A2 Milk Company Limited · NZX:ATM
A2 Milk — The a2 Milk Company — FY2023 Earnings Presentation
57 slides from A2 Milk's earnings presentation, Aug 21, 2023
Slide 1: 2023 Annual Results
For personal use only The a2 Milk Company Limited 2023 ANNUAL RESULTS We pioneer the future of Dairy for good 21 August 2023
Slide 2: Disclaimer
Disclaimer 2 R E S U L T S This presentation dated 21 August 2023 provides additional factors, many of which are beyond the control of the Company and For personal use only A N N U A L commentary on the financial results for the 12 months ended which may cause actual results, performance or achievem
Slide 3: Agenda
For personal use only Agenda Results overview 4 and strategy update Financial overview 18 Regional and 26 product performance Appendix 54
Slide 4: Strong performance in a very challenging market
Strong performance in a very challenging market 4 R E S U L T S For personal use only Full year result in line with the Company’s previous guidance with A N N U A L 1 double digit revenue and earnings growth 2 0 2 3 2 Result driven by strong growth in China segment with sales up 38% and record marke
Slide 5: Double digit revenue and earnings growth driven by China segment
Double digit revenue and earnings growth driven by China segment 5 R E S U L T S • Group results in line with the Company’s previous guidance Key financials - Group revenue growth of 10.1% to $1,592.9 million Revenue; $ millions For personal use only A N N U A L - EBITDA1 up 11.8% to $219.3 million,
Slide 6: High quality result underpinned by many operational achievements
High quality result underpinned by many operational achievements 6 R E S U L T S Operational highlights during FY23 • Achieved record market share in China label IMF channels (MBS and DOL) For personal use only A N N U A L • Reached new highs in China brand health supported by increased investment •
Slide 7: Growth strategy driving China brand health and market share increases
Growth strategy driving significant China brand health and market 7 R E S U L T S share increases with a2MC being a top-3 share gainer overall1 a2MC China brand health metrics2 a2MC China label IMF market share For personal use only A N N U A L Unprompted awareness MBS value share3 DOL value share4
Slide 8: China label IMF market challenging with fewer newborns and GB transition
China label IMF has been very challenging recently driven by cumulative 8 R E S U L T S impact of fewer newborns and market-wide new GB transition China label IMF market declines in store and online IMF market prices under more pressure during GB transition For personal use only A N N U A L Nielsen
Slide 9: English label IMF market impacted by sharp decline in Daigou channel
English label IMF market impacted by sharp decline in Daigou channel 9 R E S U L T S English label market decline driven by Daigou channel… …but English label share of total IMF market stabilising For personal use only A N N U A L English label market value; RMB billions English label share of total
Slide 10: Key segment trends continue to support a2MC growth strategy
However, key segment trends continue to support a2MC growth strategy 10 R E S U L T S a2MC China label competes in the ultra A2 protein segment continues to gain Brand concentration increasing premium segment share in the category For personal use only A N N U A L MBS value sales by price segment1,2
Slide 11: Continued growth expected in FY24 in a very challenging market
Continued growth expected in FY24 in a very challenging market 11 R E S U L T S See full outlook statement in results commentary and outlook announcement dated 21 August 2023 Market conditions For personal use only A N N U A L • China IMF market conditions are uncertain but likely to become more cha
Slide 12: Growth strategy unchanged except for BOLD values refresh
Growth strategy unchanged except for BOLD values refresh 12 R E S U L T S Purpose We pioneer the future of Dairy for good For personal use only A N N U A L Vision An A1-free world where Dairy nourishes all people and our planet PEOPLE PLANET CONSUMERS SHAREHOLDERS 2 0 2 3 Create a safe, diverse, inc
Slide 13: Significant progress made towards achieving goals
Significant progress made towards achieving goals reflected in 13 R E S U L T S measures of success PEOPLE PLANET CONSUMERS SHAREHOLDERS For personal use only A N N U A L BRAND MARKET INNOVATION SUPPLY HEALTH SHARE CHAIN 2 0 2 3 1 2 3 4 5 6 7 Safety GHG emissions China MBS share China other Access t
Slide 14: On track to achieve ambition to grow sales to $2 billion
On track to achieve ambition to grow sales to $2 billion and improve 14 R E S U L T S EBITDA margins in the ‘teens’ over the medium term Medium-term revenue and EBITDA margin ambition Areas of planned revenue growth Commentary For personal use only A N N U A L EBITDA margin Revenue, NZ$ billions EBI
Slide 15: Successful SAMR re-registration critical to China IMF opportunity
Successful SAMR re-registration critical to capturing full potential of 15 R E S U L T S China IMF opportunity New a2 至初® product • Received approval from SAMR on 6 June 2023 for re-registration of the For personal use only A N N U A L Company’s China label IMF product a2 至初® (Stages 1, 2 and 3), fo
Slide 16: Innovation ramped up significantly to support future growth
Innovation has been ramped up significantly to support future growth 16 R E S U L T S For personal use only A N N U A L 2 0 2 3 a2 Platinum® refreshed range launched a2 Milk® Lactose free a2™ Nutrition for Mothers™ 孕产妇配方奶粉 in 1Q23 in ANZ and China launched in 1Q23 in Australia CL launched in 1Q23 in
Slide 17: Meaningful progress towards achieving sustainability goals
Meaningful progress towards achieving sustainability goals 17 R E S U L T S Investing to significantly reduce GHG emissions For personal use only A N N U A L • Commenced installation of 100% renewable energy high-pressure electrode boiler at MVM which is due to be completed in October 2023 which wil
Slide 18: Financial Overview
For personal use only OVERVIEW FINANCIAL
Slide 19: Income statement reflects China IMF growth and increased investment
Income statement reflects China IMF growth and increased investment 19 R E S U L T S • Net sales revenue reflects strong growth in the China & Other Asia and $ million1 FY23 FY22 % change USA segments, up 37.9% and 27.1% respectively, and 9.2% growth in Net Sales Revenue 1,591.1 1,443.7 10.2% MVM, p
Slide 20: Significant China label IMF growth and shift to China & Other Asia
Significant China label IMF growth and shift to China & Other Asia 20 R E S U L T S segment from ANZ China & Total MVM1 For personal use only ANZ Other Asia USA Corporate Group A N N U A L $ million Revenue 371.7 1,002.2 105.1 113.9 - 1,592.9 FY23 EBITDA 93.5 254.1 (23.3) (26.5) (78.5) 219.3 2 0 2 3
Slide 21: Growth achieved across all product categories
Growth achieved across all product categories 21 R E S U L T S Revenue China & Total For personal use only 1 A N N U A L $ million ANZ Other Asia USA MVM Group IMF 162.5 945.6 - - 1,108.1 Liquid milk 184.1 15.2 104.7 - 304.0 FY23 2 0 2 3 Other 25.1 41.4 0.3 113.9 180.8 TOTAL 371.7 1,002.2 105.1 113.
Slide 22: Gross margin % increased slightly with cost pressures mitigated
Gross margin % increased slightly with input cost and mix pressures 22 R E S U L T S successfully mitigated Gross margin drivers Gross margin % For personal use only A N N U A L Percent of net sales revenue • Gross margin of 46.5%, was up 0.5ppts compared with prior year 2 0 2 3 • Several drivers co
Slide 23: Marketing and capability investment increase in line with growth strategy
Marketing and capability investment increase in line with growth strategy 23 R E S U L T S Marketing and SG&A drivers Marketing investment increase Administrative and other expenses (SG&A) For personal use only A N N U A L $ million $ million • Marketing investment was up 13.1% in FY23, and reflects
Slide 24: Balance sheet remains strong following share buyback
Balance sheet remains strong following share buyback 24 R E S U L T S • Cash and term deposits balance of $802.2 million, with $ million FY23 FY22 % change For personal use only A N N U A L consolidated net cash position of $757.2 million1. The lower Cash and term deposits 802.2 887.3 (9.6%) cash ba
Slide 25: Operating cash flow reflects COVID-19 working capital unwind and inventory build
Operating cash flow reflects unwinding of COVID-19 working capital 25 R E S U L T S impact and IMF inventory build • Cash flows from operating activities $ million FY23 FY22 % change For personal use only A N N U A L ‒ Lower cash conversion of 58%1 due to: Cash flows from operating activities Receip
Slide 26: Regional & Product Performance
For personal use only REGIONAL & PRODUCT PERFORMANCE
Slide 27: China label IMF key messages
China label IMF China label key messages 27 R E S U L T S For personal use only A N N U A L Strategic priorities Progress Business impact • Launched new IMF brand proposition • Continued to reach new highs in brand 1 Continue to invest in and a2 Milk™ base matters in 1H23 health metrics, particularl
Slide 28: China label IMF sales growth driven by strategic initiatives
China label IMF China label IMF sales growth driven by execution of strategic initiatives 28 R E S U L T S Sustained growth despite market volatility China label net sales revenue For personal use only A N N U A L • The strong performance in China label IMF sales in 1H23 continued into 2H23 $ millio
Slide 29: Consumer marketing campaigns support IMF and broader portfolio
China label IMF Consumer marketing campaigns support IMF and broader portfolio 29 R E S U L T S For personal use only A N N U A L 2 0 2 3 • Following the launch of the a2™ Milk Base Matters campaign in 2Q23, a targeted social media campaign Authentic Purity (a2®源乳® 原生纯萃 奢品天成) for the broader macromi
Slide 30: Caravan tour roadshow events drive brand awareness and trial
China label IMF Innovative caravan tour roadshow events drive brand awareness and 30 R E S U L T S trial in BCD cities Premium design with The Octonauts Interactive engagement with consumers Onsite wet sampling and gift packs to For personal use only A N N U A L IP collaboration to drive traffic and
Slide 31: Operation Smile x a2 connects with consumer hearts
China label IMF Operation Smile x a2™ connects with consumer hearts 31 R E S U L T S CSR campaign Finding the original smiles of life to fund corrective surgery for children born with cleft palate with high impact For personal use only A N N U A L 580m mass viewership 220m target coverage 2 0 2 3 4m
Slide 32: Acknowledged by top industry awards for marketing innovation
China label IMF Acknowledged by top industry awards for marketing innovation 32 R E S U L T S 1 2 1. The ADMEN Awards for For personal use only A N N U A L SMILE CSR campaign 2. The ADMEN Awards for 2 0 2 3 Caravan Tour events 3. Little Red Book Excellent Social Seeding Case for a2 Platinum® Relaunc
Slide 33: Driving continued improvement in China brand health metrics
China label IMF Driving continued improvement in China brand health metrics which will 33 R E S U L T S support future growth a2MC total brand awareness % a2MC unprompted awareness % a2MC top of mind awareness % For personal use only A N N U A L 2 0 2 3 a2MC ever trialled % a2MC past 3 months triall
Slide 34: Growth reflected in MBS record market share led by BCD cities
China label IMF Growth reflected in MBS record market share led by BCD cities 34 R E S U L T S National MBS value share Key&A MBS value share BCD MBS value share For personal use only A N N U A L a2MC MBS MAT value share (%) a2MC Key&A MBS MAT value share (%) a2MC BCD MBS MAT value share (%) 2 0 2 3
Slide 35: Weighted distribution improved with flat store footprint
China label IMF Weighted distribution improved with relatively flat store footprint due 35 R E S U L T S to store closures in market Store footprint Improvement in LFL store growth and weighted distribution For personal use only A N N U A L a2MC China distribution (store count ‘000)1 a2MC China labe
Slide 36: Record market share in DOL, closing gap to MBS share
China label IMF Record market share in DOL, closing gap to MBS share 36 R E S U L T S DOL value share Tmall and JD value share Commentary For personal use only A N N U A L a2MC DOL MAT value share (%)1 a2MC Tmall and JD MAT value share (%)1 • Online growth outpaced offline sales growth for a2MC in F
Slide 37: Leading share gainer in MBS and DOL channels
China label IMF Resulting in a2MC being a leading share gainer in MBS and DOL channels 37 R E S U L T S Market share movements by IMF brand in MBS channel Market share movements by IMF brand in DOL channel For personal use only A N N U A L Change in MBS value share in FY23 (% pts)1 Change in DOL val
Slide 38: Share gains achieved across all stages in MBS and DOL
China label IMF Share gains achieved across all stages in MBS and DOL 38 R E S U L T S MBS share by stage DOL share by stage Commentary For personal use only A N N U A L MAT value share by stage1 MAT value share by stage2 • a2MC brand benefits from strong loyalty performance through the brand funnel
Slide 39: Strong China label performance in sales event
China label IMF Strong China label performance in 618 sales event 39 R E S U L T S 618 activation overview 618 performance For personal use only A N N U A L +14% China label IMF tins sold through 618 sales period 2 0 2 3 (vs 618 2022) #6 Tmall China label IMF Flagship store (#16 in 618 2022) #10 JD
Slide 40: English label IMF key messages
English label IMF English label IMF key messages 40 R E S U L T S For personal use only A N N U A L Strategic priorities Progress update Business impact • Executed transition to refreshed • Channel inventory within targeted 1 Shift to more controlled a2 Platinum® across all EL channels levels, and r
Slide 41: English label sales growth in CBEC driven by channel shift
English label IMF English label sales growth in CBEC driven by channel shift and change 41 in distribution strategy to more controlled channels R E S U L T S Sales reflected continued channel mix shift and Daigou declines ANZ English label IMF net sales revenue For personal use only A N N U A L $ mi
Slide 42: Significant channel shift in English label market
English label IMF Significant channel shift happening in English label market 42 R E S U L T S Channel mix shift from Daigou to CBEC and O2O Commentary For personal use only A N N U A L MAT value sales by channel CBEC • Historically a transactional replenishment channel for consumers recruited via D
Slide 43: Multi-channel consumer marketing campaigns for English label IMF
English label IMF Multi-channel consumer marketing campaigns to support English label 43 R E S U L T S IMF and other products ANZ campaigns China consumer campaigns For personal use only A N N U A L 2 0 2 3 China key visual Precise digital marketing across multiple touchpoints a2 Platinum® launches
Slide 44: Investment in e-commerce capability and execution
English label IMF Investment in e-commerce capability and execution having an impact 44 R E S U L T S in CBEC and emerging platforms Award-winning collaborations with major platforms Building presence on emerging platforms use only A N N U A L Tmall JD Case Study: Douyin (TikTok) Platform Partnershi
Slide 45: More focus on capturing O2O opportunity in English label
English label IMF More focus on capturing O2O opportunity in English label 45 R E S U L T S Case Example: Momtime store network partnership For personal use only A N N U A L 1 Annual conference 2 In-store campaign 3 In-store education 4 Content sharing 2 0 2 3 • a2MC presence at Momtime Annual • Ext
Slide 46: Market share improvement in CBEC and O2O + Daigou channels
English label IMF Market share improvement in CBEC and O2O + Daigou channels 46 R E S U L T S CBEC market value share1 O2O and Daigou market value share2 For personal use only A N N U A L 2 0 2 3 23.5% 22.2% 22.6% 21.1% 21.6% 21.2% 20.8% 19.5% 19.4% 19.7% 19.5% 19.8% Dec-20 Jun-21 Dec-21 Jun-22 Dec-
Slide 47: Strong English label performance in sales event
English label IMF Strong English label performance in 618 sales event 47 R E S U L T S 618 activation overview – English label 618 performance – English label For personal use only A N N U A L +7.4% English label IMF tins sold through 618 sales period (vs 618 2022) 2 0 2 3 #2 Tmall English label IMF
Slide 48: ANZ liquid milk key messages
ANZ liquid milk ANZ liquid milk key messages 48 R E S U L T S For personal use only A N N U A L Strategic priorities Progress update Business impact • Increased marketing investment with • Fresh milk market share declined 1 Maintain brand leadership a greater focus on social and digital slightly to
Slide 49: ANZ liquid milk sales supported by innovation
ANZ liquid milk ANZ liquid milk sales supported by innovation 49 R E S U L T S • Australia liquid milk net sales revenue increased by 7.1% to $184.1 million Liquid milk net sales revenue (Australia) For personal use only A N N U A L • 2H23 growth was 8.5%, supported by a full 6 month contribution fr
Slide 50: USA key messages
USA USA key messages 50 R E S U L T S For personal use only A N N U A L Strategic priorities Progress update Business impact • Marketing mix focused on driving • Household penetration steady at 1 Educate consumers on the 2 0 2 3 consumer understanding of the 2.3% with high loyalty rates versus a2 Mi
Slide 51: USA growth supported by innovation and improved profitability
USA Growth supported by innovation and improved profitability 51 R E S U L T S • Revenue increased 27.1% to $105.1 million Revenue • Sales growth was driven by modest growth in core liquid milk volumes, contribution from For personal use only A N N U A L new products, pricing and favourable FX. Sale
Slide 52: MVM remains focused on in-sourcing a2MC volumes and innovation
Mataura Valley Milk MVM remains focused on in-sourcing a2MC volumes and 52 R E S U L T S future innovation • Net sales revenue of $113.9 million in FY23, the first full year under a2MC Revenue and EBITDA For personal use only A N N U A L ownership vs 11 months in FY22 • EBITDA loss of $26.5 million,
Slide 53: Questions
For personal use only QUESTIONS
Slide 54: Appendix
For personal use only APPENDIX
Slide 55: Reconciliation of non-GAAP measures
Reconciliation of non-GAAP measures 55 R E S U L T S $ million FY23 FY22 For personal use only A N N U A L Australia & New Zealand segment EBITDA 93.5 173.2 China & Other Asia segment EBITDA 254.1 145.1 2 0 2 3 USA segment EBITDA (23.3) (36.7) MVM segment EBITDA (26.5) (18.8) Corporate EBITDA (78.5)
Slide 56: Standard a2MC glossary of terms
Standard a2MC glossary of terms 56 R E S U L T S Acronym Meaning Acronym Meaning Acronym Meaning a2MC The a2 Milk Company Limited FY Financial year MVM Mataura Valley Milk Limited For personal use only A N N U A L ANZ Australia and New Zealand GAAP Generally accepted accounting principles NKA Nation
Slide 57: For personal use only
For personal use only www.thea2milkcompany.com