare a dividend, and is considering whether to dual list the stock on the Australian Securities Exchange.

Its shares have climbed 36 per cent this year, valuing the company at $NZ467.8m.

This month A2 agreed to simplify its arrangements with cornerstone shareholder Freedom Foods Group, ending the Australian company's anti-dilution rights in exchange for 400,000 shares, and giving Freedom Foods until March 31 next year to pay up its partly-paid shares.

A2's Australian business boosted sales 48 per cent to $NZ92.5m, and reported an 8.1 per cent fall in segment profit to $NZ3.63m. The UK unit contributed a segment loss of $NZ207,000.

The New Zealand unit boosted sales 54 per cent to $NZ2.22m.