Why A2 Milk Company Share Price Has Soared 7.86%

The A2 Milk Company Ltd [ASX:A2M] share price has soared this morning up by 7.86% to $9.74, a gain for $0.71 within the first half of trading. The jump comes on the back of a steady increase yesterday of 1.5%, much to shareholders relief.

A2M is engaged in the commercialisation of intellectual property relating to a2 brand milk and related products. Their products comprise of liquid milk, infant formula and other dairy products that contain only the a2 protein — which some claim to be healthier than regular dairy products.

What caused share prices to rise?

Despite Nestle’s announcement yesterday about plans to launch their own A2-only infant formula in Australia and New Zealand, A2M share prices seem unaffected.

The A2 Milk Company set to present on the company’s progress today in Sydney at its annual investor conference. Having released the presentation before the conference, investors seem pleased with the progress.

According to release, revenue for FY18 is up 68% to NZ$923 million. The company is also reporting a net profit after tax of NZ$195.7 million, an increase of 116% over the prior corresponding period.

The growth in profit and revenue is likely attributed to a substantial growth in distribution to China, the UK and US.

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Further growth in revenue is anticipated through the next financial year, particularly in ANZ and China. A2M have also announced they will focus on growth initiatives in emerging markets and new product development.

What’s next for A2 Milk Company?

A2’s focused expansion in China is likely to continue revenue growth, as it establishes a strong consumer franchise. Nestle’s entrance into the Chinese market doesn’t seem to be a cause of concern for A2 presently as its level of investment and distribution in China continue to grow.

This update from the conference has clearly inspired investors a little today, or at least settled their nerves. The past few months has seen poor performance in the company’s stock, however today could be a glimpse into potential future performance.

Ryan Dinse

For Money Morning

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Ryan Dinse is an Editor at Money Morning.

He has worked in finance and investing for the past two decades as a financial planner, senior credit analyst, equity trader and fintech entrepreneur.

With an academic background in economics, he believes that the key to making good investments is investing appropriately at each stage of the economic cycle.

Different market conditions provide different opportunities. Ryan combines fundamental, technical and economic analysis with the goal of making sure you are in the right investments at the right time.

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