Adds share price movements, Citi analysts comments

By Nichiket Sunil

Feb 17 (Reuters) - Shares of New Zealand's a2 Milk ATM.NZ soared 12.3% on Monday after the dairy producer declared its first dividend and hiked its annual revenue growth outlook citing stronger-than-anticipated demand for its English-label infant milk formula.

A2 Milk shares rose as much as 13.2% to NZ$7.45 per share, their highest level since August 16, 2024. It was the biggest gainer in the S&P/NZX 50 benchmark index .NZ50, which was trading 0.2% higher as of 2130 GMT.

It declared an interim dividend of 8.5 New Zealand cents per share and will continue to review capital management options, which could result in future capital returns to shareholders, likely in the form of special dividends.

The dairy producer also upgraded its fiscal 2025 revenue growth guidance to low- to mid-double-digit percent from the prior guidance of mid- to high single-digit. Its revenue grew 5.2% in fiscal 2024.

Stronger demand than anticipated for its English-label infant milk formula (IMF) in cross-border e-commerce channels, as well as more liquid milk sales, particularly in the USA club channel, boosted the dairy giant's revenue expectations.

Higher global dairy trade prices and higher volume of milk processed helped its subsidiary Mataura Valley Milk $(MVM.AU)$ post a 32% revenue growth in the first half, which also boosted its full-year outlook.

"Our strong first-half results and momentum going into the second half have resulted in an upgrade to our FY25 revenue and earnings guidance," Chief Executive Officer David Bortolussi said.

A2 Milk saw its overall IMF sales grow 7.2% during the period, driven by its English label, which saw strong growth within the cross-border e-commerce and offline-to-online channels.

Sales from China and other Asian markets, its largest revenue source, grew 11.8% in the first half, while U.S. revenue rose 13.2%.

That helped a2 Milk post net profit after tax (NPAT) attributable to shareholders of NZ$91.7 million ($52.50 million) for the six months ending December 31, beating Visible Alpha consensus estimate of NZ$83 million.

Last year, it reported profits of NZ$85.3 million.

"This seems to be a reasonable quality beat with revenue up 10%, excellent cash conversion and strong execution reducing in losses from the U.S. and MVM," Citi analysts said in a note.

An increase in marketing expenses implied by the second-half guidance should "position the business well into fiscal 2026", they said, further predicting consensus estimates for operating earnings to be hiked by at least mid- to high-single digits.

($1 = 1.7467 New Zealand dollars)

(Reporting by Nichiket Sunil in Bengaluru; Editing by Alison Williams and Lisa Shumaker)

((Nichiket.Sunil@thomsonreuters.com;))