These are investments that will make A2 bigger and better in coming years.
Yes, they do not have canning facilities at the moment, not sure how easy is it to add one to existing capabilities.
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Missed the 'plant acquisition' fun yesterday, and have mixed feelings about ATM becoming a true manufacturer.
SH have done well out of ATM's current 'capital light model' and will need convincing that any acquisition is a good move.
That said... there has been an interesting article in the South China News re increased demand for IF. There are some fears re booming lactoferrin sales too. See it here.
One highlight...
"In New Zealand, export volumes are expected to grow by 40 per cent this year to 7 million cans from 5 million cans last year, according to China infant formula market consultant Jane Li.
One New Zealand milk powder manufacturer told Li in February that it had received three times as many orders in the first two months of the year than it did for the whole of 2019"
I think they will be trying to address their 'supply chain' risks through this model. ATM's core products that drives their sales are produced by someone else; it therefore makes sense to have some modicum of control/influence as to what gets produced. Can do that through standards and monitoring, but now that ATM is selling a lot, ownership is one of the models that makes sense.
The trade-off is that you now need to earn a return on that capital (that's the 'return risk' you are thinking about). It's a trade-off, but I would have thought that as they get larger their supply chain risk is increasing rapidly, at a rate far greater than any risk they are incurring from not achieving returns on capital.
https://nz.finance.yahoo.com/news/ma...225614076.html
A2MILK : MASTERCHEF'S CHOICE.
Good point kiwidollabill.
dobby, agree it's a new capability, but by buying into an existing producer, and as long as they give the manufacturers a seat at the top table, that reduces the risk markedly. They will also have gained enough knowledge/visibility of production capability thru their Synlait partnership.