Good for margins, but at the same time you're selling a lot less.
Printable View
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
They took another $63m hit on the ‘investment’ in Synlait
In Other Comprehensive Income so doesn’t really count …but impacts reported Equity
as expected result as forecast by bull last week. that is not too good
did you read the results? They are actually extremely good and even more so considering the situation in China.
forecast doe next year is grim but it has an air of under promise, overdeliver but the environment they’re working in will be by far the harshest seen before
No dividend or further share buyback - place your faith in the directors and management to do the right thing with the cash.
With their track record, would you?
Hope they aren't thinking of spending anymore cash investing in Synlait.
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.
I think they'll end up buying Synlait for a song- I don't think the banks will want exposure to the debt at Synlait and will sell it cheap to an A2/Bright consortium. It'd be a good deal for A2 if they do. Won't stop people coming after the directors of Synlait I guess, but that is not A2's problem
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 tanking
DB did talk about possible M&A”s vaguely after being pushed by the analysts on why capital returns are not considered to the shareholders.Who knows their poor cousin could be lapped up for a steal!
Weird that PEB and ATM topped the losers board today :eek2:
Bring back the good ol days when they were the stars ;)
The license to manufacture the product A2M sells into China is held by SML, so whether A2M like it or not they will have to do whatever it takes to keep SML producing.
They've performed exceedingly well in a declining Chinese market to get an EBITDA of $254.1 million while every other part of the company drags that down to $219.3 EBITDA. This year is the opposite, China looking a little shaky, while the other parts of business get close to breakeven, leading the company to expect a similar EBITDA figure for FY24. The key contribution in maintaining their performance comes from the declining NZ milk price, which is helping maintain their margins.
Its actually next financial year (FY25) that is the worrying year where stage 3 & stage 4 will see a drop off in demand since there will be a lot less babies to serve in that category than prior years, while the NZ milk price may recover at the same time which will reduce their margins and lower their EBITDA. The one thing that could save a decline in EBITDA is how they decide to invest their cash. Large possibility it will be to takeover Synlait in some way since they have hinted it will be about supply chain transformation, though it would be hard to see Bright Dairy sell up for anything below $3, so either a joint offer or a merger that would see Birght Dairy own a part of ATM.
In the event Bright Dairy would entertain a $3 per share takeover of Synlait, that would cost ATM about $525m to acquire the 80% they don't own. Bright may entertain that deal given the declining Chinese Market and if there was a good supply agreement in place.
They are just too attached to SML to not save them especially given the depressed asset pricing, so might as well use the profits they make to take it over or another avenue will be taking over another company that can produce product for China. Originally I thought they would use MVM to transition to that straight away, but seems to be quite slow progress on that end. I'd definitely love to see them add more products to the pipeline, why stop at milk powder when they can utilise the A2 brand into other products. They need to build an ecosystem of A2 products so that parents who like A2 infant formula have other products they can use to.
https://www.nzx.com/announcements/418353
:ohmy:
The a2 Milk Company Limited (a2MC, the Company) advises that after market hours on Friday, 15 September it provided Synlait Milk Limited (Synlait) with written notice cancelling the exclusive manufacturing and supply rights enjoyed by Synlait in respect of stages 1 to 3 of a2MC’s current infant milk formula (IMF) products (being a2 Platinum® and a2 至初®) for sale by a2MC in the markets of China, Australia and New Zealand. Stage 4 IMF and other a2MC products supplied by Synlait are not subject to exclusivity. Synlait has advised that it is considering the notice of cancellation, it reserves its rights, and it will respond formally in due course.
a2MC has given notice of cancellation of Synlait’s exclusive manufacturing and supply rights due to Synlait’s delivery in full and on time performance (DIFOT) during FY23 falling below the level required for Synlait to maintain such exclusive rights, including as referenced in a2MC’s market announcement on 26 April 2023 and primarily in relation to English label IMF product.
The manufacturing and supply agreement between Synlait and a2MC (Supply Agreement) will remain in place notwithstanding removal of exclusivity and Synlait remains an important supplier of a2MC. a2MC considers that pricing terms and other key terms of the Supply Agreement between the parties will continue to apply. In particular, and as previously confirmed to the market:
• The Supply Agreement continues on a rolling term until either party gives three years’ notice of termination to the other party; and
• a2MC considers that Synlait continues to be contractually bound to supply up to the same prescribed IMF volume per annum , including all stages of both a2MC’s current English label product, a2 Platinum®, and a2MC’s new China label GB product, a2 至初® (which is being transitioned in the China market in 1H24, with the launch remaining on track).
Synlait is considering a2MC’s cancellation notice. If Synlait disputes the notice, the matter will be resolved through good faith negotiations, followed by confidential binding arbitration as provided for under the dispute resolution provisions of the Supply Agreement. At this stage, a2MC expects that any such dispute resolution process may take some time to complete. In the meantime, a2MC has advised Synlait that it would agree to maintain Synlait’s exclusivity until any dispute is resolved (assuming it is resolved by the end of 2024), and even once the matter is resolved, a2MC considers that a2MC will continue to have the right, but not the obligation, to fully source its current IMF products from Synlait.
Subject to the outcome of any dispute resolution process, removal of Synlait’s exclusivity will provide a2MC with the option to produce a2 Platinum® (being the brand of a2MC’s current English label product) at any facility in the future, including Mataura Valley Milk (MVM). MVM is a purpose-built dairy nutritionals facility situated in New Zealand’s South Island and of which the Company owns 75% in partnership with China Animal Husbandry Group (which owns 25%). Having regard to the dispute resolution process, product development cycles and the New Zealand dairy season, any positive impact of the removal of Synlait’s exclusivity on MVM utilisation and profitability is not expected to have a material impact in FY24 or FY25. As previously announced, accelerating MVM’s path to profitability by FY26 or earlier is a strategic priority.
Authorised for release by the Board of Directors
Hey Bob …..think it says we (A2) want to make some of this ‘exclusive’ stuff ourself (MVN) so we found an reason (DIFOT’ to end the ‘exclusive’ bit ….and we not really friends
Whatsup …A2 paid an average of $6.69 for their 43 million shares
So as Friday more than $230m down the gurgler
But heck … HUGE strategic value in being 19% shareholder eh
If A2 uses Matarua for production of English label IF, I guess the margins could improve and also CBEC channels showed an improvement of 8.3% YOY. I sort of get what’s going on in the management”s mind. Improve margins(as it’s manufactured by A2 itself) and eventually throw synlait from the cliff.
China Animal husbandry group which owns some of Mataura is a state owned enterprise. Would you prefer the state owned business helping your business, or Bright Dairy a business based in Shanghai. I mean best to not piss anyone off, but I would back the state owned enterprise for China every time.
I assume you realize that Bright Dairy is a part of Bright Food, which is wholly owned by the Shanghai Municipal Government. Which in China clearly means it is a state controlled business, unless you expect the city of Shanghai to do something the dear secretary would not like, which they would do at most once.
In practical terms it does not matter in any shape or form, whether the Chinese company you are working with is directly owned by the state or owned by some local Chinese authority which reports into the state as they would.
Your opinion is valued and people sharing their thoughts is totally the right approach to getting a greater understanding of anything for anyone 😊
I respect what you are saying in regards to China and state owned enterprises, and I actually fully agree with you in placing weight on their involvement Â…however their political system is layered, do you understand who owns Bright?
The company is owned (some would say fronted would be more accurate) by the Shanghai Municipal Government, behind which stands the Shanghai Investment Group…it is the second largest China food and beverage manufacturing (that is a very important word to note) company based in China…It may stand behind a number of layers but (some would say) Bright is very much China ruling party “owned”
The Animal Husbandry Group and Bright are not competitors, and it is no coincidence that these companies take blocking stakes in many businesses, alongside getting board members in place, alongside getting their banks in place, all designed to secure the manufacturing assets, and production capabilities of said companies.
These state owned entities work together and their strategic view is long term.
MVM actually needs the IP Synlait have, it is way to simplistic to say that MVM can take up capacity of Synlait production as many seem to think, and very time consuming and expensiveÂ…it is far more probable that the time is now right for Bright to move on Synlaits assets, and then transfer all the knowledge and IP required to MVM. Bright and AHG would then control the raw material supply and manufacturing assets and the channel to market (registration to sell) required to provide them what they want, no disrespect to A2 but they are along for the ride, they have an amazing brand and product but China controls this business.
Since the impact of Covid there has been so much made of the poor management of A2, and the lawsuits are underwayÂ…but if we can be balanced about it the honest truth is the management at A2 weÂ’re not asleep and neither are they stupid people, they simply over the years took credit for something that they hadnÂ’t done ( the huge profit and stellar rise of their brand)
A2 is going to be totally fine, they are going to stay in their lane and do exactly what they are being asked to do, drive the price of Synlait down (legally) and spend some money picking up the assets Bright wants ( avoids laws of foreign ownership if itÂ’s a JV with a resident company)
Everything will just continue as normal, (except most Synlait retail shareholders are going to get a haircut)
This story also takes off again SAMR enforce regulation on a2 milk practices. A2 are in a good place with close(soon to be closer) ties to relevant authorities.
It is currently of benefit to a2 to have as many participants as possible looking to break into the category, as it increase awareness and as they are the “pioneer” conversion tends to be higher. Also, legacy formula producers are marketing legacy milk with “a2”included. Which is not wrong, hence why regulation is needed.
More likely a liquidation and clean acquisition of the assets
Hard to say - I assume that the strategic goals of the Peoples Republic of China are not correlated with A2M's strategic goals - and I assume that A2M's interests feature very low on Chinas strategic priority list.
If A2M do have contacts in China whom they can trust (i.e. having a several decades long trustful working relationship) ... then they might have a quiet meeting with them to find out how they can best serve Chinas interests and benefit as well. Not sure though, A2M does have such contacts in China ... but hey, lets hope I am wrong.
Bright are not going to gamble their current sizeable investment, neither are A2…it’s a pretty good game of brinkmanship going on buts it’s all really just posturing and ego, everyone involved knows what’s going on and how valuable Synlait is in the game.
https://www.nzx.com/announcements/420060
Dispute submitted to arbitration
The a2 Milk Company Limited (a2MC, the Company) refers to its market announcement made on Monday, 18 September confirming that it had provided Synlait Milk Limited (Synlait) with written notice cancelling the exclusive manufacturing and supply rights held by Synlait in respect of stages 1 to 3 of a2MC’s current infant milk formula (IMF) products (being a2 Platinum® and a2 至初®) for sale by a2MC in the markets of China, Australia and New Zealand.
Synlait disputed the notice and, in accordance with the dispute resolution provisions of the manufacturing and supply agreement, a2MC and Synlait entered into a 20-business day period of good faith negotiations, which has not resolved the dispute. The matter will now be submitted to confidential binding arbitration as provided for under the dispute resolution provisions of the manufacturing and supply agreement.
Authorised for release by the Board of Directors
Sign of things to come…
https://www.bbc.co.uk/news/articles/cv20pywdj0zo
should be under 4$ soon i read china birth rate declined even more recently. no one feeling the love over there
AGM tomorrow, b 4 covid the meeting was a must attend, but tomorrow , what ? , who is attending ?? !
S Hers can attend the AGM by vertual link today @ 11-00
Meeting materials - https://www.nzx.com/announcements/421740
I wonder if the A2 meeting will be as interesting as yesterdays meeting at the Pullman?? With Chris, Winnie and David??
As for an outlook:
Moving now to our outlook for FY24. As stated at the time of our results release:
• We expect China IMF market conditions to be more challenging in FY24 compared toFY23 with a further double-digit decline in market value;
• Despite these headwinds, we expect to continue to gain market share in IMF; and
• At the group level, we are expecting low single-digit revenue growth, EBITDAmargins to be similar to FY23 and an improvement in cash flow.
no positive outlook statement
$1-00 cash / share on its books so $3-00 + for the rest ?
Up 5% + today, not too bad for a down day imo.
Given the conditions they are operating in ATM is actually performing quite well. Gaining market share in a shrinking IMF market in China and maintaining margins is pretty good.
A2 Milk boss says China formula market in steep decline
https://www.afr.com/companies/retail...0231116-p5ekd9
Are Class Action games still on the table, or has ATM settled all of them ? ;)
The Aussie action still underway
Marriages have a high correlation to new births, worth noting a2 are out performing in stage 1(0-6 months)
https://says.com/my/news/chinese-couples-rushing-to-get-married-to-have-dragon-babies
Attachment 14855
Bubs is in serious trouble it's gone through the cash like there is no tomorrow.
You're assuming this $128m market cap company that made a loss of $108m on revenue of $60m, and bombed out of the China market, is going to attract additional investment in a cap raise of about 165m new shares (about 20% of shares on issue), to expand (open) a new market in the USA!
We'll see about that, $28m cap raise is a massive massive dilution on the current shareholders currently suffering a $0.17 share price, with no certainty it will work out. Good luck, they'll need it.
This crap has no place on the ATM thread. There is no comparison or relevance to ATM.
David B doing a rave with Madison
How A2 aims to grow marketshare in a shrinking infant formula market
https://www.youtube.com/watch?v=u-1rK5ujjlM
Interesting…First time DB has done an interview in detail since his appointment some 3 years ago. FY24E they will have circa $865mm in cash! The market believes they are looking to acquire manufacturing but a strategic alliance is more likely imo. A few multinationals will be taking a look considering they’re taking market share and have huge operational leverage once the market turns.
“ATM is trading on a 12 month forward PE of ~17x (~14x cash adjusted) and EV/EBIT of ~10x, which is in-line with similar consumer staples peers on a PE basis” Forsyth Barr
“The a2 Milk Company (ATM) is changing its stripes. It has well-publicised strategic intentions to vertically integrate its supply chain, be it through M&A, organic investment at Mataura Valley Milk (MVM), or JVs/alliances. It's not a matter of if, it's a matter of when. Our detailed scenario analysis assesses how ATM would evolve should it purchase SynlaitMilk's (SML) Dunsandel asset. We acknowledge this isn't necessarily likely but we think it would prove to be an attractive asset for ATM, helping to reduce supply chain risks (mainly regulatory), capture manufacturing margin (albeit we don't think group margins will notably improve), and drive EPS growth ahead of current consensus forecasts. We have also explored the ramifications should ATM pursue other NZ manufacturing sites. Given current undemanding valuation multiples, investors appear cautious on the potential implications of such a large investment. Our analysis supports our OUTPERFORM rating, and we believe the market is too cautious on the potential capex investment implications” FB
20 years of a2 milk powder: one meter wide and ten thousand meters deep, leading the high-quality advancement of the milk powder market with strong innovation
Xiao Liu 2023-12-05 10:27 Views:587
Introduction: Looking at the entire dairy market, the A2 protein category has been born for more than 20 years, but the market education is relatively mature. The unique advantages of A2 protein "easy to digest and easy to absorb" have penetrated deeply among practitioners and consumers. A2 milk powder has become a popular track for dairy enterprises at home and abroad. It has also led to the rapid expansion of this market.
However, scientific research is an endless process. Thanks to the decades-long focus of scientists at home and abroad, the recent research on A2 protein has made significant progress again. A2 protein can not only improve the level of glutathione GSH, an antioxidant that is very important to the immune system, but also It can synergize with lactoferrin: lactoferrin can regulate glutathione GSH activity, thus providing better self-protection for infants and young children. Glutathione GSH can play an antioxidant role and participate in the detoxification process to help the human body maintain normal immune system function. And the latest research results have been transformed and applied by a2 milk company to the new product series of infant formula from a2 to early childhood.
A2 milk powder welcomes new opportunities for development. The new research has once again confirmed the gold content of A2 protein, and the whole industry has further seen the richer potential value and broad development prospects of the A2 category.
From niche to mainstream
The multiple benefits of A2 protein are constantly confirmed.
As an important source of nutrients for the human body, scientific research and product innovation on milk have never stopped. We can't help wondering how many secrets are hidden in a glass of milk? Especially about A2 protein, the high scientific research barriers in the early stage of category development have built the foundation for its high-end quality and unique nutritional value, and a2 company has been digging up the "nutritional gold mine" of A2 protein step by step and bringing its treasure to more people to meet different needs. Requirements.
Reviewing the relevant research and application of A2 protein, it can be roughly divided into three stages:
A coincidence inspired scientific research in the 1.0 era: a study originally published in the journal NATURE in the 1960s found that cows produce different types of beta-casein due to genetic variation, thus revealing the study of milk proteins.
Decades have been focusing on research from scientific discovery to product landing. It is the 2.0 era: from early principle research, cell experiments, animal experiments, and clinical experiments. After countless studies, it has been found that A2 protein has benefited to the human body, and it has been confirmed that milk containing only A2 protein and does not contain A1 is more prophilic milk. And the human body will significantly reduce the symptoms of gastrointestinal discomfort after drinking milk. For example, the Effects of Ordinary Milk and Milk Containing Only A2 β-casein on the Digestion of Chinese Children: A random study jointly completed by experts from China and Australia in 2019 shows that milk containing only A2 β-casein can reduce gastrointestinal symptoms caused by milk intolerance in preschool children in China, and can Improve its cognitive performance accordingly. Many experts and scholars at home and abroad have devoted themselves to the field of A2, and their research on different nationalities, different ages and different groups of people has made the A2 category significantly different from other subcategories, and their value attributes have laid the foundation of the category.
Breaking through the research margin and discovering the synergy with different high-quality nutrients means that the A2 category has entered the 3.0 era: with more and more brands entering the game, accelerating the promotion of A2 milk powder from the minority to the mainstream. On the whole, the industry's perception of A2 protein is still concentrated in intestinal health fields such as digestion and absorption. But in fact, scholars have paid attention many times in their research that milk containing only A2 protein and without A1 can double the level of glutathione GSH, a "self-protective factor" antioxidant, which is very important for human immunity, which undoubtedly adds another fire to the rapid development of the A2 category.
An exciting news is that the interpretation of the latest study "Effects of Infant Formulas Supplementing Lactoferrin on Respiratory Infection and Diarrhea in 2-3 Years Old" released at the 17th National Perinatal Medical Academic Conference (CSPM) of the Chinese Medical Association in 2023 shows that the intake of A2 beta-casein cattle Milk with excellent amount of lactoferrin can improve common acute respiratory infections and diarrhea problems, and reduce the course of acute upper respiratory tract infections and/or diarrhea by 23%.
From intestinal comfort to immune health
The latest research solves the mystery of "multiplying self-protection"
Immune health has long been the focus in the field of maternal and infant nutrition. Especially in the face of various viruses and frequent colds in autumn and winter, infants and young children, as susceptible people, need their own strong immunity to resist external challenges. Immunity is like an ordinary invisible "guardian god" that provides for the baby's health at every critical moment.
In the past, many people had a relatively simple understanding of the role of the human intestine. In fact, the intestine is not only an digestive and absorption organ, but also an important immune organ of the human body. Therefore, when scientists deeply studied A2 protein, they found that in addition to its easily perceived digestive and absorption benefits, there is a certain inevitability to improve the value of the powerful self-protective factor glutathione GSH.
In recent years, we have seen that in the field of innovation of infant powder products, the cross-combination of different high-quality nutrients has become a trend, but it is the first time in the industry to study and demonstrate the synergy between A2 protein and excellent lactoferrin. This new research not only provides a new solution for children's intestinal comfort and immune health, but is bound to lead a new wave of formula innovation. At this time, as a pioneer and leader in the field of A2 protein, the new trend of a2 company has naturally become the focus of industry attention.
It is reported that during this year's Expo, a new series of infant formula was released. This series applies the latest research and empirically proves that it only contains A2 protein milk, which has a synergistic effect with an excellent amount of lactoferrin, and plays a 1+1>2 effect in helping babies improve their self-protection. At the same time, as a blockbuster work of a2 company to open a new decade in the Chinese market, this new series is a top-grade in nutritional formula, milk source and other aspects, with a ferritin purity higher than 95%, compared with 450% upgrade of the previous generation a2 to initial product content, which has attracted great attention from the market as soon as it is launched. The product advantages of a2 to the new product "good absorption and self-protection" have also become a new standard for feeding selection for young families of the new generation, and have also set a benchmark for the industry to match A2 protein milk powder.
It can be seen that in the development of A2 category, a2 milk company not only has the forward-looking ability to lead scientific research, but also has the comprehensive strength to transform scientific research achievements and user needs into innovative products.
First, focus and innovation
Lead the A2 category to a broader future
A glimpse of the development history of the entire A2 category is the evolutionary history of the milk powder market. No matter how the external environment and user needs change, scientific research ability has always been the endogenous driving force for the development of the industry. Since 2023, the new national standard racing competition and brand breakthrough competition have also focused the focus of industry competition on scientific research and innovation.
Up to now, A2 protein has become synonymous with high-end and quality, and the layout of A2 milk powder has also become the standard configuration of leading dairy companies. Everyone collects firewood and the flame is high, and the competition in the whole A2 milk powder market has also entered a higher latitude. Looking forward to the future, why can a2 company always be in the leading position?
First, first: At first, a group of scientists engaged in A2 beta-casein research established a2 milk company and was committed to discovering and promoting the benefits of A2 protein for the human body. Globally, a2 was the first to carry out A2 protein science research, and it was also the first to launch the first A2 protein product. The two "firsts" laid the strength of a2's "looking insight + scientific research gene + transformation and landing" from the beginning.
Second, focus: As the only company in the world that only produces A2 protein dairy products, and the industry that has been focusing on A2 protein research for more than 20 years, the professional value, product matrix and user mind in the field of A2 protein are beyond the right, which determines that the enterprise is difficult to be surpassed. For example, in order to obtain milk powder containing only A2 protein, it is necessary to master the patented A2 gene detection technology, and before 2017, a2 milk company was the only dairy company with this technology. For example, although many dairy companies are currently laying out A2 milk powder, in the minds of channel merchants and consumers, as long as they mention A2 milk powder, many people think of a2 at the first time. The brand is synonymous with the category.
Third, innovation: around the continuous broadening of the research margin of A2 protein, a2 continues to increase research on empirical evidence and product iteration. The ultimate product way has always been the biggest core competition barrier of a2, and the strong scientific research endogenous force also provides a continuous impetus for continuous innovation.
Back to the beginning of the birth of the A2 category, a2 is not a unique way to create demand, but a real insight into the underlying logic of user needs: finding and solving problems.
The launch of new research and new products is also a line of "discovering and solving problems", aiming at the strong needs of maternal and infant families to improve the digestive absorption and immune health of infants, and providing more scientific research support and more accurate solutions. In this process, it also provides a new high-quality advancement for the milk powder industry.
http://www.myguancha.com/post/22812.html
A mild positive to start 2024 for ATM :
https://www.reuters.com/world/asia-p...er-2024-01-01/
New Zealand said on Monday all its dairy products were now able to enter China duty-free as safeguard duties on milk powder ended on Dec. 31, marking the removal of all remaining tariffs agreed upon in the free trade deal between the two countries.
"This is good news for our dairy sector. The removal of these remaining tariffs is expected to deliver additional annual tariff savings of approximately NZ$350 million ($221 million)," Trade Minister Todd McClay said in a statement.
OUTPERFORM
The a2 Milk Company (ATM) is changing its stripes. It has well-publicised strategic intentions to vertically integrate its supply chain, be it through M&A, organic investment at Mataura Valley Milk (MVM), or JVs/alliances. It's not a matter of if, it's a matter of when. Our detailed scenario analysis assesses how ATM would evolve should it purchase SynlaitMilk's (SML) Dunsandel asset. We acknowledge this isn't necessarily likely but we think it would prove to be an attractive asset for ATM, helping to reduce supply chain risks (mainly regulatory), capture manufacturing margin (albeit we don't think group margins will notably improve), and drive EPS growth ahead of current consensus forecasts. We have also explored the ramifications should ATM pursue other NZ manufacturing sites. Given current undemanding valuation multiples, investors appear cautious on the potential implications of such a large investment. Our analysis supports our OUTPERFORM rating, and we believe the market is too cautious on the potential capex investment implications.
ATM will vertically integrate its supply chain in time — there are numerous options
One of ATM's five strategic pillars is to ‘transform its supply chain’ with the desire to: (1) expand China Label (CL) registered market access, (2) utilise MVM and invest in NZ capability, and (3) develop China supply capability. As part of all five pillars, it has stated it will, ‘explore opportunities to accelerate strategy execution through M&A, JVs, and alliances’. The key quantitative targets related to its supply chain are access to at least three CL registrations and an expanded English Label (EL) IF portfolio. The key attraction is wider access to CL licenses; this makes sense to us as the company seeks to improve its competitive positioning over the long term, and reduce future regulatory supply chain risks. ATM has numerous viable options, including: (1) SML Dunsandel, (2) Bodco's blending & canning site, (3) other NZ based IF manufacturers (notably Yili or Yashili), (4) expedite MVM investment, and/or (5) invest in China.
A compelling option is to acquire SML's Dunsandel asset. We are not suggesting this is likely, but it does offer attractive qualities to ATM, particularly the all important regulatory licenses. We don't have a firm view on value but would expect a purchase price >NZ$400m. Our base case scenario suggests FY25 EPS accretion of ~+35% to +40% (fully cash funded), ROIC decline to ~16% (from ~17% in FY23), and a reduction in net cash balance to ~NZ$415m (from ~NZ$720m at FY23).
Valuation is relatively attractive; the market appears overly nervous on the capex implications
We have previously argued ATM's earnings multiple has been too high, particularly given the fundamental change in growth and returns as it morphs into a conventional consumer staples company. ATM is now trading on a 12 month forward PE of ~17x (~14x cash adjusted) and EV/EBIT of ~10x, ~-40% below its respective five year average multiples. It is now trading in-line with similar consumer staples peers on a PE basis and ~-20% EV/EBIT discount (both at record lows on a relative basis). We are now comfortable: (1) the step-change in ATM's business is being appropriately reflected in its share price, and (2) see relative valuation as attractive, particularly given our constructive view on medium-term growth (FY26 to FY23 EPS CAGR of ~+10%).
FB
China’s population falls by 2.08 million to 1.4097 billion in 2023 as births tumble, adding to demographic concerns
- China’s overall population fell by 2.08 million last year to 1.4097 billion, down from 1.4118 billion in 2022, while births declined by 5.6 per cent to 9.02 million in 2023
- The world’s second-largest economy is under pressure as its population declines and gets older
https://www.scmp.com/economy/economi...aphic-concerns
A2 up on news they are selling on Amazon USA today. FYI, Bubs is selling circa $705k usd of products a week(54% on Amazon). Good timing from a2 management with Bubs inventory depleted due to wc issues. Although small sums for a company of a2’s size, can fast track US profitability with current drag.
Also, marriage data looking positive for 24. A leading indicator of births
Attachment 14911
Attachment 14912
https://www.linkedin.com/posts/thea2...ium=member_ios
Seems bull had it right after all. This guy reckons A2 gained today because Chinese birth numbers weren’t as bad as they could have been.
From Market Wrap -
At home, a2 Milk rose 17c or 3.96% to $4.46 after China said 9.02m babies were born last year, down from 9.56m in 2022 – the seventh successive year that the number has fallen.
Robertshawe said the latest Chinese birth rate was positive for a2 Milk, which had previously indicated the number of births would be in the low 8m.
“The birth rate is still down but not as bad as some people thought it would be. And it appears new marriages are increasing, and maybe China has hit the bottom in births.”
Missed what point?
Give them a minute or two to connect the dots. Yeah nah, anyone watching the news and the market has already scored over 5%, today. Amazing that the Amazon USA launch news was announced on LinkedIn, you'd think it might warrant a market update? Thanks for the charts, Bub's might be a minnow but they do have some leading indicator relevance to ATM in the USA. Probably depends on how involved one is, sucking in all of the feeds and moving quickly to take advantage or avoid the downsides. Or just strolling by this thread occasionally and biffing BS and half-stories into the mix, to make some impression. Well that backfired today didn't it. Keep posting.
Yes, this will fly on ongoing positive marriage and birth data. Glad they have increased marketing investment heavily over the past three years. They will have gained so much leverage from marketing spend as seen in every data metric tracked + market shares. Coupled with USA profitability, MVM profitability/production, SG&A line decreasing in out years, organic English label, product innovations and $800mm on the balance sheet.
FB
Births in China during 2023 of 9.02m were +15% ahead of our 7.86m forecast (and likely notably ahead of market expectations). At this stage we leave our earnings forecasts for The a2 Milk Company (ATM) unchanged but increase our 2024 new birth forecasts. Under our revised industry model changes, we estimate the current share price implies ~+100 bps of China Infant Formula (IF) market share gains over the medium term, assuming ~15% EBITDA margins. We are more optimistic and forecast ~+200–250 bps of market share expansion. We continue to see the risk reward as positively skewed, particularly in light of recent constructive Kantar data and ongoing industry consolidation.
link
2023 new births +15% ahead of our forecast
We are not demographers and hence had low conviction in our 2023 new birth forecast but numerous anecdotes through 2023 suggested new births of around ~8m (or potentially lower). At ATM's ASM in November, management also indicated an expectation of ~8m. Expectations were low ahead of the data release and investors have been cautious on China's birth outlook. While the positive 2023 surprise isn't structurally significant in the context of China's infant population, we see this as favourable for investor sentiment.
2024 could be better again; we revise our assumptions upwards
Empirical evidence from policy change and challenges in China suggests a sustained increase in births medium term is unlikely. That said, we think an increase in 2024 is likely. The biggest driver is marriage data. Annualising the first nine months of 2023 on pre-COVID seasonality in Q4 suggests marriage growth of +10% versus 2022. Marriages are the best leading indicator for births (R-squared of 0.89 from 2009 to 2022). Applying the regression equation suggests 2024 births of ~10m. Further, on 25 January 2023, China announced the end of lockdowns; we think the lagged impact of this can't be discounted. Evidence in other countries has shown a solid rebound in births post COVID, which is unlikely to be reflected materially in 2023 data. 2024 is also year of the dragon in China (in Chinese culture this represents good luck, strength, and health), albeit, history shows this hasn't led to a notable increase in births.
We update our industry model for 2023 births and increase our 2024 forecast ~+15% (to 9.8m from 8.5m). We make minimal changes thereafter (we assume 8.0m–8.5m births through to 2030). We leave our ATM earnings forecasts unchanged given we still forecast solid market share growth and have only revised two years of birth data rather than making wholesale changes. However, should birth rate greenshoots be maintained this provides upside risk to our medium/long-term revenue assumptions.
ATM specific data remains constructive
ATM data remains solid irrespective of the macro backdrop. Growth in followers and search intensity for ATM's products continue to show solid performance on an absolute basis and versus peers across multiple key social media sites. Further, Alibaba market share remains at record highs and Kantar data on a three month rolling basis shows +25% growth (with market share also at record highs).
Opened up 8c/almost 2% higher in Oz.
Market loving it.