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A2 Milk reports first quarter revenue of $112.5 mln, shares rise 4%

Tuesday 8th November 2016

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A2 Milk, which markets milk based on the supposed health benefits of the A2 milk protein, says first quarter sales met expectations with sales driven by growth in infant formula and milk. The shares rose 4 percent on the update. 

The Auckland-based, Sydney-headquartered company reported revenue of $112.5 million in the three months ended Sept. 30 in a presentation by chief executive Geoffrey Babidge to a UBS conference in Sydney. Sales of fresh milk in Australia and New Zealand were up 7 percent from a year earlier. 

Babidge also said there had been "continued and consistent growth" in consumer demand for its A2 Platinum infant formula, despite research reports suggesting demand would be volatile. 

In August, A2 reported total sales of $352.8 million in the 2016 financial year, up from $154.8 million.

In China, the company is "well progressed" in its preparation for changes to the infant formula regulation process which are being overseen by the Chinese food and drug administration, with registration required by Jan. 1, 2018. A2 said it was now awaiting final guidelines for submission from the CFDA. 

Demand had grown in both direct and cross-border e-commerce trade into China, and A2 has engaged what it called a leading China-based consultancy to assist in building market intelligence and scenario planning for the medium term. 

In the United Kingdom, fresh milk sales were up 50 percent compared to the same period a year ago, although it had had to change some product lines for key retailers to reflect consumer demand for semi-skimmed milk. This is the most popular milk in Britain and has a fat content of around 1.7 percent. 

A2 reported positive earnings before interest, taxation, depreciation and amortisation in the UK in the final quarter of the last financial year, and expects this to continue for the full-year 2017. 

Sales in the US are described as "improving" in the key accounts of Whole Foods Northern California, Ralph's and Sprouts, while it has also gained new accounts in Target and Trader Joes in California.  

The Australian legal case between A2 Milk and drinks giant Lion, which centres on the scientific evidence around the benefits of milk comprised solely of A2 Milk proteins, is due to be heard in November next year, Babidge said. 

Shares of A2 Milk rose 4 percent at $2.05, a rise of 8 cents. They've risen 5.9 percent since the start of the year.

BusinessDesk.co.nz

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