A2 Milk Company Limited · NZX:ATM
A2 Milk — The a2 Milk Company — Investor Presentation (April 2017)
33 slides from A2 Milk's investor presentation, Apr 3, 2017
Slide 1: Investor Presentation USA & Asia
INVESTOR PRESENTATION USA & ASIA 3 April 2017 a2 Milk™ a2 Platinum™ and The a2 Milk Company™ are trademarks of The a2 Milk Company Limited
Slide 2: Disclaimer
Disclaimer This presentation dated April 3, 2017 is provided for general information purposes only, and is not an offer to sell or a solicitation of an offer to buy securities. The information contained in this presentation is not intended to be relied upon as advice to investors and does not take i
Slide 3: Agenda
Agenda • Company overview • 1H17 result & regional commentary • Science & IP • Summary • Appendix 3
Slide 4: Company Overview
“LY COMPANY OVERVIEW
Slide 5: As the a2 Milk pioneers, we are single-mindedly determined
As the a2 Milk® pioneers, we are single-mindedly determined to help people enjoy a healthier life. 5
Slide 6: Our consumers tell us we are making a difference to their lives
Our consumers tell us we are making a difference to their lives 6
Slide 7: The a2 Milk Company at a glance
The a2 Milk Company at a glance • The a2 Milk Company (“a2MC”) is in the business of Key metrics producing, marketing and selling premium branded dairy nutritional products in targeted global markets USD million1 NZD million Market Capitalisation2 ~1,500 ~2,150 • All a2MC branded products contain on
Slide 8: What is the a2 Milk brand difference?
What is the a2 Milk® brand difference? • The a2 Milk® brand is a naturally occurring cows’ milk and not a product of a technological process or genetic engineering • a2MC have accumulated significant proprietary know-how and quality processes to ensure a2MC products are A1 protein-free A1/A1 A2/A2 p
Slide 9: The a2 Milk Company proposition
The a2 Milk Company proposition 1 Single-minded company focus 2 Compelling and growing 34. Integrated IP portfolio and on A1 protein-free products scientific evidence proprietary know-how (pioneers and experts) 46. Unique and effective 55. Clean and green Australia 63. Capital-light investment marke
Slide 10: Expanding portfolio within targeted regions
Expanding portfolio within targeted regions UK China USA Australia and NZ 10
Slide 11: A history of significant growth and continual transformation
A history of significant growth and continual transformation 2016 onwards 2012-2015 Branded dairy nutrition 2007-2012 Branded dairy company company that profitably 2000-2007 Branded dairy also makes making a company infant formula difference to IP Company challenging people’s lives licensing the dai
Slide 12: 1H17 Result & Regional Commentary
1H17 RESULT & REGIONAL COMMENTARY 12
Slide 13: Key financial charts
Key financial charts Group Revenue (NZ$ million) Group EBITDA1 (NZ$ million) Operating Cash Flows (NZ$ million) 352.8 64.1 256.1 54.6 213.6 38.1 155.1 35.9 64.1 256.1 80.3 (4.1) (10.0) 139.2 4.8 18.7 74.8 FY15 FY16 FY17 FY15 FY16 FY17 1H15 1H16 1H17 1H 2H 1H 2H The Company’s financial year ends 30 J
Slide 14: 1H17 result highlights
1H17 result highlights1 • Total Group revenue of $256.1 million, an increase of 84% on pcp (prior corresponding period) • Group a2 Platinum® infant formula revenue of $184.5 million, up 150% on pcp • Operating EBITDA2 of $64.1 million, up 243% on pcp • Net profit after tax of $39.4 million, an incre
Slide 15: Financial overview
Financial overview NZ$ million 1H17 1H16 Movement % Segment Operating Segment Operating Segment Operating Operating Segment Revenue EBITDA1 Revenue EBITDA Revenue EBITDA ANZ 206.6 70.4 127.9 34.5 +62% +104% China and other Asia 37.7 13.7 8.4 1.2 +348% +1,021% Corporate and other - (12.3) - (8.9) - +
Slide 16: Financial summary
Financial summary NZ$ million 1H17 1H16 % change Revenue 256.1 139.2 +84% Gross margin 119.0 57.0 +109% • Gross margin reflects increased contribution from infant formula sales Sales & Distribution (11.2) (7.2) +56% Marketing (16.0) (10.0) +60% • Continued investment in marketing and brand developme
Slide 17: Strategic agenda update
Strategic agenda update • The growth of infant formula has driven the shift to a broader nutritional Growth in Group Infant Formula Sales (NZ$m) products strategy • Additional nutritional products are planned for launch during calendar 214.4 184.5 2017 • Comprehensive strategic review of China infan
Slide 18: Australia and New Zealand; China and other Asia
Australia and New Zealand • a2 Platinum® continues as fastest growing infant formula brand for latest year1, market share growing to ~25% for latest quarter1 • A flexible strategy to best meet changing distribution trends in ANZ including managing the “Daigou” channel • Fresh milk revenue continued
Slide 19: Annual category growth expected ~5-10% over next three years
a2MC expects annual category growth ~5-10% over next three years Total China Infant Formula Market: Annual Volume Growth Volume (Official + Grey) (‘000 Tons) ~5-10% 1,300 CAGR 1,200 1,100 1,000 15% 14% 12% 950 CAGR CAGR CAGR 900 900 800 770 700 680 600 570 490 500 410 400 350 300 300 250 200 100 0 2
Slide 20: Brand awareness and understanding is building in China
Brand awareness and understanding is building in China1 Brand perception ~July 2015 Brand perception ~ Sept 2016 Brand • Mainly premium Australian image driven • Premium image remains knowledge • Little knowledge and understanding of A2 protein • A2 protein understanding emerging proposition • Stron
Slide 21: China infant formula regulatory environment
China infant formula regulatory environment • A number of regulatory changes announced during calendar 2016 are being implemented • a2MC continues to adjust its manufacturing and distribution model in response to evolving market conditions China Ministry of Commerce (MoC) announcement, 17 March 2017
Slide 22: United States of America; United Kingdom
United States of America • Continued to build distribution and sales of liquid milk in California (now in ~1,800 stores in California, Pac NW and Colorado) • Sales focus on building average UPSW relevant to the speciality milk category (> 30 for range)1 • Marketing and communication increased over t
Slide 23: Science & IP
SCIENCE & IP 23
Slide 24: The difference occurs upon digestion
The difference occurs upon digestion • Studies highlight there are potential benefits of a2 Milk® due to the complete exclusion of A1 protein type – Conventional milk is a combination of A1 and A2 protein types • The A1 and A2 proteins are different in structure and hence break down differently upon
Slide 25: IP and R&D
IP and R&D • The Company continues to initiate and support R&D around the benefits of A1 protein-free products and develop its Intellectual Property portfolio (including brand assets and proprietary know-how) • New studies initiated across China, USA and ANZ with a focus on human research – Signific
Slide 26: Summary
“LY SUMMARY
Slide 27: Conclusions and outlook
Conclusions and outlook • Exceptional 1H result, reflecting continued strong growth in nutritional products • First half a2 Platinum® performance includes sales build for key China selling events • Remaining agile in response to evolving market conditions for infant formula continues to inform a pru
Slide 28: www.thea2milkcompany.com
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Slide 29: Appendix
g APPENDIX
Slide 30: Brief company history
Brief company history Today (2017) Dairy nutrition company 2012-2015 profitably making a Branded dairy company difference to people’s lives 2007-2012 that also makes Branded dairy infant formula a2 Platinum® infant formula accounts for 2000-2007 company challenging 72% of Group turnover IP Company t
Slide 31: Reconciliation of non GAAP measures
Reconciliation of non GAAP measures NZ$ million 1H17 1H16 Australia & New Zealand Segment EBITDA 70.4 34.5 China & other Asia Segment EBITDA 13.7 1.2 UK & USA Segment EBITDA (7.7) (8.1) Corporate & other Segment EBITDA (12.3) (8.9) EBITDA1 64.1 18.7 Depreciation/Amortisation (1.6) (1.3) EBIT1 62.5 1
Slide 32: Cash position
Cash position Group Cash Movement: 1H17 (NZ$ million) • Inventory reduction reflects strong 1H infant formula sales and conservative management of production and inventory • Working capital movement driven largely by increase in trade debtors and prepayments relating to infant formula • Other non-ca
Slide 33: www.thea2milkcompany.com
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