a2 Milk shares are on a tear as infant formula sales keep busting forecasts

Baby giant pandas. ChinaFotoPress/ChinaFotoPress via Getty Images

The a2 Milk Company has again substantially increased its profit guidance as demand for untainted infant milk formula in China keeps exceeding all forecasts.

The company expects full year revenue in the range of $300 million to $315 million and EBITDA of between $33 million and $37 million.

a2 Milk shares were up more than 23% to $1.28 in early trade, a long way from a year low of 46 cents.

At its annual general meeting last month, the company forecast revenue of $285 million and EBITDA of $22 million.

However, since then there has been a “significant uplift” in sales of the a2 Platinum infant formula, exceeding sales projections again.

This sales lift is expected to continue in December. The company forecasts sales of a2 Platinum to be $68 million for the six months to the end of December.

CEO Geoffrey Babidge says the infant formula market is rapidly evolving.

“The company has recently increased the supply of a2 Platinum infant formula to our customers,” he says. “However, we continue to experience a level of out of stocks on shelf.

“The strong trading performance advised today provides further evidence of the increasing appeal of the a2 Platinum brand in Australia and China and the growth potential in additional markets in the future.”

Demand for Australian-made infant formula is booming as Chinese consumers seek a safe and clean product. A2 milk is one of those brands which quickly go off the shelves.

Blackmores, the Australian vitamin maker, is also doing big trade in China and also has a partnership with Bega, the dairy company, to develop a high quality infant formula.

A2 Milk, which only sells milk with the A2 type of protein from specially selected cows, is now selling and distributing its a2 Platinum infant formula in China directly with a local sales team in Shanghai.

The New Zealand-based company in October completed a $NZ 40 million capital raising to help expand into Asia and the UK.

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