The rise and rise of a2 Milk showed no signs of abating after the company reported a 55 per cent lift in net profit for the six months to December.
Shares in the alternative milk company shot up by $1.35 or 10.5 per cent to $14.22 after it reported a 55 per cent lift in its net profit to a record $152.7 million in the six months to December.
That lifted the company's market capitalisation by a billion dollars to $10.45 billion.
At that level, a2 Milk is New Zealand's biggest company by market capitalisation, eclipsing the power generator Meridian ($9.4b), telco Spark ($7.2b) and more than double the size of building materials and construction company Fletcher Building ($4.3b).
On strength of the result, analysts are now looking at revenue coming in at $1.35 billion for the June year, which would be up 46 per cent on last year's figure, and EBITDA of $420m up 48.4 per cent.
Harbour Asset Management senior research analyst and long-time a2 Milk watcher, Oyvinn Rimer, said there was nothing in the result to indicate any slowdown in the company's likely growth trajectory.
"A2 Milk continues to perform very strongly across all channels," Rimer said. "There is no question that it is doing really, really well," he said.
A2 Milk's success started in Australia, which became a springboard for its foray into China.
Over the last few years, A2 milk has turned its sights on the United States, and Rimer said a2 Milk's experience in America was looking similar to its early days in China.
"It could become a second leg (before Australia) very, very quickly," Rimer said.
Seafood exporter Sanford said last week that it had been having difficulty getting salmon exports to China cleared through Chinese ports, against the background that China may be turning up the heat on exporters because of the Huawei saga.
Asked if a2 Milk had experienced any similar problems, chief executive Jayne Hrdlicka told the Herald: "No. We stay focused on the things that we control."
Similarly, Hrdlicka said the company had not had difficulty with the changes to China's cross border e-commerce regulations, which become effective on March 31.
Hrdlicka said growing awareness of the brand in the US, where the company had racked up revenue growth of 114 per cent over the six months, was "promising".
In its outlook statement, a2 Milk said the company was now in a position to reinvest the benefits of scale into increased marketing activities in the second half.
"This is intended to drive brand awareness, predominantly in China, and the US," the company said.
Increased brand and marketing investment was expected to continue into 2020, it said.
There were strong signs of a closer relationship with Fonterra after the company entered a joint venture with the co-op last year.
In a separate statement, Fonterra said it had started signing up Waikato farms to supply milk for The a2 Milk Company in the 2019/2020 season.
The two companies started jointly marketing an a2 Milk brand under Fonterra's Anchor label late last year.
Fonterra said signing up farms would significantly increase the supply to a2 Milk.
In a2 Milk's result, the company said the leap in first half earnings was driven by continued strong sales growth in all key product segments - infant formula, liquid milk and milk powders.
Sales of infant formula totalled $495.5m for the half - an increase of 45.3 per cent on the prior year - driven by share gains in China and Australia.
The company, which markets a1 beta free infant formula and dairy products, also saw growth in its liquid milk business of 20.2 per cent to $83.4m.
Sales of other nutritional products grew 40.4 per cent to $34.3m, driven predominantly by milk powders and supported by new products launched towards the end of last year.
A2 Milk's EBITDA came to $218.4m – up 52.7 per cent on the previous corresponding period, and compared with market expectations of $200m.
Analysts pointed to a big improvement in group margins to 55.6 per cent from 51.1 per cent a year earlier as being a key driver.
Chris Bainbridge, senior investment analyst at Pie Funds, said a2 Milk's projected revenue and margin growth projections for the second half were "potentially conservative".