The a2 Milk Company Posts 12.4% FY26 Revenue Growth and $300M Special Dividend

a2 Milk delivers 12.4% FY26 revenue growth and a special dividend despite late-year China disruption

The a2 Milk Company (ASX: A2M) delivered FY26 revenue growth of 12.4% to NZ$1,974.9 million for the 12 months ended 30 June 2026, driven by momentum across English label Infant Milk Formula (IMF), Liquid Milk and Other Nutritionals.

Reported EBITDA edged down 2.5%, but underlying EBITDA rose 5.4%, with the drag stemming from a 4Q26 China label supply chain disruption that the Company reported is now resolved. Despite the setback, capital returns remained intact, with total ordinary dividends of 21.0 cents per share and a $300 million special dividend (41.36 cps).

The result presents a nuanced picture: strong underlying growth undercut by a temporary, disclosed China headwind, with shareholder returns and strategic progress continuing.

FY26 financial results at a glance

The headline group numbers, presented on a continuing operations basis, illustrate the material gap between reported and underlying performance. The underlying figures strip out losses tied to the a2 Pōkeno facility and one-off transformation costs.

Several points clarify the reported versus underlying distinction:

• Underlying figures exclude a2 Pōkeno losses (EBITDA loss of $23.2m and NPAT loss of $28.3m) reflecting temporarily low production volumes, plus one-off transformation costs.

• Total reported NPAT was $111.1 million, after a $96.4 million loss from discontinued operations, mostly the non-cash Mataura Valley Milk (MVM) divestment recognised in 1H26.

• The balance sheet remained strong, with closing net cash of $784.5 million and operating cash conversion of 68%, in line with guidance.

The underlying business grew profitably, with the reported dip reflecting deliberate, transitional investment in supply chain capability.

What drove the numbers, and what the 4Q26 disruption means

Strong momentum across categories and regions

Category performance was broad-based across the year. Total IMF sales grew 4.7%, led by English label IMF, which rose 23.2% on cross border e-commerce (CBEC) and offline to online (O2O) channel growth, plus an increasing contribution from other markets, particularly Vietnam.

Liquid Milk sales grew 21.8%, with ANZ up 17.2% and USA up 28.9%. Other Nutritionals climbed 59.9%, driven by kids and seniors fortified milk powders and supported by the launch of a new kids fortified UHT product and the a2 至奕™ (a2 Zhi Yi™) paediatric supplements range.

By segment, China & Other Asia revenue rose 11.2%, ANZ grew 10.2%, and the USA advanced 28.6%. The USA business achieved breakeven in 2H26, with its full-year EBITDA loss improving to $3.4 million from $9.3 million in FY25, marking a return toward profitability.

The 4Q26 China supply chain disruption

The Company reported shortfalls of China label IMF product at distributors and retailers that materially affected in-market availability during 4Q26, forcing a large proportion of existing users to switch to alternative brands as pantry stock ran out, mainly in June.

The shortfalls were attributed to several factors:

The FY26 guidance downgrade issued in April 2026 traced the disruption to five converging supply constraints, including Synlait manufacturing backlogs, enhanced cereulide testing, and elevated Chinese customs inspection rates, with management framing the revenue shortfall as a timing shift into FY27 rather than lost demand.

1. Strong demand in the preceding quarter

2. Freight challenges

3. Synlait production backlog

4. Extended product release times

5. Additional customs clearance requirements and testing measures

The Company stated that these contributing factors have now been resolved, with product availability significantly improved. China label IMF revenue declined 14.0% to $544.3 million, having been up 6.5% in 1H26 before falling 33.0% in 2H26, indicating the fall was driven by disruption rather than underlying demand.

The impact on English label product was limited on a2 Platinum™. Its 4Q26 offtake in China was indirectly affected by the May 2026 USA label IMF recall, which was isolated to USA label product with a different formulation and relevant ingredient to the a2 Platinum™ sold in Australia, New Zealand, South Korea, Vietnam and through cross border channels into China.

Understanding the a2 Pōkeno transformation (and why underlying matters)

a2MC completed the acquisition of a2 Pōkeno, described as a world class nutritional facility, and the divestment of MVM, as announced in August 2025. The move increases the Company’s control over its own supply chain, expands capacity and capability, a form of vertical integration where a business owns more of its production process.

The facility currently creates a reported drag because it is under-utilised ahead of the planned insourcing of a2 Platinum™ from Synlait in 1H27. This explains the FY26 EBITDA loss of $23.2 million, and why underlying earnings strip it out.

Once production scales, the insourcing is expected to capture margin that previously went to a third-party manufacturer, an outcome the Company describes as vertical margin capture. Progress during the year included:

• $51.6 million invested in a2 Pōkeno as part of the previously announced ~$100 million multi-year capital programme, which remains on time and on budget.

• Regulatory approval secured for two new China label products to be produced at the facility.

China SAMR approval for two new a2-branded infant formula product registrations, secured in June 2026, was the final regulatory condition that locked in the Pokeno acquisition and removed the right to unwind the transaction, making the vertical integration strategy and the special dividend both unconditional at the same moment.

• The a2 Pōkeno manufacturing team more than doubled since acquisition.

In effect, today’s drag is positioned to become tomorrow’s margin, reframing the reported EBITDA dip as an investment phase.

Dividends and shareholder returns

The Board declared a material capital return alongside the results, reflecting balance sheet strength. Details are as follows:

• Final dividend of 9.5 cps (unimputed and fully franked), with a record date of 18 September 2026 and payment date of 2 October 2026.

• Total FY26 ordinary dividends of 21.0 cps, up from 20.0 cps, representing an improved payout ratio of approximately 74% of continuing operations NPAT.

• A special dividend of $300 million (41.36 cps), foreshadowed in August 2025 and paid on 24 July 2026, following regulatory approvals connected to the a2 Pōkeno China label registrations.

FY27 outlook and the road to recovery

The Company expects revenue and EBITDA to grow in FY27, but materially weighted to 2H27 due to the flow-on effects of the 4Q26 disruption. On a continuing operations basis, guidance includes:

• Revenue growth of mid single digit percent, with 1H27 revenue broadly in line with 1H26

• EBITDA margin of approximately 15%, with 1H27 materially down on 1H26

• Depreciation and amortisation of approximately $20 million

• Cash conversion of approximately 70–80%

• Capital expenditure of approximately $70 million

The recovery plan centres on regaining lapsed China label users, accelerating new-user recruitment, and increased marketing in 1H27. Two new China label IMF products are set to launch, expanding the portfolio from one to three, while the a2 Platinum™ insourcing is underway. The Company will provide an update on its IMF recovery plan at the Annual Meeting on 19 November 2026.

The broader thesis remains that of a fundamentally growing business, with recent innovation contributing over 50% of FY26 revenue growth, the USA scaling toward profitability, and Vietnam English label IMF sales up 200%. That momentum is now working through a temporary, well-defined China setback, with the November Annual Meeting shaping up as the key checkpoint for investors tracking the recovery.

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