A2 Milk Company Limited · NZX:ATM
A2 Milk — The a2 Milk Company — H1 2018 Earnings Presentation
30 slides from A2 Milk's earnings presentation, Feb 21, 2018
Slide 1: Half year interim results FY18
Half year interim results FY18 Geoffrey Babidge| Managing Director & CEO 21 February 2018 a2 Milk™, a2 Platinum™ and The a2 Milk Company™ are trade marks of The a2 Milk Company Limited
Slide 2: Disclaimer
Disclaimer This presentation dated 21 February 2018 provides additional comment on the Interim Report for the six months ended 31 December 2017 of The a2 Milk Company Limited (the “Company” or “a2MC") and accompanying information released to the market on the same date. As such, it should be read in
Slide 3: Contents
Contents ¢ Result highlights ¢ Financial overview ¢ Group strategy update ¢ Regional update ¢ Outlook
Slide 4: Result highlights
Result highlights
Slide 5: 1H18 highlights
1H18 highlights ¢ Group revenue $434.7 million’ and Operating EBITDA? $143.0 million * Group a2 Platinum® infant formula revenue of $341.0 million, up 85% on pcp ¢ ANZ segment revenue +47% and EBITDA +65% ¢ China revenue and EBITDA more than trebled vs pcp ¢ Infant formula consumption market share i
Slide 6: Key financial charts
Key financial charts’ Group Revenue (NZ$ million) Group EBITDA2 (NZ$ million) Basic Earnings Per Share (Cents) 549.5 141.2 143.0 FY1S FY16 FYI7 1H18 FY15 FY16 FY17 1H18 FY15 FY16 FYI7 1H18 @1H @2H miH m2H Full Year mHalf Year 1 The Company‘s financial year ends 30 June; 1H refers to the first half p
Slide 7: Financial overview
Financial overview
Slide 8: Financial summary
Financial summary NZ$ million 1H18 1H17. % change Revenue 434.7 256.1 +70% Gross margin 216.5 119.0 +82% Distribution (13.0) (9.5) +37% Marketing (26.0) (16.0) +62% Employee costs (16.4) (9.9) +65% Administration & other (18.0) (19.5) 8% EBITDA 143.0 64.1 +123% EBIT 141.9 62.5 +127% NPAT 98.5 39.4 +
Slide 9: Segment financial performance
Segment financial performance an Australia & New | China & other 2 Total NZS million Zealand ‘Asia Corporate UK & USA’ Group Infant Formula tute Revenue 304.2 114.4 - 16.1 434.7 341.0 EBITDA' 116.4 48.3 (13.3) (8.4) 143.0 417 Revenue 206.6 37.7 - 11.8 256.1 184.5 EBITDA 70.4 13.7 (12.3) (7.7) 64.1 R
Slide 10: Reconciliation of non-GAAP measures
Reconciliation of non-GAAP measures NZ$ million 1H18 1H17 Australia & New Zealand Segment EBITDA 116.4 70.4 China & other Asia Segment EBITDA 48.3 13.7 UK & USA Segment EBITDA (8.4) (7.7) Corporate EBITDA (13.4) (12.3) EBITDA' 143.0 64.1 Depreciation/Amortisation (1.1) (1.6) EBIT! 141.9 62.5 Net int
Slide 11: Cash position
Cash position Group Cash Movement: 1H18 (NZ$ million) 423 43.2 ss 052) es “ Cash on hand Group NPAT Inventory build Other working capital__ Investments in Depreciation, FX and other Cash on hand Qun-17) PPE & intangibles amortisation & other (Dec-17) non-cash + Inventory build reflects increase in i
Slide 12: Group strategy update
Group strategy update J
Slide 13: Progress made on strategic priorities
Progress made on strategic priorities & © oe BROAD DAIRY TARGETED PROPRIETARY NUTRITIONAL ATTRACTIVE KNOW-HOW, PRODUCT PORTFOLIO REGIONS A2 PROTEIN EXPERTISE Across a continuum from the purity of fresh Asia Pacific focus Integrated intellectual property portfolio a2 Milk™ to customised 1 protein-fre
Slide 14: Global strategic supply partnerships
Global strategic supply partnerships Multi-site, multi-product and geograph Synlait Milk Limited Fonterra Co-operative Group Limited * Foundation infant nutrition partnership + Emerging markets, multi-product partnership + Multiple New Zealand manufacturing sites + Australia and New Zealand manufact
Slide 15: Strategic relationship with Fonterra
Strategic relationship with Fonterra a2MC has entered into a comprehensive strategic relationship with Fonterra Co-operative Group Limited (Fonterra): Nutritional products manufacturing and supply agreement * Provides a2MC with a highly credentialed second manufacturing partner ¢ Fonterra to supply
Slide 16: Strategic relationship with Fonterra
Strategic relationship with Fonterra New Zealand fresh milk licence * Fonterra granted an exclusive licencing agreement: — Launch of a2 Milk™ branded fresh milk for end sale in New Zealand covering production, distribution, sale and marketing — Fonterra to access a2MC’'s systems and know-how relatin
Slide 17: New unifying brand identity rolling out across regions and innovation
New unifying brand identity rolling out across regions and innovation CHOCOLATE! REDUCED FAT MILK Pregnancy, infant and toddler nutrition _—— 2H18 launch
Slide 18: Regional update
Regional update
Slide 19: 1H18 regional performance overview
1H18 regional performance overview' ANZ Revenue (NZ$ million) China & other Asia Revenue (NZ$ million) IK & USA Revenue (NZ$ m 439.6 21.0 FY15 FY16 FY17 1H18 FY15S FY16 FYI7 1H18 FY1S FY16 FY17 1H18 m1H =2H m1Hm@2H m1H @2H * Revenue: $304.3 + Revenue: $114.4 + Revenue: $16.1 * EBITDA: $116.4 * EBITD
Slide 20: Australia and New Zealand
Australia and New Zealand ¢ Outstanding performance for the ANZ business * Strong growth in a2 Platinum® infant formula: — Australian market value share increased from ~26% to 30%! — Remains the fastest growing infant formula brand by value in Australia’ * a2 Milk™ branded fresh milk revenue grew ~3
Slide 21: China and other Asia
China and other Asia Exceptional performance for the China and other Asia business Flexible multi-channel infant formula strategy in China delivering success: — Kantar consumption market share by value increased from ~3.5% to ~5.4%! — Successful participation in key seasonal online sales events in C
Slide 22: China: a2 Platinum new marketing campaign and activations
China: a2 Platinum® new marketing campaign and activations * National live streaming of pop-up event in Chengdu! with life size a2 Platinum® can filled with interactive activities for visitors and hosted by celebrity mum Huke (#A®T) and her son An Ji (@#) — 250k live visitors, 23 million online view
Slide 23: Hong Kong: new video billboards in high traffic zones
Hong Kong: new video billboards in high traffic zones' View billboard video here ’ Advertisement runs January 2018 through February 2018, and continues post Chinese New Year 23
Slide 24: United States
United States «Further positive progress in building sales per store and distribution footprint * Progressive improvement in gross margin and distribution costs * Brand awareness continues to grow supported by; — ‘Love Milk Again’ free-to-air and subscription TV campaign — Editorial and digital medi
Slide 25: Distribution expanded to Northeast from January
Distribution expanded to Northeast from January Legend HE Broad distribution IB Limited distribution No current cistribution @ Processing and milk supply @ Usoffice, Boulder, Colorado California + Launched April 2015 + High levels of acceptance from retailers including Sprouts, Whole Foods, Kroger &
Slide 26: United Kingdom
United Kingdom * Progressive growth of revenue and operating earnings ¢ Volume sales of a2 Milk™ branded fresh milk increased by more than 50% against pcp * — ‘a2tonishing’ marketing campaign continues to resonate with consumers ¢ Sales growth reflects improvements in merchandising, in-store facings
Slide 27: Science developments
Science developments Studies published: ¢ Human clinical research study! involving 600 Han Chinese participants reported benefits of a2 Milk™ with respect to milk intolerance — Al protein? found in conventional milk may trigger symptoms associated with milk intolerance! Studies completed and submitt
Slide 28: Outlook
Slide 29: 1H18 trading performance and outlook
1H18 trading performance and outlook 1H18 trading performance * Group revenue of NZ$434.7 million: — Reflects market share gains in nutritional products and liquid milk — Includes seasonal sales from key China selling events, particularly in November and December * Group EBITDA of NZ$143.0 million:
Slide 30: thea2milkcompany.com
thea2milkcompany.com