New Zealand's a2 Milk Co Ltd (ATM.NZ) received approval to export its infant milk formula to the United States as the country faces a shortage of baby food, sending the company's shares up about 7%.
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A2 Milk

The U.S. Food and Drug Administration (FDA) has allowed the dairy major to sell and distribute its a2 Platinum infant milk formula (IMF) product in the country through Jan. 6, 2023, the company said on Thursday.

The approval could be extended to Oct. 18, 2025 under certain conditions, the company added.

The move will help plug a gap in baby food supply in the United States after Abbott Laboratories , the biggest U.S. supplier of powder infant formula, in February recalled dozens of products following reports of serious bacterial infections in four infants. read more

A2 shares jumped 6.8% to NZ$6.14 by 2141 GMT, while the broader market (.NZ50) inched 0.1% lower.

A2 said it believes the U.S. represents a “significant opportunity” to develop its brand in the IMF category over the long term, but it is currently difficult to predict the sales potential.

“If the U.S. requires further support over an extended period, we have the proven ability to scale up significantly,” said a2 Milk Chief Executive David Bortolussi.

The company flagged lower-than-average gross margins and higher distribution costs in fiscal 2023 due to potential air freight and rework costs in the near term, and marketing and trade investments to enter the U.S. market.

A2 had applied to sell its infant milk formula in the country earlier this year but the FDA had deferred its request in August. read more

The dairy major added that Synlait Milk (SML.NZ) has the capacity to manufacture 9 million cans of a2 Platinum by June 30, 2023.

Fonterra Cooperative Group, the world’s biggest dairy exporter, raised its earnings forecast for the second time in three months after a strong first quarter driven by demand for protein products.

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