ATM-A2 MILK

[BlackPeter]

Ah yes, and just in case the post above is talking too much about fundamentals - I guess at the end this is a purely hype driven stock, right?

However TA does not look that flash either. SP for the last two years in an unbroken downtrend ... and despite some jitter still firmly below both MA 100 and MA 200.

I guess it does not appear to be a falling knife anymore, but its still in an established downtrend. Ask KW what she thinks about buying shares under these circumstances ;

[Shareguy]

Have the same concerns BP.

One of my main concerns with A2 was its reliance on China. Comvita is doing well in North America. Surely this would be a good opportunity for the company to start selling their formula in the states even if they're not making a lot of money initially. Now they are in the manufacturing business this could be a volume winner. 18 percent duty currently, high but would of thought feasible?


Are those empty shelves in Australia empty because of demand or poor stock management?

If the company gets FDA approval it's going to be material for the share price I think, even though potentially it is a short-term opportunity.

[kasper]

Have the same concerns BP.

One of my main concerns with A2 was its reliance on China. Comvita is doing well in North America. Surely this would be a good opportunity for the company to start selling their formula in the states even if they're not making a lot of money initially. Now they are in the manufacturing business this could be a volume winner. 18 percent duty currently, high but would of thought feasible?


Are those empty shelves in Australia empty because of demand or poor stock management?

If the company gets FDA approval it's going to be material for the share price I think, even though potentially it is a short-term opportunity.

I'm back in for a punt based on FDA approval plus upcoming result which will have a run up leading upto it, have less than a tenth of the shares I once held so happy at that level.

[Left Field]

Agree with BP

I'd recommend waiting for a change in real 'news' (FY updates etc) and a positive change in the TA indicators ie 'golden cross.'

No hurry IMO.

[Minimoke]

I'm back in for a punt based on FDA approval plus upcoming result which will have a run up leading upto it, have less than a tenth of the shares I once held so happy at that level.

You might be in luck. Just been into a anther supermarket and zero infant formula in very empty looking shelves.

[kasper]

Agree with BP

I'd recommend waiting for a change in real 'news' (FY updates etc) and a positive change in the TA indicators ie 'golden cross.'

No hurry IMO.

There is never a hurry to buy anything on the market really, its a bit like observing your tin roof starting to get a bit of surface rust, you could switch it out right then or do it in a few yrs and it still won't be leaking.

[Minimoke]

27 May 2022, FDA announce Australian co BUBS will be supplying Infant Formula to USA to held relieve severe shortage

30 May A2 announce they have applied to FDA to supply IF - subject to availability of supply.

8 July is last time FDA announced a company supplying to help relieve shortage. So far neither A2 or Fonterra have got approval.

16 July Bloomberg reports supply (at 10 July) is running at about 72%, an improvement from 70% the week  before. They also report it is low income families that are suffering. (so not really A2's target market).

The new Formula Act (which will temporarily remove 27% tariffs applied to countries with out a Free Trade Agreement) may help big standard infant formula suppliers.

I think it is now safe to assume any hope of an SP improvement based on an FDA announcement in A2's favor is now dead in the water. A2 have been silent since their 30 May announcement. I just think they aren't chasing this particular opportunity hard.

I think they would have perhaps chased harder if they had extra supply. Which they probably dont as whatever they had would have been conservative after last years botch up and wanting to supply just enough for the Chinese sales days.

Given the lack of announcement of profit upgrade/downgrade I reckon they are close to meeting target based on China sales.

So what this all means, in summary is that A2 remains a non-growth company. With no aspirations to do anything  with their cash. Despite SP recently being at all time lows.

Probably time for that English based chair to be woken from his slumber at the London gentleman's club, encouraged to sign a letter a resignation and begin the hunt for a new chair with some energy, creativity and an understanding of what it means to look after shareholders rather than self interest at the trough.

[Basil]

You can't like them on this years forecast numbers that's for sure.  PE 32.5
https://www.marketscreener.com/quote/stock/THE-A2-MILK-COMPANY-LIMIT-11384022/financials/
With all that's going on in China with lockdown's, declining birth rates and domestic brands rapidly gaining traction to name some of the issues the increase in sales and margin the average analyst has for FY23 to get them on a forward PE of 24 look quite challenging to me.

They have a definite tailwind with the currency though which should help.  I remain extremely cautious and I think they lost first mover advantage many years ago and this is rapidly transitioning into just another commodity.  All the years of big talk of legal protection for their intellectual property over A2 milk has come to nothing but a load of hot air and bluster.

I don't see any good reason to invest.

[Minimoke]

A little more than a month out before results announcement is due. So lets refresh ourselves on the half year forecast

China label IMF sales are still expected to be up in FY22 and now expected to be significantly up in 2H22 versus 1H22. This is due to 1H22 having been impacted by distributor inventory rebalancing and in 2H22 as the Company's growth strategy starts to have a positive impact on MBS and DOL sales.

In English label IMF, sales are now expected to be up in FY22 and up in 2H22 versus 1H22 due to improved inventory levels and pricing, as well as improved execution in ANZ reseller and CBEC channels driven by the Company's growth strategy.

Incremental sales growth in Australian liquid milk for FY22 is still expected with sales still likely to be down in 2H22 versus 1H22 due to reduced COVID-19 related lockdowns and a corresponding reduction in levels of in-home consumption. Input costs are significantly higher than FY21, partially offset by an increase in pricing that took effect from November 2021.

In USA liquid milk, sales growth for FY22 is expected, with sales up significantly in 2H22 versus 1H22 due mainly to new product launches. EBITDA losses for FY22 in local currency are expected to remain at similar levels vs pcp due to a part-year impact of trade spend reductions and price increases, lower margin new product sales and continuing higher freight costs.

MVM revenue is now expected to be approximately $100 million (excluding intercompany revenue), previously expected to be $80 million. An EBITDA loss of approximately $20 million is still expected for the 11 months post-completion. No material change in EBITDA is expected despite the increase in sales due to an increase in milk costs and a reduction in more profitable nutritional sales

SP today is $4.91

[Left Field]

A week ago I was talking to a former technical manager involved with Fonterra and now retired.

Looking back on his career, he said two of the biggest mistakes by ex Fonterra CEO Theo Spierings, were;
a.) the China acquisition
b.) Missing out on A2

He reckoned the majority of dairy herds will soon be A2.... but only one company can really benefit.

Still holding free held shares and taking a long term view.

[Minimoke]

The FDA is going to review istelf. But its a review of process (and one that includes tobacco/vaping as well)

They have 60 days to investigate and report. Lets call it August and September.

Nothing happens fast in govt departments. Lets give them six years to implement key changes. You dont unravel this in a hurry "In May, Califf testified before Congress about missteps that slowed the agency's response to contamination problems at the Michigan formula plant that triggered the shortage. While many of the problems happened before Califf started on the job, he struggled to explain who was ultimately responsible for food safety within FDA's bureaucracy.FDA's food program has a byzantine leadership structure in which there is a director for food and a separate deputy commissioner for "food policy and response."

The FDA boat has sailed and A2 isn't on it "Califf previously predicted the formula shortage could last until July. He said Tuesday that retail data show that supplies have improved with increases in both U.S. production and imports."What you're going to see is a gradual climbing out of the current situation as more and more formula becomes available," Califf said."

More here: https://www.pressherald.com/2022/07/19/fda-weighs-oversight-changes-after-formula-juul-troubles/

[Left Field]

The USA FDA thing is not necessarily the panacea many think it is.

As I understand it, at present ATM hasn't got the stock of IF to supply a potentially huge USA market. Besides which, ATM may be better to sell its current IF stocks to Asia/China markets where it can get better margins/returns for IF than in the USA.

Maybe when MVM is up to speed ATM will be able to turn their attention to the USA IF market.... if the FDA allows it and if it can be done profitably.

Happy to wait to the next update. Until then it is all speculation.

[KW]

https://amp.theaustralian.com.au/business/companies/fonterra-a2-milk-awaiting-fda-approval-to-export-formula-to-us/news-story/866effe981c5daa0c8842b4eee423919

Fonterra – the world's biggest dairy exporter and one of New Zealand's biggest companies with an extensive presence in Australia – has been awaiting approval since late May. "We have informed FDA that it is our intention to reallocate the infant formula stock we had earmarked for the US to New Zealand or other markets as it has a limited life span," Mr McVitty said.

Sounds like the FDA has said "yeah, nah".

[winner (n)]

Export / Import data for June month ex Stats NZ

Milk powder fell $57 million (5.7 percent) to $935 million; the quantity exported fell 28 percent. The average unit value rose 31 percent.

Suppose it means something re A2 performance

[CG]

Luckily A2 do not export milk powder.

preparations of milk, cereals, flour, and starch (includes infant formula), up $87 million (58 percent)

Suppose it does mean something re A2 performance