Dairy company a2 Milk to pay first ever dividend

Dairy company a2 Milk will pay shareholders a first-ever dividend with high single-digit full year revenue growth anticipated.

The company said sales of infant milk formula and liquid milk were slightly ahead of an earlier guidance and was expected to boost last year's revenue of $1.67 billion.

Underlying profit as a percentage of revenue was expected to about 14 percent, which compared with last year's $234.3 million, with the second half stronger than the first.

The speciality milk company also announced its first dividend payout policy with an interim dividend to be paid for the first half ending in December.

a2 Milk Company has made considerable progress in developing its operating model and creating a more resilient business, board chair Pip Greenwood said.

"Given this progress and our strong balance sheet position, the board believes the time is right to introduce a dividend policy that delivers sustainable cash returns to shareholders over time."

a2 had $969m in cash at the end of FY24, but had never paid a dividend.

Subsequent dividends were expected to be declared on a semi-annual basis in February and August each year at a level consistent with a2's target payout ratio range.

The dividend policy targets a payout ratio range of between 60 percent and 80 percent of net profit after tax excluding non-recurring and other items.

Greenwood told shareholders at Friday's annual meeting a2 was continuing to explore opportunities to obtaining access to additional China label registrations as well as developing its own nutritional manufacturing capability.

She said this could be achieved through acquisitions or commercial partnerships, but was unable to offer an update.

"I can say that we continue to make good progress in this regard and that this remains a top priority for management and the board."

She said the board was conscious of the company's significant cash balance, which was $969m at the 30 June 2024 balance date.

"As the company continues to execute its strategy and risk evolves, the board will continue to review capital management options which may result in further capital returns to shareholders, likely in the form of special dividends."

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