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Formula boom helps A2 Milk double revenue

AAP logoAAP 23/08/2016

A2 Milk shares have dropped sharply after the company flagged the possible short-term impact of changing regulation in China.

A2, which is listed on the Australian and New Zealand share markets, said growth domestically and in China lifted annual revenue to $NZ353 million from $NZ155 million, but managing director Geoffrey Babidge sounded a note of caution amid a generally positive outlook.

"The company expects continued growth in the 2017 financial year, in particular from infant formula and milk powders in Australia and China and improved momentum in the US business," he said in a statement.

"Whilst there are changing regulatory dynamics in the China market, the company remains confident in the medium term opportunities and its ability to adapt to the evolving market circumstances."

A2 shares on the Australian Securities Exchange dropped 14 cents, or 6.4 per cent, to $2.05.

Increased sales of infant formula drove A2's revenue growth, and it swung to a $NZ30.4 million full year profit, from a $NZ2.1 million loss in 2014/15.

The company said the Australian market share of its branded fresh milk remained broadly stable at about 9.3 per cent within mainstream retailers, while its A2 Platinum product was the fastest growing infant formula brand in Australian during the 2015/16 financial year.

Total sales to China grew from $NZ4.0 million to $NZ38.2 million after A2 started selling through online shopping platforms Tmall and JD.com.

A2 ACCELERATES SALES

* Net profit of $NZ30.4m v $NZ2.1m loss

* Revenue of $NZ352.8m v $NZ155.1m

* No final dividend

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