Infant formula driving A2

AUSTRALIAN and Chinese demand for A2 Milk’s Platinum infant formula has prompted the company to predict a gain of almost 50% in annual revenues this financial year.

An agreement to boost production has been struck with manufacturing supplier Synlait.

A2 Milk yesterday released a trading update, forecasting a 49% revenue gain, for its year to June, rising from $352.8 million a year ago to $525 million.

A2 shares, which have more than doubled in value since touching $1.40 in June last year, were up almost 6% to a record $3.39, following the announcement.

A2 Milk managing director Geoffrey Babidge said since a midFebruary update, demand for its Platinum infant formula had exceeded expectations.

‘‘Demand has been particularly strong in Australia, but also through the crossborder ecommerce channel into China,’’ he said.

For the nine months to March, revenue stood at $388.5 million.

In early March, A2 Milk acquired a 8.2% stake in Canterbury milk processor Synlait for $47.9 million, based on expansion of an earlier infant formula supply agreement between the companies.

Mr Babidge said in response to the continued strong demand, A2 Milk had been working closely with Synlait Milk to lift the production schedule.

On the assumption of continuing strong demand for Platinum infant formula, and increased production, A2 Milk was expecting secondhalf trading sales to exceed firsthalf sales.

In February, A2 Milk scaled back its expected growth for infant formula sales as Chinese regulators siught to tighten laws for sales through online ‘‘grey market channels’’, The New Zealand Herald reported.

While that has weighed on rivals such as ASXlisted Bellamy’s, A2 had managed to navigate the changes with little impact on sales so far.