A2 execs sell down holdings following strong first-half earnings

A2 Milk Co's chief executive and chairman have sold down their stakes in the milk marketing firm, less than a week after reporting first-half profit more than tripled as demand for its A2 Platinum infant formula surged in its key Australia, New Zealand and China businesses.

Chairman David Hearn sold one million shares for about $2.5 million, or $2.48 a share, on Friday, while chief executive Geoffrey Babidge sold 900,000 shares for $2.2 million, or an average price of $2.49, yesterday.

Mr Hearn gained the shares by exercising one million of his five million options, for which he paid $630,000, with the sale to facilitate a property transaction in the UK to move his personal residence, according to documents published to the NZX.

Last week, the milk marketer reported net profit soared to $39.4 million in the six months ended December from $10.1 million in the year-earlier period, while revenue rose 84% to $256.1 million.

The shares, which are notoriously volatile, had rallied to a record $2.60 in the lead-up to earnings being reported, slipped 1c to $2.57 after the results, and have continued to decline since. They traded at $2.51 on Friday, when Mr Hearn sold his shares, $2.44 yesterday, and are down 4.1% to $2.34 today.

A2's shares have bounced around in the past quarter, dragged down from a then record $2.58 in December when ASX-listed rival Bellamy's was put in a trading halt, causing investors concern that there might be sector-wide issues.

It continued to struggle until mid-January when A2 quelled concerns about its earnings outlook and Bellamy's cut its profit forecast for the second time and announced its chief executive's exit. Bellamy's ran into trouble after China moved to tighten regulations in a bid to crack down on the grey market – or 'daigou' – sales and allay concerns about food safety.

In the first half, A2 posted strong growth from China, with revenue rising to $37.7 million from $8.4 million a year earlier, and operating earnings before interest, tax, depreciation and amortisation rising to $13.7 million from $1.3 million in 2016.

The company says it has a considerable growth opportunity in China and is using multiple channels, including cross-border e-retailers, to sell into that market, while monitoring Chinese regulation of infant formula and cross-border trade.

(BusinessDesk)