CHINESE DEMAND DRIVES A2 MILK COMPANY REVENUE UP NEARLY $20 MILLION
Written on the 16 June 2017 by David Simmons
THE a2 Milk Company (ASX: A2M) has upgraded its full year outlook on revenue to approximately $517 million for the 2017 financial year thanks to a steep increase in Chinese demand.
The increase in forecast revenue of almost $19 million is driven by high levels of Chinese demand for the popular a2 Platinum infant formula.
To meet demand a2 has been working with manufacturing partner Synlait Milk to increase production of the infant formula for the remainder of FY17.
The increased demand can be attributed to an extra $9.5 million a2 spent on marketing during the second half of this financial year, used predominantly to sell directly to Chinese buyers.
One of the main reasons for the increase in sales is attributed to the Chinese custom called "daigou" where products are purchased by buyers in Australia, sent to China, and on-sold in China to customers for an inflated price.
A2 has also been pushing the infant formula product through online Chinese retailers as well as mother and baby stores in China.
The price of A2M shares are up 8.66 per cent this morning to $3.64.
This latest announcement from a2 puts the company in a strong position against its main competitor, Bellamy's (ASX: BAL), who yesterday announced strong results from a round of capital raising.
Bellamy's generated $14.3 million from the institutional component of its capital raising which the Company will put towards a major overhaul of its operations.
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Author: David Simmons