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A2 boosts Australian supermarkets share, opens Sydney plant

BUSINESSDESK: A2 Corp, the milk company carrying out a strategic review of its business, has boosted its share of fresh milk sales in Australian supermarkets and opened a new Sydney facility to cope with growing demand across the Tasman.

The company has built its Australian market share to 6% by value of fresh milk sales, a gain of more than 45% in the past 12 months, chief executive Geoffrey Babidge says.

The Sydney plant will process up to 60 million litres of fresh milk a year, using product supplied from its specialist Australian herds. The facility was opened by New South Wales Premier Barry O'Farrell.

"Consumer acceptance of A2 brand milk as easy to digest with other potential benefits has been achieved against a backdrop of competitive price pressure for standard milk," Mr Babidge says.

"Australian consumers have shown an understanding of the benefits of A2 brand dairy products which we are confident can be replicated in other markets where there are particular concerns around digestion of standard dairy products." 

A2, which claims a health benefit from the protein variant in its milk, more than tripled profit in the last six months of 2011 as rapidly growing Australian sales generated almost two-thirds of its $30.1 million total revenue.

The growth in Australian comes as supermarkets across the Tasman continue to battle on price by discounting standard milk, and as the use of added milk permeate, the natural waste product from the ultra-filtration of milk, comes under growing scrutiny.

In April, A2 appointed Greenhill Caliburn to review its business after being approved by would-be partners in a bid to accelerate growth and maximise shareholder value.

The NZAX-listed shares fell 2.2% to 45 cents and have surged 88% this year. The stock is rated outperform by the one analyst recommendation compiled by Reuters with a target price of 56 cents.