Fed Minutes | A2 Milk Silences the Critics

21 February 2019


Global markets were mixed overnight as minutes were released from the Federal Reserve’s last meeting.

Fed minutes showed the US central bank said it would be "patient" with respect to further interest rate hikes, and that many participants were not yet clear what adjustments to rates might be necessary later this year.

As we mentioned yesterday, it was a big day for local earnings announcements and we touch on result highlights below. We will release full reports on the company’s under our coverage that reported in our weekly report and it was a mixed bag with – A2 Milk, Fletcher Building, Spark, Ebos, Woolworths, WiseTech, Crown, and Sky TV all making profit announcements.

Stock in Focus: A2 Milk (:NZX / A2M:ASX)

Shares in A2 Milk jumped +10% yesterday to new highs after delivering another impressive first half result – contrary to some commentators who expressed concerns prior to the result. 

A2 Milk managed to lift revenue for the first half of the 2019 financial by +41% to $613.1m, driven by increased investment in marketing, brand awareness, market development and organisational capability across all key product segments and regions. This translated into a +55% jump in profit. The growth was particularly strong for infant formula in China which continues to increase its market share, as well as the US experiencing strong revenue growth due to an improved distribution network. 

We have always had a positive view towards A2 Milk as a high growth stock with strong macro-factors driving demand for their product (albeit at times expressed valuation concerns) and it was a very pleasing first half.

We currently have a BUY (High-Risk) rating on A2. 


Australia & New Zealand Market Movers

The Australian share market was slightly lower on Wednesday (ASX 200 index -0.17%) as investors digested disappointing wage data and earnings.

Woolworths slid after delivering a weaker-than-expected 1 per cent increase in net profit in the December-half. The supermarket giant said it was reviewing its strategies for Big W and Dan Murphy's and needed to turn sales growth into profit growth.
WiseTech Global shareholders were spooked by a lower-than-expected operating earnings, despite upgrading its revenue projections, as the company reaffirmed its earnings guidance for the year.
The Crown share price also fell on weak profit, revenue, and dividend numbers in a result management blamed on weaker economic conditions, while the group is probably also still cycling the fallout from China’s crackdown on the luring of high-value gamblers to Melbourne.


The New Zealand market was higher yesterday (NZX 50 index +0.27%) amid a flurry of company earnings.

Fletcher Building dropped despite posting a smaller decline in first-half earnings than predicted, with a small upgrade to forward guidance. There are growing concerns about the extent of the property market slowdown, and some investors were also disappointed that Fletcher didn't signal a capital return from the sale of its Formica unit.
Spark shares slipped after posting a 5.6 percent decline in first-half profit on the lack of dividend from Southern Cross Cable. Underlying earnings rose 7.2 percent as it widened margins after stripping out costs in its Quantum restructuring programme.
Ebos Group decreased as its first-half profit slipped 4 percent on one-off costs from mergers and acquisitions, rationalising its warehouses, and redundancy payments.
Sky Network Television dropped to a new low, as it reported a 20 percent decline in first-half earnings in long-serving chief executive John Fellet's swansong in charge of the once-dominant pay-TV operator. 


3 Things Markets Will be Watching this Week

  1. US Federal Reserve minutes are released Thursday morning AU/NZ time.
  2. Local earnings season continues across NZ and Australia this week.
  3. Minutes from the last Reserve Bank of Australia meeting are released on Tuesday.


Have a Great Day,


As we mentioned yesterday, it was a big day for local earnings announcements and we touch on result highlights below.

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