Got Milk: 6 dairy stocks recorded gains in August
Food & Agriculture
Food & Agriculture
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It’s been anything but smooth sailing for stocks in the dairy and infant formula sectors, but August produced the biggest number of gainers for some months.
Although the sector is down 20 per cent in 12 months, the sector saw a slight gain in the past month and there were positive developments for a number of companies.
Despite rising trade tensions between Australia and China, the best performers were either still able to reach Chinese consumers or find other markets and this was reflected in their financial results.
July’s best performer Maggie Beer Holdings (ASX:MBH) advanced another 13 per cent in August.
The company began the month announcing a range of plant-based meals will be sold in about 400 Coles (ASX:COL) stores.
It capped off the month with a positive earnings result on a group-wide basis and in each of its three businesses.
This includes the St David Dairy business (the reason it’s on Stockhead’s dairy stocks list), which booked $8m in revenue in the 2020 financial year.
Group-wide earnings of $248,000 was a $5.6m turnaround from FY19.
The top stock was AuMake (ASX:AU8) with a 39 per cent jump in its share price during August. The company is focused on the Chinese daigou (which means to buy on behalf of) trade.
While its traditional customer base has been unable to enter Australia for much of this year, the company has still been able to reach customers online and actually saw its revenue and gross profits increase.
While stocks are continuing to make money from China, tensions have escalated this year and have spilled over into the business community.
One major fallout from the growing tensions was telco Huawei earlier this week quitting its sponsorship of the Canberra Raiders, citing a negative business environment.
Despite China continuing to be a key market for many companies, some are establishing a presence in other markets.
Take Bubs for example, while its sales to China last financial year rose by 32 per cent, the company has expanded its export horizons to countries like Vietnam. Bubs reported five-fold growth in the Vietnamese market.
Meanwhile, not being headquartered in Australia has its advantages.
New Zealand-headquartered heavyweight A2 Milk (ASX:A2M). has seen its sales to China rise 65 per cent in the last year and by over 2,500 per cent in the last five years.
In an interview with Bloomberg, CEO Geoffrey Babidge said being based in New Zealand was “very relevant at this point in time” in light of deteriorating relations between China and Australia.