The a2 Milk Company Announces FY26 Revenue Guidance Upgrade

The a2 Milk Company (ASX:A2M, NZX:ATM) has announced an upgrade to its a2 Milk Company FY26 revenue guidance, lifting expectations to low double-digit growth from the previously forecast high single-digit trajectory. The revision, disclosed on 20 November 2025, marks the second adjustment since the initial outlook was provided on 18 August 2025.

The update is attributed to stronger-than-expected trading across its three core product categories: Infant Milk Formula (IMF), Other Nutritionals, and Liquid Milk. Furthermore, the company has noted that New Zealand dollar depreciation against key trading currencies is inflating reported sales and expenses. However, the impact to earnings before interest, tax, depreciation, and amortisation (EBITDA), net of hedge losses, is not anticipated to be material.

Operating on a continuing operations basis, which excludes Mataura Valley Milk (MVM) and includes a2MC Pokeno from 1 September 2025, the company now anticipates FY26 revenue growth of low double-digit percent. This is against the FY25 continuing operations baseline of $1,757 million, implying a revenue range of approximately $1,933 million to $2,108 million for the fiscal year ending 30 June 2026.

Despite the revenue upgrade, a2 Milk Company has maintained its EBITDA margin guidance at approximately 15% to 16%. This suggests that expense inflation and strategic investments are offsetting some of the operational leverage benefits typically associated with higher sales. The company currently has 708,520,075 shares on issue and holds a market capitalisation of approximately $6.69 billion.

What Is Driving the Upgraded a2 Milk Company FY26 Revenue Guidance?

The upgraded forecast is underpinned by operational outperformance across multiple product segments rather than one-off factors. This broad-based strength suggests resilient consumer demand for the company’s premium a2 protein products across different markets.

Infant Milk Formula continues to be the primary growth driver. The company has specified that English label IMF revenue growth is expected to be significantly higher than China label IMF revenue growth, indicating a notable shift in geographic and channel mix. English label products, manufactured for sale outside mainland China, typically serve markets like Australia and New Zealand, including the daigou reseller network.

This trend is strategically significant for investors, as robust English label IMF sales suggest resilience in the daigou network and domestic markets, reducing concentration risk associated with the mainland China market. In contrast, China label IMF products are growing at a more modest pace, reflecting ongoing challenges such as declining birth rates and intense competition.

Other Nutritionals, including adult milk powders, are also contributing meaningfully to the positive revision. This category diversification provides a buffer against cyclical pressures in the infant nutrition market. Additionally, Liquid Milk in Australia is trading stronger than anticipated, reinforcing the company’s leadership in the premium fresh milk category and providing stable, recurring revenue.

How Does Currency Impact FY26 Financial Performance?

New Zealand dollar depreciation against currencies like the Australian dollar, US dollar, and Chinese yuan mechanically inflates both reported sales and expenses when translated into NZD. However, the company has clarified that the net impact to EBITDA, after accounting for hedge losses, is not expected to be material.

This distinction is critical for investors. The translation impact is an accounting effect that alters reported figures without changing underlying cash flows. In contrast, the transaction impact creates real cash flow effects from foreign currency transactions. The company’s hedging program is designed to mitigate these transaction risks.

The company’s statement suggests that its hedging program is effectively neutralising the bottom-line effects of currency movements. Consequently, understanding the true operational performance beneath the headline revenue figures is essential for evaluating the a2 Milk Company FY26 revenue guidance.

What Should Investors Consider When Analysing the Revenue Guidance?

The revenue upgrade is partially influenced by favourable currency movements; therefore, constant currency growth would be lower than the reported low double-digit figure. Investors should focus on volume growth and market share dynamics to gauge underlying business performance.

The decision to maintain the EBITDA margin guidance at 15% to 16% despite higher revenue suggests some margin compression on a constant currency basis. This could reflect increased promotional spending, higher input costs, or strategic brand investments. Furthermore, interest income is projected to decline, which may explain why net profit after tax (NPAT) is only expected to be slightly up on the FY25 reported figure of $203 million.

What is the Updated FY26 Financial Guidance Framework?

The updated outlook reflects stronger near-term revenue momentum but limited earnings conversion at the NPAT level. The revenue growth of low double-digit percent implies a range of approximately $1,933 million to $2,108 million. The maintained EBITDA margin of 15% to 16% suggests an EBITDA of roughly $290 million to $337 million. Depreciation and amortisation is expected to be approximately $20 million to $24 million, and this comprehensive framework provides a clear picture for the a2 Milk Company FY26 revenue guidance.

How Will Revenue Phasing Affect Half-Year Performance?

The company expects 1H26 revenue growth to be higher than 2H26 revenue growth when compared to prior corresponding periods. This phasing suggests that key sales events or seasonal demand in the first half of the fiscal year will be significant drivers of the full-year result. Investors will be monitoring trading updates closely to confirm if this early momentum is sustained through the remainder of the fiscal year.

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