ATM-A2 MILK

[Shareguy]

Trading halt

https://www.nzx.com/announcements/396312

[KW]

Rumours that USA IF deal about to be announced this week. Any surplus not sold to Daigou could keep USA babies happy.

A2 up 8.8% at the moment. And over 9m shares traded today on ASX

Currently in a trading halt.  Leaky boat? 
Screwing over the daigou channel was what brought Bellamys unstuck.  Especially if even despite the China problems Zhang was still their biggest customer in 1H22.

[Shareguy]

7.6 m traded on asx. Upward price movement suggests something positive to me.

[winner (n)]

Trading halt

https://www.nzx.com/announcements/396312

Spoil sports - just as the fun was starting

[Shareguy]

Reasons for trading halt: We have become aware of media speculation concerning the status of our application to the US Food and Drug Administration for permission to sell infant formula within the United States of America. We are requesting a trading halt to provide us with additional time to properly consider the current information and to consider new information as it becomes available, and inform the market.

[KW]

It would amuse me no end if they get a US deal, but its for the same volume as they were previously supplying Zhang with, so there is no net growth 

It looks like people are playing the next best thing and now Synlait is ripping.  Although there is no guarantee that any extra production (if there is extra production) will be at Synlait, its more likely to be Fonterra - reason being that Fonterra's plant is already approved through their Danone deal.

[Basil]

Reasons for trading halt: We have become aware of media speculation concerning the status of our application to the US Food and Drug Administration for permission to sell infant formula within the United States of America. We are requesting a trading halt to provide us with additional time to properly consider the current information and to consider new information as it becomes available, and inform the market.

Its hardly earth shattering stuff.  Wonder how they're getting on with the class action lawsuits.

[Left Field]

latest just out...

MKTUPDTE: ATM: a2MC notes and responds to media speculation

The a2 Milk Company (a2MC, the Company) notes a media article that has
appeared online in the Australian Financial Review today that suggests that
the Company is nearing approval from the US Food and Drug Administration
(FDA) to allow a2MC to import infant milk formula products into the US and
that such approval could be received "as soon as this week".

The Company wishes to confirm that while we have been informed by the FDA
that our application is under active review, at this stage there is no
certainty as to the outcome of the application or the timing of any approval.

[Shareguy]

Its hardly earth shattering stuff.  Wonder how they're getting on with the class action lawsuits.

Yes it's a short term thing. Maybe more to it. Once again the market found out before the announcement......

Up 9 percent today and 8 million traded on asx before halt.

[CG]

It would amuse me no end if they get a US deal, but its for the same volume as they were previously supplying Zhang with, so there is no net growth 

It looks like people are playing the next best thing and now Synlait is ripping.  Although there is no guarantee that any extra production (if there is extra production) will be at Synlait, its more likely to be Fonterra - reason being that Fonterra's plant is already approved through their Danone deal.

then may be you should add this quote from AFR article as well
"He [David Bortolussi] told The Australian Financial Review that daigou channel still plays a critical role in new user acquisition and brand development but hinted that Mr Zhang was unwilling to exclusively commit to deal with a2 Milk – without directly commenting on his allegations.

"During the past year, we have increased our direct engagement with the daigou community, provided more marketing support and seen an increasing number of daigou representing our a2 Platinum brand," he said.

"Consistent with our growth strategy communicated to the market last year, we are simplifying and delayering our English Label infant milk formula distribution network. In doing so, we are evolving our distribution network towards partners willing to commit to more exclusive, transparent and performance-based arrangements, and we are pleased with progress to date.""

Just because mr.Zhang left the building does not mean there was no replacement. I'm sure there were a few smaller daigou that were happy to take his share and seems this is what DB has confirmed. So, now A2 has more control over distribution and pricing in China which is great. 

[Basil]

The truth is probably somewhere in the middle.  Other diagou players would have picked up some of his business but with all the issues with logistics caused by Covid and given significant price advantages Local Chinese manufacturers deliver with support from the CCP to buy Chinese made, this all means that the Chinese manufacturers are basically eating, (or should that be drinking ?) ATM's lunch for them.

All this in a shrinking total addressable market as the number of babies born in China are in serious decline.
I fail to see ANY compelling reason at all to jump back in here given very demanding metrics and no obvious route back to being a high growth company.

I reckon its a case of SELL before the annual result gives the company yet another opportunity to disappoint you later this month.

[Minimoke]

There is of course a significant growth opportunity of selling IF into the USA market. A market that had been essentially previously closed.

On 2 August the FDA said "Infant formulas for which the FDA has exercised enforcement discretion that are imported to the U.S. on or before November 14, 2022, can remain on the market after that date. The FDA does not intend to require product on the market to be removed after that date."

The market is currentyl reporting a 30% out of stock rate - with no sign of improvement until November. Paretns of babies afre crying out "Outr govt is starving our babies" so Biden at some point will make change happen in the FDA which is currently moving at glacier pace.

So, if A2 can get on that list by 14 November (which is months away) it has a Green Card to get as much product as possible into the market by 14 Nov.

From there we just need FDA to keep removing barriers to import foreign IF. And once in the market, that should smoot that course

A2 just needs to get Synlait and Mataura (gee - isn't it good it has another local IF plant coming on stream) to get in behind it.

And its fortunate the A2 brand is already well known in the USA through its liquid milk sales.

In the meantime there are calls within the USA to make sure a shortage like this never happens again. And best way to do that is open up foreign supply.

Which won't be a bad thing for mums worried about little baby tum tums.

Fun fact. US babies consume about 65 million 8-ounce bottles a week. So far the FDA has approved the import of 396.5 million 8oz bottles. So A2's entry (and ability to supply meaningful quantities at a decent margin) is by no means guaranteed. (Probably worth noting that out of the 396 bottles 121m are from Australia Care - and its A2 protein formula. So someone else is doing A2 legwork on A2M's behalf. And you have to wonder  how it is they managed that supply and A2M didnt)

Still a risky buy.

[Minimoke]

Global Dairy Trade index down 6.1% overnight.

Not a lot of confidence in Whole Milk Powder.

Index has been trending down since 1 March 2022. And is back to levels found in Aug 2021 and Feb 2021 - which was a modern high

[mcdongle]

so Synlait may be able to take advantage of Abbot Laboratories problems in the US.... ironic

[KW]

Dumping your biggest customer because they wont agree to sell your product exclusively seems to be cutting off your nose to spite your face.  Especially since now Zhang will be 100% focused on selling Bubs instead.

Speaking of Bubs, they are also supplying A2 formula to the United States.

Also you need to understand how infant formula distribution works in the US.  Approx 50% of it is purchased and distributed via the Govt WICs programme (its free to consumers as most of it is specialty formula), the rest by market retailers.  After November, while IF on the market can stay on the market, it is by no means guaranteed that the US Govt will continue to order foreign IF (in fact, I'd say its highly unlikely once Abbott is back at full production).  However, those that are supplying the market retailers like Walmart and Target and who have locked in ongoing distribution deals are looking well set up. 

So its not just FDA approval required, its also retail distribution deals need to be signed.

A good explanation of how WICs works  is here https://www.cbpp.org/research/food-assistance/infant-formula-shortage-highlights-wics-critical-role-in-feeding-babies