ATM-A2 MILK

[Minimoke]

Big day today. Presumably results are going to be within guidance. I want to hear what they are going to do with their cash. The buy back didn't really work.

[Left Field]

Good result in difficult times.....gaining market share in the declining Chinese market is testimony to their product and team...... however, as I've been saying for a long time, they need strength in more markets. Will FY 24 be the year USA sees a2 introduced?

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ATM/416640/400764.pdf

1. Full year result in line with the Company's previous guidance with double digit revenue and earnings growth
2. Result driven by strong growth in China segment with sales up 38% and record market share in China label IMF
3. China brand health reached new highs driven by record levels of marketing investment increasing by 13% to $260m
4. Total IMF sales were up over 8% in a market that declined by 14% making a2MC a top-3 share gainer in the market
5. Successful SAMR re-registration of China label IMF product provides continued access to the domestic market

Here's a bit more on USA

Following the receipt of FDA's enforcement discretion approval to import IMF, a small amount of a2 Platinum® IMF product has been produced recently to facilitate FDA required clinical studies and distribution trials during FY24
• a2MC is pursuing longer term FDA approval of a2 Platinum®, while carefully considering market entry options
• Accelerating the path to profitability in the USA by FY25 / FY26 remains a key strategic priority – steps taken to improve future profitability include price increases, reduced trade spend, marketing effectiveness, merchandising cost reduction and management changes

Wise to keep their cash mountain ready for the big USA push.

On track to achieve ambition to grow sales to $2 billion and improve EBITDA margins in the 'teens' over the medium term

[Minimoke]

Biggest concern is the "low single figure" growth outlook.

And I'm still brassed off they are sitting on $800m cash with zero plans on what to do with it. Other than shareholders get diddly squat.

[Left Field]

Biggest concern is the "low single figure" growth outlook.

And I'm still brassed off they are sitting on $800m cash with zero plans on what to do with it. Other than shareholders get diddly squat.

Given the hard economic times with many diary companies struggling I think it wise to keep their strong balance sheet and cash reserves..... they have talked about the need for more acquisitions and may need more production facilities or distribution facilities. That said, I also used to be a big fan of their 'capital light' approach, but concede that was the past and they now need more certainty in quality product supply.

[Minimoke]

Ealy punters on NZX don't like result. Down 7%

[winner (n)]

Hardly a high margin growth company these days is it

$4.50 to $5.00 probably a realistic share price in circumstance but would want to see that growth slowing even more

[Left Field]

Hardly a high margin growth company these days is it

$4.50 to $5.00 probably a realistic share price in circumstance but would want to see that growth slowing even more

MVM production/revenue should increase margins but not till FY25...... and China risks are growing meantime. Caution needed until we see more progress in Asia or USA.

[Arbroath]

Selling for less than 20x earnings (ex-Cash) but China risks are a concern...plenty of growth still possible but need their birth rate to stabilise at minimum and better still recover.  1.2 births per female now versus about 1.6 in NZ, Australia, USA is a huge difference. China still producing almost 10m babies a year but the trend is concerning.  India is around 2.0 but most too poor to buy consumer goods...

[snapiti]

oversold on the NZX this morning based on results......bought some this morning expect a bounce off $4.90 NZX when ASX opens

[Basil]

FY24 Outlook
Market conditions
China IMF market conditions are uncertain but likely to become more challenging in FY24 with a further double-digit decline in
market value expected. This is due to volume declines driven by the rolling impact of fewer newborns in recent years on later
stage IMF products, and a lower number of newborns expected in CY23 due to the lagged impact of COVID-19 prior to an
expected increase in CY24. In addition, it is expected that average selling prices will remain under pressure due to an increase in
competitive intensity driven by the market-wide transition to new GB product, excess manufacturing capacity and challenging
macroeconomic conditions.

[BlackPeter]

Yep Nupe... that economy is not a normal functioning capital market . Its command and control they will likely loose control of it .... Crash is the word...

https://www.cnbc.com/2023/08/01/china-should-act-to-pull-sputtering-economy-back-from-brink-professor-.html

ATM might be able to ride out the crash but ....

whos going to pay for all those new toys,,,,, aircraft carriers, nuclear sub, tanks, missiles .... guns , lots of guns...

Good thing is - with dropping birthrates China will have as well less cannon fodder to play with and need less guns to supply to them.

I know from experience that you don't want to carry more than one gun per soldier.

This would leave them with a bit more money for subsidizing milk formula, so that their shrinking pool of repruductive females can afford to produce new cannon fodder.

[Shareguy]

Craig's just out

ATM expecting 2H24 to be stronger than 1H24 (implying a decline in earnings in 1H24) 5) No buy back or dividend announced (likely to disappoint market given cash balance over c.$800m).      Conclusion: Guidance represents a material downgrade to ATM's FY24 outlook of c.12% relative to consensus and c.5% relative to CIPe's bottom of the street estimates. We had expected a soft outlook for the core infant formula business but with no buyback, or particularly positive news on Mataura Valley or the US business to offset this, we expect ATM shares will trade lower today.

[winner (n)]

This doesn't bode well ... in the media re Stats NZ release

New Zealand infant formula exports halved in July from a year earlier, compounding a 13% decline in the price simultaneously.

[winner (n)]

A2 have Aspirations of sales ~$2billion in F27

Jeez that's a growth rate of 5%/6% pa

A2 a real growth company these days eh ...no wonder share price tankin

[Minimoke]

Should we need reminding

"The buyback programme that started on 7 November 2022 ended with the acquisition of 21.68 million A2M shares at an average price of NZ$6.87 per share. This buyback represents 2.9% of total issued capital, and the company spent around NZ$149 million on this programme, including brokerage costs."

Current SP down 12.5% to $4.68