Fonterra embraces A2 in joint marketing agreement

No change to Synlait and a2 Milk infant formula supply arrangements

a2 Milk and Fonterra partner

"The Australian investors in particular just like this company".

Spierings added that the companies share the same priority on producing premium milk products and that a2MC products promoted by the new partnership fit well within its overall portfolio.

Dairy farmers will need to be recruited in Australia who are able to supply the specialist milk which is sourced from cows that produce A2 beta-casein proteins in their milk.

A2 Milk shares spiked 16 percent to a record after the company announced it had more than doubled first-half profit on strong infant formula sales and has aligned itself with Fonterra Cooperative Group which will see the two companies partner up on a range of products.

Some A2 milk is already available in New Zealand outlets under some smaller independent brands such as Fresha Valley.

Lucas Review market strategist Evan Lucas said A2 Milk's financial results had well surpassed the market's expectations, the company was sitting on a wad of cash, and the Fonterra alliance would boost A2 Milk's market strength, especially in China.

Miles Hurrell, Fonterra's chief operating officer farm source, said he would begin talks with farmers in the fortnight.

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"The partnership is meant to fast-track market growth, and this creates opportunity for our farmers to create additional value from their milk", Fonterra CEO Theo Spierings said.

The Australian arm of Fonterra will set up an A2 milk pool to service its nutritional product range which is produced from its Darnum factory in Gippsland.

Fonterra also announced that it has a licensing agreement for the production, distribution, sale and marketing of A2 milk in New Zealand.

Fonterra will also have an exclusive license for the production and sale of A2-branded fresh milk in New Zealand, while a new A1 protein-free milk pool will be developed in Australia and New Zealand.

Net profit rose to $98.5 million in the six months ended December 31 from $39.4 million a year earlier as sales climbed to $434.6 million from $256 million, Auckland-based, Sydney-headquartered a2 said. It sources locally for its fresh milk in Australia, the United Kingdom and U.S., and gets supply for its formula from Synlait in the South Island.

The share price has soared over the past year and hit $10.80 a share after the latest announcements.

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