Sharechat Logo

A2 Milk shares jumped 14% on improved guidance

Wednesday 15th June 2016

Text too small?

A2 Milk shares rose 14 percent after the milk marketing company raised its full-year guidance and said it is well placed to cope with changes to infant formula regulations in China

Revenue is now forecast to be in a range of $350 million to $360 million in the year ending June 30, from a previous forecast of $335 million to $350 million, the company said today. Operating earnings before interest, tax, depreciation and amortisation are projected to be $52 million to $54 million, up from the $45 million-to-$49 million range it gave with its first-half results in February.

Shares in A2 Milk hit a record high of $2.61 in trading on Feb. 17 but have since fallen back on worries about Chinese regulations. They reached $1.79 today, having soared 152 percent in the past 12 months.

Michael De Cesare, an analyst at Nikko Asset Management New Zealand, said investor concerns about the regulatory regime in China had weighed on the stock. "The market as a whole has been struggling with what seems to be a great long-term story caveated with quite complex and ever-changing regulation coming out of China in terms of food standard specifications and how that might impact on Australasian exporters of infant formula."

In its statement, A2 said it was "well placed to cope with changes to infant formula regulations in China announced in recent months including taxation of cross-border e-commerce (CBEC) traded commodities, publication of product lists for CBEC traded commodities through China free-trade zones and an infant formula registration rule for domestic and imported infant formula products in China."

De Cesare said A2 is well placed to benefit from the increased Chinese scrutiny of the infant formula market. "Companies with a quality product are going to benefit the most from the tightening up of this market, it will be the periphery, the lower-quality companies who will no longer be invited to the party."

A2 is due to join the S&P/ASX 200 Index at the close of trading on June 17 after a successful listing in Australia. De Cesare says the share register of A2 has broadened considerably in the last year and the inclusion in the ASX 200 will attract funds from around the world “When you combine the ASX listing which makes it investable for Australian funds and the second tick, with the inclusion in the ASX 200, that’s the cherry on the cake, now they’re in the flagship benchmark you get increasing interest from offshore, from North America, from the UK.”

BusinessDesk.co.nz



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

Trustpower signals $11 mln profit boost from metering sale
Chorus defeats secrecy breach claim
Hedging losses drag Kiwi Property first-half net profit down 23.8%
Sky predicts revenue and earnings fall for FY20
Steel & Tube warns of further hit to first-half profit
A2 Milk's AGM should sort the bulls from the bears
Has NZ reached the lower limits of monetary policy?
NZ dollar maintains gains on China-US talks, local rate outlook
MARKET CLOSE: NZ shares edge lower; power companies under pressure
NZ dollar rises as bets on another OCR cut fade

IRG See IRG research reports