“They are unique in that there are not many companies out there with that kind of cash on their balance sheet – particularly relative to their market cap ($4.57b) – so investors have been looking for something like this around capital management for a while,” Forsyth Barr analyst Matt Montgomerie said.

A2 Milk chief executive and managing director David Bortolussi said acquisitions were still possible, despite the sea change.

The dual-listed company has already invested heavily in its majority-owned Mataura Valley Milk (MVM) facility in Southland.

He said the policy was to continue to invest in the company’s supply chain capacity, but also in those companies with Chinese infant formula registration (SAMR) in order to gain greater market access to China, easily the world’s biggest infant formula market.

“Our base plan is to continue to invest in MVM, but also we are looking to invest in M&A and joint venture opportunities to accelerate that over time because we are the only company in the China label market in the top 10 that has only one registration,” he said.

“We feel that we need to have more registrations to appeal to more consumer needs as well to manage different channels in the market,” Bortolussi told the Herald before today’s annual meeting.

Chinese label formula is made specifically for the Chinese market and is usually sold through specialised mother and baby stores.

English label product formula – available in New Zealand and Australia – has a different recipe, and is usually sold over internet platforms.

Gaining SAMR registration for Chinese label product is a drawn-out process.

“We think that gaining more access to more registrations is important for our business and we are trying to accelerate that because the lead times to register product are quite lengthy,” Bortolussi said.

In September, a2 Milk said it was in discussions regarding the potential acquisition of a manufacturing facility. The company said then that discussions were incomplete, with no binding terms agreed.

In response to a shareholder question at the meeting, Bortolussi poured cold water on the suggestion that a2 Milk could be interested in some of Fonterra’s consumer assets, which it currently has up for sale.

Forsyth Barr’s Montgomerie said there was an element of surprise that an acquisition was not announced alongside its capital management initiative.

“But there is a suggestion of them being relatively close to an acquisition to some extent.”

He said the 60%-80% dividend payout regime would still leave room for more initiatives for capital management over the longer term, and acquisitions were still possible.

A possible takeover target for a2 Milk could include Yili’s Oceania Dairy in Glenavy, in South Canterbury, (worth $400m to $450m), or Yashili’s New Zealand plant at Pokeno ($300m).

“Given the state of the dairy industry in New Zealand, the excess of stainless steel [manufacturing capacity] around, you suspect that material premiums to asset values are probably unlikely,” he said. “The days of elevated asset multiples for dairy assets are probably over.”

Montgomerie said there was some relief that the company did not issue an earnings downgrade, as some had expected, because of difficult trading conditions in China.

Shares in a2 Milk rallied sharply after the company upgraded its revenue outlook unveiled the dividend plan.

It said year-to-date trading was ahead of plan and the previous guidance provided on August 19, primarily due to a significant increase in Mataura Valley Milk’s external ingredient sales.

In addition, English-label infant formula sales and liquid milk sales were slightly ahead of plan.

The company said it now expects mid to high single-digit revenue growth in the current 2025 financial year compared with 2024, rather than its previous guidance of mid single-digit growth.

Earnings before interest, tax, depreciation and amortisation (Ebitda) margin, as a percentage of revenue, in 2025 were still expected to be broadly in line with FY24, with the first half down and and second half up compared with the previous year.

The company said its Chinese-label infant formula sales were broadly in line with its plan, taking into account supply constraints.

Production levels – arising from key supplier Synlait – returned to normal during the first quarter of 2025, and trade stock was returning to target levels ahead of Chinese New Year.

Chairwoman Pip Greenwood said a2’s liquid milk businesses in Australia and the United States, both under new leadership, progressed well in 2024.

The company continued to progress its application for long-term US Food and Drug Administration approval to import infant milk formula into the US.

In August, the company reported an annual net profit of $167.6m for the June year, up 7.7%.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.