A2 sales meet expectations, support growth outlook

A2 Milk Co still sees annual revenue growth piggybacking off the strength of its infant formula products, after first-quarter sales met expectations.

The milk marketer's share of China's infant formula consumption grew to 5.8 percent in the three months through September, from a 5.1 percent share in the June quarter. It also now has more than 10 percent of the branded fresh milk market in New Zealand and Australia.

Sales through that period were in line with A2's expectations, which the company said reflected strong growth in infant formula and milk products. Growth in the formula products was across both English and Chinese labels.

A2 reiterated it expects revenue growth from infant formula sales in Australasia and China and liquid milk sales in the US. The firm's earnings before interest, tax, depreciation and amortisation margin will largely reflect that growth in the June 2018 financial year, the company said.

It hasn't provided formal guidance, but the mean forecast among analysts predicts revenue of $1.25 billion in the current June year and ebitda of $385.4 million.

The company's update to investors at the Annual Australian and New Zealand Investment Conference in Sydney was its first since disclosing chief executive Jayne Hrdlicka sold shares in September having recently joined the firm.

The stock last traded at $9.70, down about 22 percent since Hrdlicka's disclosure. That's coincided with a wider decline in stock markets, with the S&P/NZX 50 index down 6 percent during the same period.

A2's weaker share price was seen as a good buying opportunity by Morningstar Research, which added the stock to its top 10 picks for Australia and New Zealand earlier this month.

Meanwhile, Fisher Funds Management senior portfolio manager Sam Dickie yesterday said the sale was poorly managed and communicated, but didn't indicate any problems with the company's performance. Fisher Funds-managed Kingfish has allocated about 10 percent of its portfolio to A2.

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