The A2 Milk Company Ltd [ASX:A2M] enjoyed a 3.89% increase in their share price today, sitting at $10.14 at time of writing.
The development came soon after the announcement in that the company will extend its arrangements with China State Farm Holding Shanghai Co to supply China with infant formula.
The deal, in correlation with the massive state-owned agricultural company, renews the exclusive import and distribution rights for A2 for another three years from 6 December 2018, with the possibility of a fourth.
The continuation of the agreement is welcome news, not only for its high profitability, but it shows that trade tries have remained strong, despite the icy diplomatic conflict between Canberra and Beijing.
A signing ceremony is being held today at Parliament House in Canberra for A2 and China State Farm representatives, attended by Trade Minister Steven Ciobo. China’s ambassador to Australia, Cheng Jingye, has also been invited to attend.
What is A2 Milk?
A2 Milk was founded in New Zealand in 2000. The company, like the name suggests, contains only A2 proteins — removing A1 which has been said to cause digestion discomfort and other detrimental health concerns. The company has become a household name in the last few years, and trades in Australia, New Zealand, China, US and UK.
In the announcement of the continuing partnership, Ms Jayne Hrdlicka, General Manager for CSFA Shanghai said:
‘This important relationship with the very well respected China State Farm Holding Shanghai has been growing for several years and we continue to value their very strong support of our China business with their deep local knowledge, capability and relationships within the China market.
‘Today signals a continuation of a very successful working relationship and partnership between the two entities.’
Mr Zhao Qing Yong, General Manager of CSFA Shanghai said:
‘China State Farm is delighted and honoured to continue our relationship and partnership with a company that has achieved such unique success in the China market, as together we bring the very high quality infant nutrition to Chinese consumers.
‘This renewal signals the strength of our long-term partnership and we look forward to the future with great excitement.’
What this development means for investors
In the midst of trade agreements and tensions, this news comes as a clear indicator of smooth sailing — great news for an already favourable stock.
We’re interested to see what happens in the next three years.
For Money Morning
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