Dairy stocks a2 Milk and Synlait surge after new infant formula deal
Health & Biotech
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Shares in a2 Milk Company surged after announcing an extension and increase to its supply deal with Synlait, the New Zealand-based infant formula company.
a2 Milk (ASX:A2M) — one of the ASX’s best performing large caps in 2017-18 with an annual gain of 180 per cent — moved ahead 5 per cent today to an intraday high of $10.91.
Synlait Milk (ASX:SM1) was up 3 per cent to an intraday high of $10.70.
The a2 Milk Company announced a two-year extension to the a2 Platinum infant formula supply agreement, effectively creating a new minimum term of five years to July 2023.
The deal also increases the volume of infant formula products as demand for a2 Platinum infant formula continues to grow in China and in Asia.
Dairy and infant formula exporters such as Bubs, Jatenergy, Bioxyne, Wattle Health, Bellamy’s and A2 Milk have all made big share price gains over the past year — particularly those focused on china exports.
Chinese demand for Australia consumer goods is expected to continue growing — especially in smaller cities which are becoming bigger, richer, and more eager to spend.
“The success of the a2 Platinum product has exceeded all expectations over the past two years,” says a2 Milk CEO John Penno.
“This step is about bringing Synlait and the a2 Milk Company closer together in anticipation of continued growth.”
The company in February posted a 150 per cent jump in profit to $98.5 million for the first half.
The company also announced earlier this year a new strategic relationship with New Zealand’s Fonterra Co-operative Group Limited to ensure future supplies of milk.
The deal links Fonterra’s global milk pool and supply chain, manufacturing capability and in-market sales and distribution capacity with a2’s brand strength and capabilities.