22 Apr 2020

A2 Milk sales boosted as consumers stock up

12:04 pm on 22 April 2020

Speciality dairy company a2 Milk is getting a windfall boost to sales from the Covid-19 virus.

Serving fresh milk in a glass vase on a wooden table

Serving fresh milk in a glass vase on a wooden table Photo: 123RF

The company, which mostly sells infant formula, said revenue for the three months to 31 March was higher than expected with strong growth across all key regions, as households stocked up with its products notably in China and Australia.

"This primarily reflected the impact of changes in consumer purchase behaviour arising from the Covid-19 situation and included an increase in pantry stocking of our products particularly via online and reseller channels," chief executive Geoffrey Babidge said.

"It is unlikely that these factors will be sustained as these unprecedented circumstances begin to unwind."

Babidge said a drop in the value of the New Zealand dollar against the US dollar also helped its earnings in China.

It is forecasting full year revenue of between $1.7 and $1.75 billion compared with last year's $1.3 bn, with its profit margin expected to be around 30 pct over the medium term.

Its overheads had also fallen because of travel restrictions and a freeze on hiring staff.

Babidge said it had managed to get around supply challenges by assistance from its various partners, and would closely watch developments in its various markets.

A2 Milk has been aggressively spending on marketing its special products, and last month struck a deal to enter the Canadian market.

It has withstood the worst sharemarket fallout caused by Covid-19 during the past month, and its price was up nearly 3 percent close to a record high after the latest update.

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