A2 Milk surges on better sales, lifts guidance
A2 Milk Co shares soared to a record high yesterday after the milk marketer raised its annual revenue guidance following better-than-expected sales in the third quarter.
The company’s shares closed up 25c yesterday at $3.45, adding to a 50 per cent gain so far this year.
The Auckland-based, Sydneyhead quartered company forecast revenue of $525 million in the year ending June 30, up from $352.8 ma year earlier, it said.
A 2 generated sales of $388 min the nine months ended March 31, with third-quarter infant formula sales exceeding expectations.
“Demand has been particularly strong in Australia, but also through the cross-border e-commerce channel into China,” said managing director Geoff Babidge.
“On the assumption of continuing strong demand for a2 Platinum infant formula and production deliveries achieved consistent with the revised production schedule, the company is now expecting infant formula sales for the second half FY17 to exceed sales achieved in first half FY17.”
In February, a2 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 has managed to navigate the changes with little impact on the company’s sales so far.
Hamilton Hindin Greene director Grant Hamilton said a2 had not been held back by changes to Chinese regulations, with consumers in the world’s second-biggest economy embracing its infant formula product.
“Their product is getting very well accepted in China,” Williamson said. “The Chinese do go that extra bit for their children.”
Williamson said a2 will probably be able to self-fund its expansion into other markets while being able to reward shareholders with dividends, “which shows how far they’ve come in a very short period of time”.
A2 migrated to the NZX’s main board in late 2012 from the NZAX and is now the 16th biggest company on the exchange with a market value of $2.33 billion.
A2 said it was working with infant formula manufacturing partner Synlait Milk to increase supply for the rest of the financial year to meet strong demand.
Last month, a2 bought an 8.2 per cent stake in Synlait, deepening the relationship between the companies. They signed a supply agreement in 2012 and last year inked a new deal allowing for an increase in production if demand warranted.
The stock is rated an average ‘buy’ based on five analyst recommendations compiled by Reuters with a median price target of $2.90.