Australia Dairy Farms is going full organic and switching to infant formula — a move that’s sent investors into a froth.

The company’s (ASX:AHF) shares more than doubled from 11c to 25c today as the news kicked the stock out of a year-long rut.

The shares closed up 68 per cent at 18.5c.

Australian Dairy Farms is converting all six Victorian farms to organic production and moving into organic infant formula for both the Australian and overseas markets.

They’re entering a highly established market with players including Clover Corp, Bellamy’s, Wattle Health, Bub’s, Synlait, and A2.

The main market in infant formula, which Australian Dairy Farms did not specifically mention, is China.

Just last week Clover Corp and Synlait reported strong revenue figures thanks in part to Chinese sales.

Shares in Australian dairy Farms were largely flat in late 2017 and have been falling ever since a price spike in 2015.
Shares in Australian dairy Farms were largely flat in late 2017 and have been falling ever since a price spike in 2015.

“This is a high value-added market with major barriers to entry and sparse competition,” said chief Peter Skene.

“While a vertically integrated and efficient producer currently, the company has a modest market share in the conventional milk market. The board believes the company’s best prospects lie with moving up the value chain to be a highly profitable manufacturer of these speciality products.”

The company owns 3600 acres and has 3500 free-range milking cattle, producing 17 million litres of milk annually.

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