Sunshine over China for Australasia’s embattled dairy companies?
a2 Milk (A2M) shares jumped more than 7% in Australia and New Zealand yesterday after the dual-listed company lifted sales expectations for the second half of its 2016-17 on stronger demand from China.
The news flowed through to Bellamy’s (BAL) whose shares rose more than 5%.
New Zealand-based a2 said in a statement to the stock exchanges in both countries that in February it had been expecting sales in the second half to be lower than the first half of the year, but since the update demand for its a2 Platinum infant formula has exceeded expectations.
Sales in the second half of the year are now expected to exceed those in the first half of the year, the company said.
The Auckland-based, Sydney-headquartered company forecasts revenue of $525 million in the year ending June 30, up 49 per cent from $352.8 million a year earlier, it said in a statement. a2 said it had sales of $388 million in 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,” managing director Geoff Babidge said.
“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 [of 2017] to exceed sales achieved in first half,” he said in yesterday’s statement. Australian vitamin and food companies had been shaken by Chinese proposals to tighten cross-border e-commerce rules last year on fears this would hit the growing market for online sales to the country.
In March Beijing changed stance saying goods entering the country via online sales platforms would be classed as personal trade rather than for commercial operations. That saw shares for a2, Bellamy’s and other makers jump sharply, along with the shares for vitamin companies such as Blackmores.
a2 Milk said it has been working with its baby formula manufacturing partner Synlait Milk to increase the production schedule for the rest of the financial year.
Last month, a2 bought an 8.2% stake in Synlait. The two companies signed a supply agreement in 2012 and last year did a new deal allowing for an increase in production if demand warranted. a2 shares ended up 7.7%% at $3.20 a share on the ASX, and up 6.3% in New Zealand.
Bellamy’s, which has taken some heavy body blows from investors nervous over its heavy reliance on China sales, saw its shares end up 5.1% at $4.88.
