The A2 Milk Company Ltd (ASX: A2M) share price is under the spotlight after the company’s positive China news.
A2 Milk is one of the largest infant formula makers in Australia and New Zealand.
SAMR approval
A2 Milk and Synlait Milk Ltd (ASX: SM1) announced that Synlait has received approval from China’s State Administration for Market Regulation (SAMR) for the re-registration of A2 Milk’s China label infant milk formula product, stages one, two and three, formulated in line with China’s new GB standards.
This approval will allow Synlait, which manufactures infant formula for A2 Milk, to manufacture for A2 Milk until September 2027, being five years after the expiry of the first registration.
Synlait noted that this SAMR registration is for its Dunsandel facility.
The CEO of Synlait, Grant Watson, said:
Our shareholders, staff, customers, and farmer suppliers all benefit from the certainty of today’s re-registration and continued China market access.
Synlait and The a2 Milk Company have a long-standing and complementary partnership, and we look forward to continuing to support their China growth ambitions. The re-registration is a very important milestone and we have worked hard together to ensure its success. We thank SAMR and the Ministry for Primary Industries, for their support during this process.
A2 Milk response
The A2 Milk Managing Director and CEO David Bortolussi said:
We look forward to making our upgraded new China label IMF product available to parents and their infants and young children in China, building on the strong brand loyalty we have developed with Chinese families over the past decade as the pioneer and leader of the A2 protein category.
The approval provides a2MC with continued access to China’s substantial registered domestic infant milk formula market which remains the key focus of our refreshed growth strategy.
Final thoughts on the A2 Milk share price
The infant formula business needs to be able to keep accessing the key Chinese market – that’s a huge market, and the end customers make up a lot of A2 Milk’s earnings base.
A2 Milk could have had a bad reaction if it wasn’t approved, but I think this enable the ASX share to continue its business as usual.
If it can keep growing earnings over time, the A2 Milk share price could keep rising, but it has a lot of reliance on the China market, which has proven to be a risk, why is why it’s not one of the ASX growth shares on my own watchlist.
