A2 shares rise 7.7% on back of increased infant formula sales

AUCKLAND: A2 Milk Co shares jumped 7.7% after the company reaffirmed its expected annual revenue growth, piggybacking off the strength of its infant formula products.

The milk marketer yesterday said its share of China’s infant formula consumption grew to 5.6% in the three months through to September, from 5.1% in the June quarter.

It also now has more than 10% of the branded fresh milk market in New Zealand and Australia.

Sales through that period were in line with a2’s expectations, which the company said reflected strong growth in infant formula and milk products. Growth in the formula products was across both English and Chinese labels.

The stock rose 75c to $10.45 at 1pm yesterday. It fell to an eightmonth low of $8.67 on Friday and is now down 16% since chief executive Jayne Hrdlicka sold shares in September having recently joined the firm.

That disclosure coincided with increased volatility in the market.

‘‘When there’s as much market volatility as we have seen over the last two weeks, growth or momentum stocks are the ones that can get hit pretty hard,’’ said Grant Williamson, a director at Christchurch broking firm Hamilton Hindin Greene.

‘‘That’s exactly what we’ve seen in a2.’’

A2 yesterday reiterated that it expected revenue growth from infant formula sales in Australasia and China and liquid milk sales in the US.

The firm’s earnings before interest, tax, depreciation and amortisation margin will largely reflect that growth in the June 2018 financial year, the company said.

It has not provided formal guidance, but the mean forecast among analysts predicts revenue of $1.25 billion in the present June year and ebitda of $385.4 million.

A2’s weaker share price was seen as a good buying opportunity by Morningstar Research, which added the stock to its top 10 picks for Australia and New Zealand earlier this month.

Meanwhile, Fisher Funds Management senior portfolio manager Sam Dickie on Tuesday said the Hrdlicka sale was poorly managed and communicated, but did not indicate any problems with the company’s performance.

Fisher Fundsmanaged Kingfish has allocated about 10% of its portfolio to a2.