A significant boost of infant formula sales has prompted a revenue upgrade by the A2 Milk Company, sending its share price skyward.
Following the upgrade, its shares rose 25%, or by 28c, to $1.39, a 73% gain on a year ago.
The earlier A2 financial guidance forecast revenue to grow to $285million and operating earnings before interest, tax, depreciation and amortisation (ebitda) to $22million for the 2016 financial year.
That was upgraded yesterday to revenue in a range of $300million to $315million, and ebitda in the $33million to $37million range.
A2's milk is a protein fragment claimed to have health benefits. It was first commercially explored by late Dunedin businessman Howard Paterson from the 1990s.
A2 managing director Geoffrey Babidge said the strong trading performance provided further evidence of the increasing appeal of the A2 Platinum brand in Australia and China, and growth potential in additional markets in the future.
‘‘The infant formula market in Australia is rapidly evolving and experiencing significant growth,'' he said in a statement.
Craigs Investment Partners broker Peter McIntyre said the upgrade by A2 was ‘‘significant'' and underlined the strong demand for infant formula in China.
‘‘That is not going to disappear overnight ... China's move to a two-child policy will make demand even stronger,'' he said.
Mr Babidge expected sales of A2 Platinum to be about $68million for the six months to December.
While A2 had recently increased the supply of A2 Platinum infant formula to customers, it continued to be insufficient to meet demand.
A2, now based in Australia, raised $40 million in a discounted share placement in October to help drive growth of infant formula sales in China, Australia and New Zealand, BusinessDesk reported.
The earnings upgrade was the second in as many months, based on demand for the Platinum infant formula.
