The A2 Milk Company has more than doubled its first-half profit and has entered into an alliance with global dairy giant Fonterra to produce new products and enter new markets.
A2 Milk’s net profit for the six months to December 31 soared 150 per cent to $NZ98.47 million ($A91.8 million) on the back of strong growth in its infant formula business and higher liquid milk sales in core markets.
Shares in A2 Milk were $A1.70, or 19.5 per cent, higher at $A10.41 at 1020 AEDT.
New Zealand-based A2 Milk has also entered into a strategic alliance with Fonterra under which Fonterra will exclusively supply A1 protein-free milk products in bulk powder and packaged form to A2 Milk.
Fonterra will have exclusive supply rights for some nutritional products to be sold in new priority markets in south-east Asia and the Middle East up to a specified volume.
A2 Milk in turn has been allocated production capacity at some Fonterra manufacturing facilities as volume grows.
Fonterra will also have the an exclusive license for the production and sale of A2 Milk branded fresh milk in New Zealand.
Also, a new A1 protein-free milk pool will be developed in Australia and New Zealand.
Furthermore, A2 Milk and Fonterra will evaluate opportunities to sell A1 protein-free butter and cheese in Australia, New Zealand and China.
“This is a significant development for A2 Milk given the wide-ranging nature of the relationship,” A2 Milk said in a statement on Wednesday.
“The arrangements expand A2 Milk’s ability to build its business in new priority markets and beyond, providing exciting growth initiatives in new A1 protein-free products and enable consumers to obtain new and innovative milk products.”
First-half sales of its A2 Platinum infant formula grew substantially in China and Australia, while the company increased brand awareness and expanded in the US.
Sales of fresh milk in the United Kingdom continued to build.
A2 Milk said it continues to consider opportunities to invest in blending and canning, the potential for a share buyback and the implementation of a dividend policy.
A2 Milk is pure dairy milk which comes from cows that are selected to produce A2 beta-casein proteins in their milk rather than the A1 protein.
A2 Milk says the proteins affect digestion differently and A2 Milk may benefit people who normally experience discomfort when drinking cow’s milk.
BIG LIFT IN REVENUE, PROFIT FORA2 MILK
* First-half net profit up 150pct to $NZ98.5m
* Revenue up 70pct to $NZ434.7m
* No interim interim dividend, unchanaged
Source: The Bull.com.au