(Bloomberg) -- New Zealand infant formula distributor a2 Milk surged the most in more than six years after revealing it will start paying dividends in early 2025.
The stock jumped 21% to NZ$6.44 at 10:35 a.m. in Wellington — headed for the biggest one-day gain since February 2018.
“The company has made considerable progress in developing its operating model and creating a more resilient business,” Chair Pip Greenwood said Friday in Wellington. “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 will target a payout of 60-80% of net profit after tax excluding non-recurring and other items, and expects to pay a dividend in line with the bottom end of that range in February when it announces first-half earnings. The company today said it is now expecting mid-to-high single-digit revenue growth in the full year, compared to previous guidance of mid-single-digit growth.
Despite being traded on the NZX since 2004, a2 has never paid a dividend as it has focused on reinvesting earnings to target growth, particularly in the China market. Before today, it was the second-worst performer on the benchmark NZX 50 index the past six months as China’s slowing economy and declining birth rates have curbed demand for formula.
Greenwood said the board remains conscious of the company’s significant cash balance, which is being prioritized for supply chain transformation, growth opportunities and risk mitigation.
As it executes 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 over time,” she said.
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