A2 Milk upgrades revenue forecast due to China demand

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The a2 Milk Company has further upgraded its revenue guidance for the current financial year underpinned by booming demand for its flagship a2 Platinum infant formula product in China.

A2 said this morning its revenue for 2017 would now be $NZ545 million, up $NZ20m on a previous upgrade given to the market in late April.

The latest upgrade comes after a2’s New Zealand-based infant formula supplier Synlait Milk increased production due to very strong demand in the China market.

A2 (A2M) also said this morning its marketing spend in China in the second half would now be $NZ10m higher than the first half rather than the previously predicted $NZ15m increase, due to changes in the phasing of planned investment.

A2 has bet big on supplying product through so-called daigou, where its products are purchased by buyers in Australia, sent to China and sold at a premium.

But it is also pushing its products hard into cross-border e-commerce and mother and baby store channels in China.

A2 shares have been one of the top five performers on the sharemarket so far this year after soaring from $2.20 since the start of March to close at $3.35 yesterday.

They have also been rivalled by Bellamy’s, which was the best performer on the S & P/ASX 200 yesterday as the infant formula supplier resumed trading after completing the first phase of a $60.4 million capital raising.

Bellamy’s shares rose 15.2 per cent to $6.50 yesterday from $5.76 when the company entered a two-day trading halt to conduct the institutional compo­nent of a capital raising to help buy a canning facility to help satisfy Chinese regulatory demands.

By DAMON KITNEY
The Australian

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