a2 Milk rises on increased Chinese demand for infant formula

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Baby formula maker a2 Milk jumped more than 5 per cent in Australia and New Zealand on Wednesday after the dual-listed company lifted sales expectations for the second half of 2017 on strong demand from China.

The New Zealand-based company said in February it was expecting sales in the second half to be lower than the first half of the year, but that since the update demand for its a2 Platinum infant formula has exceeded expectations. Sales in the second half of the year are expected to exceed those in the first half of the year, the company said.

“Demand has been particularly strong in Australia, but also through the cross border e-commerce (CBEC) channel into China,” a2 Milk said in a trading update.

Australian vitamin and food companies had been shaken by Chinese proposals to tighten cross-border e-commerce rules last year on fears this would hit the growing market for online sales to the country. In March Beijing took an ‘as you were’ stance saying goods entering the country via online sales platforms would be classed as personal trade rather than for commercial operations.

a2 Milk said it has been working with its baby formula manufacturing partner Synlait Milk to increase the production schedule for the rest of the financial year.

The company’s shares were up 5.2 per cent at A$3.125 a share in Australia while the benchmark S&P/ASX 200 is up 0.8 per cent. a2 Milk’s shares are up 6.3 per cent in New Zealand. Australian organic baby food maker Bellamy’s, which also ships to China, was up 3.45 per cent joining a2 Milk among the best performing shares on the S&P/ASX 200.

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