The A2 Milk Company Ltd (ASX: A2M) share price is having an excellent start to the week.
In afternoon trade, the embattled infant formula company's shares are up 12% to $5.95.
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Why is the A2 Milk share price racing higher?
Investors have been bidding the A2 Milk share price higher today following the release of its half year results.
In case you missed it, A2 Milk reported a 2.5% increase in revenue over the prior corresponding period to NZ$661 million. Though, this was driven by the inclusion of the Mataura Valley Milk (MVM) business, which wasn't part of the company in the prior corresponding period.
A better reflection on its performance during the half was that of its core infant nutrition business, which reported a 10.5% reduction in revenue to NZ$471 million. This was driven by the lower birth rate and rapidly changing market dynamics in China.
On the bottom line, things were even worse. A2 Milk reported a 53.3% decline in net profit after tax to NZ$56 million. This compares unfavourably to the market consensus estimate, which according to Commsec was NZ$60 million.
So why are its shares rising?
The catalyst for the rise in the A2 Milk share price today appears to have been its outlook.
Some upbeat commentary from management seems to have offset the profit miss and got investors excited.
A2 Milk's CEO, David Bortolussi, commented: "The Company's outlook for 2H22 revenue has improved. It is still expected to be significantly higher than 2H21, and with growth now expected on 1H22 and for FY22, ahead of initial expectations due mainly to growth in China label and English label IMF."
Mr Bortolussi also revealed that the company has seen an improvement in trajectory in the ANZ reseller/daigou channel and that he is "confident in the long-term China infant milk formula market."
All in all, this appears to have sparked hopes that the company is now over the worst of its issues. Time will tell if that is the case.
