* A2 says baby formula demand in China stoked profits
* Says broad distribution system helped China sales
* Shares hit record high after profit announcement
(Adds comment, detail)
WELLINGTON, Feb 15 New Zealand dairy firm A2
Milk Company Ltd on Wednesday said its half-year
profits jumped nearly 300 percent, boosted by sales of baby
formula in the hotly-contested China market.
A2 shares rose more than 5 percent to a record high of
NZ$2.68 after it posted a net profit after tax for the six
months to Dec. 31 of NZ$39.4 million ($28.2 million). That
compared to about NZ$10 million in the same period last year.
"The outstanding aspect of our half-year performance was the
continuing growth in a2 Platinum infant formula through a
multi-channel strategy involving a combination of local
distribution, e-commerce, and overseas shopping traders,"
Managing Director Geoffrey Babidge said in a statement.
The company said the use of so-called 'daigou' was a growing
sales channel to China. Meaning 'buy on behalf of' in Chinese,
daigou buyers are individuals based abroad who ship sought-after
products to buyers back home.
A2's results contrast with rival Australian baby formula
company Bellamy's, which cut its revenue forecast in January,
sending shares plummeting 40 percent.
A survey published last week by brokerage firm UBS showed
A2's online brand recognition among Chinese parents and
expectant mothers was just over 40 percent, double that of
"You've got to keep all the channels open where China is
concerned ... the daigou is the best at one stage, the direct
sales, the internet sales at another," said Bryan Gaynor
director of investment firm Milford Asset Management, which owns
A2, which produces milk free from a protein that it says
causes gut problems in some milk drinkers, has recently expanded
in major U.S. supermarkets and has focused heavily on the
Chinese market, where revenues increased by 348 percent to
The company expects infant formula profits in the next
six-month period to drop from the previous half, partly because
there are less major Chinese sales events scheduled.
A2 said its board planned to adopt a dividend policy at the
end of full-year 2017.
($1 = 1.3965 New Zealand dollars)
(Reporting by Charlotte Greenfield; Editing by Hugh Lawson and