Chinese thirst for Kiwi milk sees A2 shares skyrocket

The A2 Milk Company saw the value of its shares rise more than 30% in Sydney on Friday after the company raised its earnings forecast on demand for its infant formula in China and Australia.

In the firm's home country, A2 Milk stocks were up 28.83% on the NZX in Wellington.

Friday's announcement - in which the company said group revenue could reach NZD$315m (£141.54m) for the financial year, up from NZD$285m - was the second upward revision of A2 Milk's guidance since November.

A2 Milk produces a type of milk that contains the so-called A2 beta-casein protein. It sells the product fresh in New Zealand, as exports it as a powdered formula to Australia and China.

"The company has recently increased the supply of A2 Platimum infant formula to our customers, however we continue to experience a level of out of stocks on shelf", said CEO Geoffrey Babidge.

"The strong trading performance advised today provides further evidence of the increasing appeal of the A2 Platinum brand in Australia and China, and the growth potential in additional markets in the future."

The A2 Milk Company told the BBC that the level of faith in New Zealand dairy products was so strong in China, they did not change or translate their labelling for the market.

"Chinese buyers want to know the products are from Australia or New Zealand, so we don't have to repackage or use Chinese language on the products", a spokesman told the corporation.

A2 Milk remained a small player in the New Zealand dairy market, however, with annual revenues of NZD$155.1m last year. Fonterra - the country's largest company, and responsible for a third of the world's milk exports - saw revenues of NZD$18.8bn in 2015.

At market close on Friday, A2 Milk Company shares were trading at NZD$1.43 on the NZX and AUD$1.385 on the ASX.

Chinese market a rollercoaster for New Zealand suppliers

Dairy remained New Zealand's primary industry in 2015, and demand for the country's milk was flying high in China in December. The market hadn't been quite so easy for Kiwi suppliers, however, in recent years.

Earlier in 2015, a threat of eco-terrorism in New Zealand led to fears of infant formula being poisoned with the pesticide sodium fluoroacetate, or '1080'. Exports to China dropped in the immediate aftermath, and extensive testing and security was implemented on domestic production and sales.

In 2013, a number of New Zealand dairy products were pulled from the shelves after the country's biggest dairy co-operative, Fonterra, purportedly found botulism-causing bacteria during safety tests. The test results were later found to be false, at a detrimental cost to the country's primary industry.

And in 2008, New Zealand's dairy industry was involved in the Chinese milk scandal, in which six babies died and 300,000 more became unwell when it was found Chinese companies laced imported milk powder with melamine, giving the appearance of a higher protein content.