The death of infant formula sales to China has been exaggerated

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Shares in the a2 Milk Company jumped after the dairy and infant formula company raised its profit guidance on the back of sales to China.

A short time ago, a2 shares were up 12% to $1.685. Shares in Bellamy’s, which also sells infant formula in China, were up 4% to $10.97 today.

a2 Milk says full year revenue is now forecast to be in the range of $350 million to $360 million. EBITDA (earnings before interest, taxes, depreciation and amortisation) will be between $52 million and $54 million.

In February, a2 Milk was forecasting revenue in the range of $335 million to $350 million.

The market has been wary of recent import restrictions in China, including a tax for foreign products bought through online retailers.

However, a2 today said it was well placed to respond to changes in the infant formula regulatory environment in China.

“The company continues to adjust and evolve its manufacturing and distribution model in response to such changes,” the3 company told the ASX.

“In particular the Company remains of the view it is alert and well placed to respond to other potential changes in the regulatory environment.”

a2 sells company sells through online retailers Tmall and JD.com and in bricks and mortar stores in China.

In its latest half year results, profit was up almost 800% to $NZ10.1 million as sales of the a2 Platinum infant formula, seen in Asia and China as clean and safe, exceed expectations.

Overall revenue increased 86% in the six months to $NZ139.1 million.

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