China’s booming demand for baby formula had prompted dairy company a2 Milk Co to boost its earnings forecast for the 2016 financial year.
The company, which operates in Australia and New Zealand, said the demand for its a2 Platinum infant formula was “growing exponentially”, with sales hitting $NZ38 million for the first for months of the new fiscal year, compared to a total take of $NZ42m for the entire 2015 financial year.
Baby formula now accounts for around half of a2 Milk’s total group revenue, the company told shareholders at its annual general meeting today.
The group expects total revenue of $NZ285m for the year, up from its previous forecast of $NZ267m, and raised earnings before interest, tax, depreciation and amortisation guidance to $NZ22, nearly double prior estimates.
The bullish outlook comes amid headline grabbing reports of supermarket shelves being emptied of milk formula after customers — often Chinese tourists, migrants or students — remove stock by the pallet-load to sell online at home at inflated prices. The reports have caused an uproar among parents and consumer groups, who have called on the government to intervene.
But a2 Milk said demand was growing amongst both Australian and Chinese customers. The group said the growing success of a2 Platinum products was based on the reputation of the a2 Milk brand in Australia, while positive perceptions around Australia and New Zealand’s “clean and green” sourcing, was also helping drive strong demand from China.
The company said retail stock shortages were continuing despite production volumes increasing, while demand was continuing to exceed supply.
The group said it was building branded flagship stores across selected e-commerce retailers to build and capitalise on the growing demand in China.
“The a2 Milk Company is on the cusp of converting our recent investments into significant and meaningful business platforms, both in Australia and abroad, which will generate significant growing returns across the coming years.” chairman David Hearn said.
