Good for margins, but at the same time you're selling a lot less.
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Attachment 14712
A glimpse at the new China Label. The true alpha here is an upgrade to English label where margins are a lot higher and possibly in the organic category. See Aptamil Essensis priced $65aud. Nevertheless, report Monday. Outlook will be catalyst along with US update/capital management.
Market doesn't like it - down 7% this morning.
https://www.nzx.com/announcements/416640
The a2 Milk Company (“the Company”, “a2MC”) today announces a strong FY231result driven by execution of its growth strategy which is mainly focused on capturing the full potential of the China infant milk formula (IMF) market. More specifically:
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
These results are particularly strong considering the very challenging market conditions in China. The China IMF market, which accounts for almost 70% of a2MC’s sales, declined materially in FY23 reflecting volume declines driven by the rolling impact of fewer newborns in recent years and a decline in average selling prices due to an increase in competitive intensity.
Financial results and outlook2,3
• Revenue growth of 10.1% to $1,592.9 million- China & Other Asia segment sales up 37.9%, ANZ sales down 30.2% due to an intentional change in distribution strategy, USA sales up 27.1% and MVM sales up 9.2%- IMF sales up 8.4% with China label sales up 27.8% and English label sales down 6.1%4- Liquid milk sales in ANZ and USA up 7.1% and 27.1% respectively
• EBITDA5 up 11.8% to $219.3 million with an EBITDA to sales margin of 13.8% (up 0.2ppts)
• Net profit after tax (NPAT) including amounts attributable to non-controlling interests up 26.2% to $144.8 million with$155.6 million6 attributable to owners of the Company
• Basic earnings per share (EPS) up 28.7% to 21.2 cents
• On-market share buyback of $149.1 million completed with closing net cash7 of $757.2 million
• Despite an expected double-digit decline in the China IMF market in FY24, the Company expects to increase market share and achieve low single-digit
Group revenue growth in FY24 and an EBITDA margin broadly in line with FY23 (see full outlook statement in the ‘FY23 Results Commentary and Outlook’ announcement)
Operational highlights
• Reached new highs in China brand awareness, trial and loyalty metrics supported by new brand positioning, increased investment, higher impact integrated marketing campaigns and always-on consumer engagement
• Achieved top-3 share gainer in China IMF market overall with record market share, particularly in China label IMF in mother and baby stores (MBS) and domestic online (DOL) channels, and with China label sales exceeding English label sales for the first time in FY23 supported by growth in lower tier cities
• Received approval from China’s State Administration for Market Regulation (SAMR) for the re-registration of a2MC’sChina label IMF product a2 至初®, formulated in line with China’s new GB standards enabling continued access to the registered market that accounts for 85% of the total China IMF market (English label representing remaining 15%)
Increased English label IMF market share in the cross-border e-commerce (CBEC) channel as the number 1 share gainer, and increased market share in the combined offline-to-online (O2O) and Daigou channels
• Grew sales and improved online platform rankings in China label and English label IMF in the Double 11 and 618 key sales events with reduced promotional activity and improved market pricing
• Ramped up innovation and supported growth through new product launches in all categories
• Improved business health key indicators, including improved market pricing and trade margins supporting the distribution ecosystem, increased share of early-stage product sales, and IMF channel inventory and product freshness maintained attarget levels notwithstanding new GB product transition which is tracking to plan• Extended exclusive import and distribution partnership with China State Farm Agribusiness (CSFA) for 5 years and entered into a longer-term strategic co-operation agreement
• Achieved Enforcement Discretion and progressed long-term FDA approval process to sell IMF product in the USA and significantly reduced USA operating losses
• Accelerated supply chain transformation, including increasing raw A1 protein free milk supply, completing the in sourcingof all a2TM branded milk powder products , completing production trials for the insourcing of certain a2TM IMF branded product with manufacturing to start in 1H24, and commencing production trials for a new a2TM English label IMF range, all with Mataura Valley Milk (MVM) and new supply partners
• Advanced sustainability programmes, including commencing the electrification of MVM from 100% renewable energysources, commenced on-farm methane inhibitor feasibility study, entered into a research agreement with Lincoln University and developed a sustainable packaging roadmap CEO commentary The a2 Milk Company’s
Managing Director and CEO, David Bortolussi said: “I’m proud of what our team has achieved this year, growing sales by 10% while the core China IMF market declined by14% is a remarkable achievement.• “Our China label IMF sales exceeded English label sales for the first time, and our total IMF sales were over $1.1 billionmaking us a top-3 share gainer in the market overall.• “Achieving re-registration of our China label IMF product recently was critical to maintaining access to the important domestic market and we look forward to launching our new product in the coming months.•
“The Daigou market in English label IMF declined sharply again this year by almost 40% and we have pivoted further tothe more controlled channels which have performed better and where we continue to gain share.• “We have re-invested more in our brand again this year driving further gains in China brand health metrics and supportingfuture sales growth.•
“The China IMF market has become increasingly challenging as a result of lower birth rates and increased competitiveintensity. Notwithstanding, we are well positioned to continue to invest and grow share in FY24 to emerge in a strongerposition when the market recovers.”
results out 830am. down 7-8%. and its nearly 11am. and no comments yet (other than Bobs regular results post). something strange going on!
Triple threat.
Declining birth rate as everyone is aware.
Competition against local brands.
Lower milk prices
To add a fourth, increased inventory.
Majority of the npat increase is due to int income.
Loaded with risk. Nothing to really like.
What a turn around after todays so so ann !
Where are all the rampers gone? Where are all the tales of endless growth and these pretty charts showing everything good just going higher?
Only three years ago SP was above $20 and punters did beat up anybody who signalled the obvious risks for ATM which by now materialized.
Sounds like the party is over, is it?
Mataura Valley EBITDA loss $24m on $113m of sales
Ouch …but all be OK after 2026
Always thought MVN be a real drag on the group financial performance