You are using an older browser version. Please use a supported version for the best MSN experience.

China demand A2 boosts sales expectations

NZ Newswire logoNZ Newswire 15/06/2017 Paul McBeth

A2 Milk Co has lifted annual sales guidance for the second time in as many months as it beefed up production to meet sweltering Chinese demand for infant formula.

The Auckland-based, Sydney-headquartered milk marketer says revenue is expected to be $545 million in the 12 months ending June 30, a $20m increase from its April update which was itself an upgrade. A2 reported annual revenue of $352.8m in 2016.

In the April update, a2 said it was working with Synlait Milk - it has an 8.2 per cent stake - to increase supply for the rest of the financial year to meet rising demand for its Platinum infant formula product.

After reviewing the financial results to May and Platinum production the company believed it was appropriate to revise its full-year outlook upwards, says managing director Geoffrey Babidge.

In February, the company scaled back its expected growth for infant formula sales as Chinese regulators looked to tighten regulations for sales through online grey market channels.

While that weighed on rivals such as ASX-listed Bellamy's, a2 managed to navigate the changes with little impact on sales so far.

The company has boosted marketing, primarily in China where demand for its product has been strong, and had previously predicted its marketing costs in the six months ending June 30 would be up to $15m higher than the $16m it spent in the first half of the financial year.

A2 on Friday said it changed the timing of that increase and marketing will be about $10m higher, implying the company will spend about $26m in the half.

A2 shares last traded at $3.56 and have jumped 67 per cent so far this year, outpacing the 9.2 per cent increase on the S&P/NZX 50 index over the same period.

image beaconimage beaconimage beacon