a2 Milk's profit has tripled but watch out for China

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a2 Milk’s annual profit jumped 198% to $NZ90.65 million ($A83.4 million) on booming sales in both China and Australia.

And the company says it’s working on meeting new rules in China requiring infant formula brands to be registered by January 2018.

Sales and earnings in China more than doubled to $NZ88.9 million ($A81.8 million) from $NZ38.2 million ($A35.1 million).

The company’s total revenue was up 55.8% to $NZ549.53 million ($A505.7 million).

Infant formula generated 72% of the company’s total revenue for the year, up from 61% in 2016.

“The company is clearly focused on sustainable growth of a2 Platinum infant formula through significant investment in product supply and quality, building brand awareness and strength, and meeting the requirements of China’s regulatory regime,” the company says.

Managing Director Geoffrey Babidge says the growth reflects increasing consumer acceptance of the a2 brand and the benefits of dairy-based products free from the A1 beta casein protein.

“It is particularly pleasing that we have been able to respond progressively to the supply challenges arising from growth in demand for a2 Platinum infant formula over the year which exceeded our previous expectations,” he says.

“A key element in fulfilling the growing demand is the renewed long-term supply agreement with our manufacturing partner Synlait.

“The company is also strongly focused on China’s evolving regulatory regime, in particular the requirement for registration of infant formula brands by China’s Food and Drug Administration from January 2018.”

a2 Milk hasn’t had the sales problems in China faced by other Australian infant formula suppliers such as Bellamy’s which hit a wall last year after regulatory changes.

Company didn’t declare a dividend but announced an on-market share buyback over the next 12 months of up to $NS40 million ($A36.8 million).

The results at a glance:

Source: a2 Milk

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