New Zealand’s a2 Milk almost triples profit on strong Chinese demand

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New Zealand’s a2 Milk Co said on Wednesday its full-year profit nearly tripled in 2017 to hit its highest-ever level, fuelled by soaring demand for its infant formula products in China.

Net profit after tax rose to NZ$90.6 million ($83.4 million) for the year ended June, from NZ$30.4 million a year ago, beating an average estimate of NZ$81.5 million from three analysts polled by Thomson Reuters.

Revenue jumped 56 per cent to NZ$549.5 million, in line with the company’s June guidance of NZ$545 million.

Infant formula sales accounted for almost a quarter of total revenue.

The dairy company had originally predicted that sales in the second half of the year would drop, but strong Chinese demand for its flagship infant formula product prompted the firm to reverse its forecast and raise its revenue outlook.

A2’s China sales have climbed in part due to the company’s close relationship with informal travelling shopping agents known as “daigou” who post its products to the mainland.

Infant formula sales accounted for almost a quarter of total revenue now.Infant formula sales accounted for almost a quarter of total revenue now. Photo: Alasdair James

Other formula makers, such as rival Bellamy’s Australia, have struggled with product licensing regimes in China.

While sales in Australia, New Zealand and China underpinned A2’s results, its UK business has recorded its first annual operating profit, the company said.

Reuters

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