ATM-A2 MILK

[Minimoke]

$74m cash profit. Which appears to be basically being spent on the share buy back. So no hole being made in the $700 cash stockpile. Can't be long before they start talking about a dividend.

Have to say I'm pretty impressed with the results in what was said to be very tough trading times.

[Left Field]

Results out....... I'm happy.... EPS up 24%..... Increased market share in China in a tough time when overall IF mkt down......onwards and upwards.

(Impressive gains in USA fresh milk sales etc)

... and this is v impressive....China & Other Asia sales up 54.0%, while ANZ sales down 24.6%, USA sales up 61.8% and MVM sales up 18.4%
- ChinalabelIMFsalesup 43.5%

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ATM/406946/388833.pdf

• Revenue growth of 18.6% to $783.3 million
- China & Other Asia sales up 54.0%, ANZ sales down 24.6%, USA sales up 61.8% and MVM sales up 18.4%
- IMF sales up 18.0% with China label sales up 43.5% and English label sales up 1.0%3
- Liquid milk sales in ANZ and USA up 5.6% and 62.0% respectively
• EBITDA4 up 10.5% to $107.8 million with an EBITDA to sales margin of 13.8%
• Net profit after tax (NPAT) including amounts attributable to non-controlling interests up 22.1% to $68.5 million with
$73.8 million5 attributable to owners of the Company
• Basic earnings per share up 24.1% to 10.0 cents compared to 8.0 cents in 1H22
• On-market share buyback of up to $150 million commenced in 1H23 and 60.1% complete
• Strong balance sheet with closing net cash6 of $707.2 million
• Outlook for FY23 revenue growth of low double-digit and EBITDA % margin similar to FY22. This is consistent with the prior update at the Company's Annual Meeting of Shareholders

Market proving a fickle beast today ATM SP down 7% at time of writing.... I guess China market fears still (USA/China relations sinking lower), SAMR registration still not known etc.

That said, I judge the SP will outperform the NZX50 index over the next 12 months, so still a hold for me. Next news should relate to this weeks SAMR process.

[Minimoke]

Market proving a fickle beast today ATM SP down 7% at time of writing.... I guess China market fears still (USA/China relations sinking lower), SAMR registration still not known etc.

That said, I judge the SP will outperform the NZX50 index over the next 12 months, so still a hold for me. Next news should relate to this weeks SAMR process.

Seems insiders got the jump on Friday and are now bailing having made their profit.

[Waltzing]

"I guess China market fears still (USA/China relations sinking lower),"

right of course it is and has been for a few years..

and when Graham starts to sound and act like RR and is now unplugged maybe becuase he thinks Trump is in Trouble and Senator G can now say what ever he likes...

""You have to have actions consistent with that statement," he said. The senator said Ms Harris' comments in Germany were particularly poignant given the historical context. "We're talking about the Vice President of the United States declaring that Russia is involved in crimes against humanity — in Germany of all places, you know, echoes of World War II," he said."


One gun run from China to Serbia and all bets are off...



https://www.telegraph.co.uk/world-news/2023/02/20/train-ukrainian-pilots-f-16-fighters-now-biden-urged/

[KW]

"This morning, the team at Credit Suisse responded to this infant formula company's half-year results by downgrading its shares to an underperform rating with a [AU]$5.10 price target. Its analysts have concerns that overall infant formula demand could fall materially in China in 2023."

[Minimoke]

"This morning, the team at Credit Suisse responded to this infant formula company's half-year results by downgrading its shares to an underperform rating with a [AU]$5.10 price target. Its analysts have concerns that overall infant formula demand could fall materially in China in 2023."

I wonder what their short position is?

[Left Field]

Whether it is short term worry about Daigou sales channels or declining Chinese birth rates the big picture is that the in the long term the world is increasingly needing reliable quality supplies of milk protein.

The following USA Census Bureau data reveals that US households continue to struggle to find/purchase adequate supplies of IF;

ATM has some interesting potential ahead of it;

1.) In China - to launch more adult orientated high protein offerings, while consolidating/growing its IF market share.

2.) To reduce reliance on the Chinese market by launching IF and other 'high protein' formulations into the USA

As a result I don't sweat the short term, and still consider ATM a very good long term hold.

The just released update results show ATM is doing very well in the USA (Revenue up 62% with improved profitability)...... and this is just the start.

You cannot view this attachment.

[BlackPeter]

Interesting ...

So, this is a company where board and management used already many opportunities to demonstrate their incompetence beyond reasonable doubt. Huge political risks hovering over their only sort of profitable market. Market potential shrinking.

Earnings this year (if we are optimistic) might be 20 cents per share (and earnings growth so far negligible - 10 yrs EPS is 15 cents, so yes, it goes upwards ... but very slow ...) and the company holds a war chest of roughly $1 cash per share.

All this amazing beauty is available for a bargain price of only $6.26 per share.

But hold on - if I just keep my $6.26 I have much more money and less risks?

I know, risks are fun .. but personally I could see better ways to burn money.

Anyway - GLTH.

[Left Field]

A glimpse of how ATM in the face of declining birth-rate trends in China, is diversifying away from reliance solely on IF.....

In this promotion it is partnering with Lego, targeting young children, with a 'smart nutrition' claim.

[BlackPeter]

A glimpse of how ATM in the face of declining birth-rate trends in China, is diversifying away from reliance solely on IF.....

In this promotion it is partnering with Lego, targeting young children, with a 'smart nutrition' claim.

Does it work?

[Whome]

A glimpse of how ATM in the face of declining birth-rate trends in China, is diversifying away from reliance solely on IF.....

In this promotion it is partnering with Lego, targeting young children, with a 'smart nutrition' claim.

A very clever marketing move ... it uses Lego in the promo to first up grab the attention of young children and steers this intended audience clearly apart from baby IF, then closes the deal with a 'smart nutrition' message to the parent purchaser that they are looking after their growing children's nutritional needs.

It will be interesting to see what they do to develop the adult market. I'm not convinced with positioning A2 milk as a 'high protein' alternative for the adult market. That's already a crowded market with all the nutritional drinks available world-wide.

Some sort of digestive intolerance to cow's milk is reported to be prevalent in 30% of people of Asian origin in all countries and that is a far easier market to penetrate and establish a unique adult product especially given they already have a market message along those lines. It will not be a panacea for all digestive problems, more of a suck it and see situation, but if it works for 10% of those affected that is a huge market - and better than being an also ran 'high protein' drink.

Apologies if this has already been discussed here - I have not read this thread for a long time - not since the sp was $19 - lol!

[BlackPeter]

A very clever marketing move ... it uses Lego in the promo to first up grab the attention of young children and steers this intended audience clearly apart from baby IF, then closes the deal with a 'smart nutrition' message to the parent purchaser that they are looking after their growing children's nutritional needs.

It will be interesting to see what they do to develop the adult market. I'm not convinced with positioning A2 milk as a 'high protein' alternative for the adult market. That's already a crowded market with all the nutritional drinks available world-wide.

Some sort of digestive intolerance to cow's milk is reported to be prevalent in 30% of people of Asian origin in all countries and that is a far easier market to penetrate and establish a unique adult product especially given they already have a market message along those lines. It will not be a panacea for all digestive problems, more of a suck it and see situation, but if it works for 10% of those affected that is a huge market - and better than being an also ran 'high protein' drink.

Apologies if this has already been discussed here - I have not read this thread for a long time - not since the sp was $19 - lol!

Hmm - I suppose you realise that A2-milk sold by A2 is from cows as well, that Asians (while more of them are lactose intolerant than Europeans) live quite well without consuming milk (i.e. they are not desperate to change their diet just to make some funny NZ company rich) and that A2 is not more "protein rich" than any other "normal"(A1) milk?

So - what exactly is your point?

[Left Field]

Interesting article about the reasons behind China's declining birth rate...... doesn't look like it's going to increase/change anytime soon.

https://www.washingtonpost.com/opinions/2023/02/28/behind-china-collapse-birth-marriage-rates/

[KW]

With over 700,000 students studying overseas, many of whom dont go back to China, the population of young, well off, fertile Chinese is also shrinking.  These students will form families in their newly adopted country, not China.

[Whome]

Hmm - I suppose you realise that A2-milk sold by A2 is from cows as well, that Asians (while more of them are lactose intolerant than Europeans) live quite well without consuming milk (i.e. they are not desperate to change their diet just to make some funny NZ company rich) and that A2 is not more "protein rich" than any other "normal"(A1) milk?

So - what exactly is your point?

I do realise A2 milk is from cows. I managed to remember that from when I first bought ATM shares at 9cents, that cents with a 'sis', and that was a wee while ago ....
... And for technical correctness, pls note the A2 point of difference has nothing to do with lactose ...
... and back in the halcyon days, Chinese mothers were desperate to change the diet of their babies to a brand of IF that did not harm them from melamine contaminated home product that led to the meteoric rise in the popularity of NZ origin IF ...
... and yes, you are right that A2 is not more protein rich than normal milk, so why would you market A2 to adults in competition with protein enriched sports drinks.

My point - I was looking at the future direction of A2 after the savaging of the share price in recent years and their proposal to transition from a single product company to one that developed promotions to appeal to different market segments and the consequent forecast effect on the future share price.

They still have original IF product but now with stronger competition.

I liked their innovative marketing approach for young children as a new segment by their partnering with Lego which should help A2 sales.

However IMHO I think promoting A2 to adults as a protein rich drink is a mistake. They have poured millions of $'s into establishing a brand based on the message that it can provide relief from a common digestive ailment many experience after consuming 'normal' milk containing both the A1 and A2 proteins vs. A2 with just the A2 protein component. IMO that remains a very strong unique selling point for adults to switch to A2.

...... simply commenting on where I think their marketing initiatives will take the sp.