ATM-A2 MILK

[winner (n)]

From Market Close report -


Global marketer a2 Milk was down 8c to $8.73 after reaching an intraday low of $8.58.

Robertshawe said an a2 Milk competitor, China Feihe, which has 20% of the Chinese infant formula market, has introduced sales incentives with large cash payments for families having babies.

"It looks like a customer acquisition strategy, and it will be interesting to see how this plays out," he said. "If the market gets bigger or a2 Milk starts losing market share, then they will have to compete by offering more sales incentives or spending more on promotions."

 

[BlackPeter]

From Market Close report -


Global marketer a2 Milk was down 8c to $8.73 after reaching an intraday low of $8.58.

Robertshawe said an a2 Milk competitor, China Feihe, which has 20% of the Chinese infant formula market, has introduced sales incentives with large cash payments for families having babies.

"It looks like a customer acquisition strategy, and it will be interesting to see how this plays out," he said. "If the market gets bigger or a2 Milk starts losing market share, then they will have to compete by offering more sales incentives or spending more on promotions."

 

Not sure I ever understood the attraction of investing into this bubble.

At current I see an agricultural producer (i.e. high factory costs, no scalability) sitting on a (3yr) forward PE of 32 (remember, analysts are optimists) and a (10y) backward PE of 44 (which is probably closer to how the future will look as well). 44 years to just earn the marketcap.

OK - revenue forward CAGR is 9 (remember the optimistic analysts), but even this works only due to very small earnings in the past, and even a PE of 32 with an earnings CAGR of 9 doesn't look good.

Even the (always optimistic) Graham formula forecasts a share price of only $5 (and only $4 according to the modified beagle formula), but if we stay realistic, the share is probably worth only something like 8.5 to 10 PE, which would be around $2.50.

Not yet considering the headwinds related to falling birth rates and rising competition.

Anybody can help me to understand, why people are prepared to pay for this sharte more than $8? What is the investment case?

[Minimoke]

Well, Time to take some off the table. Which I did today at $9.14.

And I will congratulate myself on being such a greater investor when I originally bought these at $8.16 while simultaneously ignoring the ones I bought at a higher price.

[Minimoke]

Anyone else drink the milk?

I havent been able to get it from new World, Countdown or Pak  n save for weeks now.

[Left Field]

Anyone else drink the milk?

I havent been able to get it from new World, Countdown or Pak  n save for weeks now.

Interesting.....maybe Fontera abandoning A2 pending sale of Anchor?

Fresha Valley (Waipu Northland) offer A2 Protein milk via Woolworths in my area.

FWIW - No longer hold ATM...... switched to FSF last year. GLH.

[Buzz]

Anyone else drink the milk?

I havent been able to get it from new World, Countdown or Pak  n save for weeks now.

Yes I do, from New World, but often it's the first of all the milks to be sold out.

[CG]

We are sad to say that a2 Milk™ by Anchor™ is no longer available under the Anchor™ brand in the New Zealand market. We are working through options to make a2 Milk™ available to our New Zealand consumers again. We do not have anything to share right now but we will provide an update as soon as we can.

In the meantime, a2 Milk™ Full Cream UHT 200ml is available in Costco. a2 Milk™ Premium Instant Milk Powder in Full Cream and Skim is available in selected Chemist Warehouse stores and online.

If you have any further questions, please reach out to the a2™ Careline team on 0800 22 46 32.


https://a2milk.nz/

[Minimoke]

We are sad to say that a2 Milk™ by Anchor™ is no longer available under the Anchor™ brand in the New Zealand market. We are working through options to make a2 Milk™ available to our New Zealand consumers again. We do not have anything to share right now but we will provide an update as soon as we can.

In the meantime, a2 Milk™ Full Cream UHT 200ml is available in Costco. a2 Milk™ Premium Instant Milk Powder in Full Cream and Skim is available in selected Chemist Warehouse stores and online.

If you have any further questions, please reach out to the a2™ Careline team on 0800 22 46 32.


https://a2milk.nz/

How odd. Especially given A2 cows are just down the road from me. Has there been a falling out with Fonterra? is liquid milk not profitable?

[KW]

How odd. Especially given A2 cows are just down the road from me. Has there been a falling out with Fonterra? is liquid milk not profitable?

It may have something to do with A2 needing to maximise its own assets and brand, rather than just licencing the brand to Fonterra.  Especially now that Fonterra is selling off its brands to competitors.  This might have triggered a break up clause in the contract.  

[Left Field]

It may have something to do with A2 needing to maximise its own assets and brand, rather than just licencing the brand to Fonterra.  Especially now that Fonterra is selling off its brands to competitors.  This might have triggered a break up clause in the contract. 

Exactly.... that's what I was trying to say in post #664

Interesting.....maybe Fonterra abandoning A2 pending sale of Anchor?

[Otago K]

Exactly.... that's what I was trying to say in post #664

This may appear a bit off topic with the discussion but I determine that as a result of covid international market impacts the niche that sat with likes of A2 cows milk ( predominantly from Jersey lineage Cows) and even more the NZ Dairy Goat industry demise ( BNZ lender of preference 100% bailed post financially growing it ), the value is not that easy for suppliers to access.
Fonterra is limited in the capacity and / or for financial benefit, desire to accommodate differentiates to a standard product such as separating A2, Organic products. Can have bizarre occurrences such as semi filled milk tankers driving past Edendale Southland plant to go to Washdyke in Sth Canty plant, at least Spring 2021 I was being told that by tanker drivers.
ATM may find a means to re new SP heights if Mr Market falls in love, just speculation but some ASX focus on that as fact maybe arising, also some technical analysts are watching, but that's not my expertise at all.

[Left Field]

ATM may find a means to re new SP heights if Mr Market falls in love, just speculation but some ASX focus on that as fact maybe arising, also some technical analysts are watching, but that's not my expertise at all.

I have long felt that ATM needs to lessen its reliance on China.

With Trump's tariffs it's likely that ATM's USA ambitions will continue to struggle.

Then Fonterra's impending sale of its Anchor brands provides ATM both opportunities and risks. Perhaps we will see ATM market its own fresh milk brand in NZ? (As it has done so successfully in AUS.) 

It will be interesting to read the commentary with this years results.

And here they are..... wow exciting MVM and concentrating on Pokeno.... and ATM branded liquid milk underway. Exciting.

https://api.nzx.com/public/announcement/456904/attachment/449698/456904-449698.pdf

FY25 Results

- Delivered record sales of $1.9 billion with double-digit growth in revenue, EBITDA and EPS
- Reached top-4 brand position in China's IMF1 market, a major milestone in brand health and market penetration
- Achieved English label (EL) IMF double-digit sales growth and record market share in China label (CL) IMF driven by
high new user recruitment
- Launched a range of new products targeting growth opportunities in the infant, kids and seniors nutrition segments,
and entered the Vietnam IMF market
- Initiated returns to shareholders, declaring first ever dividends totalling 20.0 cents per share for FY25

Key financials and FY26 Outlook2,3
• Revenue up 13.5% to $1,902.0 million
• EBITDA up 17.1% to $274.3 million with an EBITDA % margin of 14.4% up 0.4 ppts
• Net profit after tax (NPAT) up 21.1% to $202.9 million4
• Basic earnings per share (EPS) up 20.9% to 28.0 cents
• Closing net cash5 of $1,061.2 million up $92.2 million on 30 June 2024 with operating cash conversion of 95%6
• Total FY25 dividends declared of 20.0 cents per share (~71% payout), with a final dividend of 11.5 cents per share
declared (fully franked and ~78% imputed)
• FY26 continuing operations guidance for revenue growth of high-single digit percent versus FY25 and EBITDA %
margin to be approximately 15% to 16% (see full FY26 Outlook in the "2025 Annual results and Supply Chain
Transformation update" announcement)

Supply chain transformation update
Since the end of the financial year, the Company has continued to progress its supply chain transformation strategy
announcing the following transactions today:
• The acquisition of an integrated nutritional manufacturing facility with two CL IMF product registrations, located in
Pokeno, New Zealand, by purchasing all of the shares in Yashili New Zealand Dairy Co., Limited7, from Yashili
International Group Limited (a subsidiary of China Mengniu Dairy Group Limited) for approximately $282 million8 on a
debt and cash free basis; and
• The divestment of a2MC's 75% and China Animal Husbandry Group's (CAHG) 25% shareholding in Mataura Valley Milk
Limited (MVM) to Open Country Dairy Limited (Open Country), with a2MC net proceeds of approximately $100 million
on a cash and debt free basis (conditional on China regulatory filing). MVM will be treated as discontinued operations
and the Company expects to recognise a loss on sale of MVM of approximately $130 million
The Company intends to invest ~$100 million in a multi-year capital investment programme to increase capacity and enhance
capability at the new a2MC Pokeno site with plans to employ more than 100 additional people over time, providing significant
development opportunities to current and future team members.
Strategic rationale
The acquisition and divestment announced today are supported by a clear strategic rationale:
1. Secures opportunity for greater market access to the attractive NZ$23 billion9 CL IMF registered market through
control of two highly sought after product registrations for CL IMF that can be amended to expand the a2™ branded
portfolio with the potential of a third registration over time, all subject to China regulatory approval. a2MC's existing
China label IMF registered product, a2 至初™
, will remain at Synlait
2. Supports growth in core IMF business over time through CL product portfolio expansion and innovation, assisting in
unlocking growth potential in lower tier cities and the domestic online channel
3. Accelerates development of nutritional manufacturing capability. The new a2MC Pokeno site is a world-class fully
integrated nutritional manufacturing facility with proven IMF experience including the current production of a2MC's
new English label products, a2 Genesis™ and a2 Gentle Gold™
4. Provides access to A1 protein free milk pool from New Zealand's highly regarded Waikato region in the North Island for
production of a2™ branded products, under a long-term supply agreement with Fonterra
5. Optimises asset footprint and capacity utilisation through the divestment of MVM whilst retaining access to high
quality A1 protein free ingredients from the site through a commercial supply agreement
6. Generates attractive financial returns over time through vertical manufacturing margin capture and additional brand
contribution, with return on invested capital expected to achieve weighted average cost of capital in FY29

[Minimoke]

I have long felt that ATM needs to lessen its reliance on China.

With Trump's tariffs it's likely that ATM's USA ambitions will continue to struggle.

Then Fonterra's impending sale of its Anchor brands provides ATM both opportunities and risks. Perhaps we will see ATM market its own fresh milk brand in NZ? (As it has done so successfully in AUS.) 

It will be interesting to read the commentary with this years results.

And here they are..... wow exiting MVM and concentrating on Pokeno.... and ATM branded liquid milk underway. Exciting.

https://api.nzx.com/public/announcement/456904/attachment/449698/456904-449698.pdf

FY25 Results

- Delivered record sales of $1.9 billion with double-digit growth in revenue, EBITDA and EPS
- Reached top-4 brand position in China's IMF1 market, a major milestone in brand health and market penetration
- Achieved English label (EL) IMF double-digit sales growth and record market share in China label (CL) IMF driven by
high new user recruitment
- Launched a range of new products targeting growth opportunities in the infant, kids and seniors nutrition segments,
and entered the Vietnam IMF market
- Initiated returns to shareholders, declaring first ever dividends totalling 20.0 cents per share for FY25

Key financials and FY26 Outlook2,3
• Revenue up 13.5% to $1,902.0 million
• EBITDA up 17.1% to $274.3 million with an EBITDA % margin of 14.4% up 0.4 ppts
• Net profit after tax (NPAT) up 21.1% to $202.9 million4
• Basic earnings per share (EPS) up 20.9% to 28.0 cents
• Closing net cash5 of $1,061.2 million up $92.2 million on 30 June 2024 with operating cash conversion of 95%6
• Total FY25 dividends declared of 20.0 cents per share (~71% payout), with a final dividend of 11.5 cents per share
declared (fully franked and ~78% imputed)
• FY26 continuing operations guidance for revenue growth of high-single digit percent versus FY25 and EBITDA %
margin to be approximately 15% to 16% (see full FY26 Outlook in the "2025 Annual results and Supply Chain
Transformation update" announcement)

Supply chain transformation update
Since the end of the financial year, the Company has continued to progress its supply chain transformation strategy
announcing the following transactions today:
• The acquisition of an integrated nutritional manufacturing facility with two CL IMF product registrations, located in
Pokeno, New Zealand, by purchasing all of the shares in Yashili New Zealand Dairy Co., Limited7, from Yashili
International Group Limited (a subsidiary of China Mengniu Dairy Group Limited) for approximately $282 million8 on a
debt and cash free basis; and
• The divestment of a2MC's 75% and China Animal Husbandry Group's (CAHG) 25% shareholding in Mataura Valley Milk
Limited (MVM) to Open Country Dairy Limited (Open Country), with a2MC net proceeds of approximately $100 million
on a cash and debt free basis (conditional on China regulatory filing). MVM will be treated as discontinued operations
and the Company expects to recognise a loss on sale of MVM of approximately $130 million
The Company intends to invest ~$100 million in a multi-year capital investment programme to increase capacity and enhance
capability at the new a2MC Pokeno site with plans to employ more than 100 additional people over time, providing significant
development opportunities to current and future team members.
Strategic rationale
The acquisition and divestment announced today are supported by a clear strategic rationale:
1. Secures opportunity for greater market access to the attractive NZ$23 billion9 CL IMF registered market through
control of two highly sought after product registrations for CL IMF that can be amended to expand the a2™ branded
portfolio with the potential of a third registration over time, all subject to China regulatory approval. a2MC's existing
China label IMF registered product, a2 至初™
, will remain at Synlait
2. Supports growth in core IMF business over time through CL product portfolio expansion and innovation, assisting in
unlocking growth potential in lower tier cities and the domestic online channel
3. Accelerates development of nutritional manufacturing capability. The new a2MC Pokeno site is a world-class fully
integrated nutritional manufacturing facility with proven IMF experience including the current production of a2MC's
new English label products, a2 Genesis™ and a2 Gentle Gold™
4. Provides access to A1 protein free milk pool from New Zealand's highly regarded Waikato region in the North Island for
production of a2™ branded products, under a long-term supply agreement with Fonterra
5. Optimises asset footprint and capacity utilisation through the divestment of MVM whilst retaining access to high
quality A1 protein free ingredients from the site through a commercial supply agreement
6. Generates attractive financial returns over time through vertical manufacturing margin capture and additional brand
contribution, with return on invested capital expected to achieve weighted average cost of capital in FY29

$130m loss on sale of Mataura!

[Minimoke]

Quick back of the envelope calculation. A 4.1 cent dividend coming up

edit. I see its $0.115

Edit. Market seems to like it. Up 5.5% on open to $9.20.  (Yeah!. I'm back in the black again!)

Edit again. So it seems to be a Special dividend of $0.041 and a usual dividend of $0.115

[Left Field]

$130m loss on sale of Mataura!

I've now read the following more detailed ATM FY25 Results and Supply Change info. Lots to absorb and v impressive IMO.

https://api.nzx.com/public/announcement/456904/attachment/449706/456904-449706.pdf

Good to see strong progress in all existing markets along with the newer markets of Vietnam and USA. The supply chain changes make good sense. Margins can only improve. Heading to $2.0 Billion in revenue FY27 (possibly earlier.) $1.1 Billion cash on hand. Well done ATM.