A2 Milk renews distribution deal with China State Farm

The deal affirms an exclusive import agent agreement for China label products, including a2's China label infant milk formula. Photo / Thinkstock

Shares in a2 Milk rallied after the company said it renewed exclusive import and distribution arrangements with a Chinese company for five years.

By early afternoon, the stock was up 20c or 3.3 per cent at $6.32.

China State Farm Agribusiness has been a2 Milk's strategic distribution partner in China since 2013 and is the exclusive import agent for its China label products, including a2's China label infant milk formula.

CSFA is a wholly owned unit of China National Agriculture Development Group Co (CNADC), which is also the parent company of China Animal Husbandry Group (CAHG), which holds a 25 per cent stake in Mataura Valley Milk.

A2 Milk owns the rest of Mataura Valley.

"The extension of arrangements with China State Farm confirms the strength of our relationship with key partners in China and our shared confidence in the future," a2 Milk chief executive David Bortolussi said.

Bortolussi said China State Farm's support would be critical for joint success in China.

In August, a2 Milk reported a 42 per cent jump in annual net profit to $114.7 million, driven by strong growth in its infant formula business.

At the same time, the heavily cashed up a2 Milk said it intended to return capital through a $150m on-market share buyback.

Revenue in the June year grew 19.8 per cent to $1.44 billion. A2 Milk said it was on the way to reaching revenue of $2b in five years' time.

A2 Milk's buyback starts on Wednesday.

The company said last week the weaker New Zealand dollar made for a positive start to the current financial year, with first quarter sales expected to be marginally ahead of plan.