A2 Milk Company Limited · NZX:ATM
A2 Milk — The a2 Milk Company — H1 2023 Earnings Presentation
49 slides from A2 Milk's earnings presentation, Feb 20, 2023
Slide 1: 2023 Interim Results
DRAF For personal use only T 2023 INTERIM RESULTS The a2 Milk Company Limited 20 February 2023
Slide 2: Disclaimer
Disclaimer 2 R E S U L T S For personal use only This presentation dated 20 February 2023 provides additional factors, many of which are beyond the control of the Company and I N T E R I M commentary on the Interim Report for the 6 months ended which may cause actual results, performance or achievem
Slide 3: Agenda
Agenda 3 R E S U L T S For personal use only I N T E R I M Results overview 4 2 0 2 3 and strategy update Financial overview 15 Regional and product 22 performance Appendix 46
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 I N T E R I M 11. Half year result is in line with the Company’s expectations with double digit revenue and earnings growth 2 0 2 3 22. The Company delivered total IMF sales growth of 18.0% in a challenging China I
Slide 5: Double digit revenue and earnings growth driven by China label IMF and innovation
Double digit revenue and earnings growth driven by strong 5 R E S U L T S China label IMF performance and innovation For personal use only • Group results in line with the Company’s expectations I N T E R I M - Group revenue growth of 18.6% to $783.3 million - EBITDA1 up 10.5% to $107.8 million, wit
Slide 6: China IMF market challenging but still significant growth opportunity
China IMF market challenging but still significant growth 6 opportunity for a2MC R E S U L T S For personal use only • The number of births in China declined a further 10.0% in CY22 to 9.6 million.1 The overall I N T E R I M China IMF market declined 11.0% in volume and 12.5% in value in 1H23.2 The
Slide 7: Growth strategy and positive market trends supporting a2MC growth
Growth strategy and positive market trends supporting a2MC growth 7 R E S U L T S For personal use only I N T E R I M a2MC has evolved its mix of a2MC China label competes in A2-protein segment continues to Market consolidating towards business towards China label IMF growing ultra premium segment g
Slide 8: FY23 outlook remains positive despite increasingly challenging market
FY23 outlook remains positive despite increasingly 8 challenging market R E S U L T S For personal use only See full outlook statement in results announcement dated 20 February 2023 Outlook I N T E R I M • Low double-digit revenue growth expected in FY23 ‒ Growth in China label IMF, ANZ liquid milk
Slide 9: Key priorities of refreshed growth strategy remain unchanged
Key priorities of refreshed growth strategy remain unchanged 9 R E S U L T S For personal use only Purpose We pioneer the future of Dairy for good I N T E R I M 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
Slide 10: Significant progress made against strategic priorities and goals
Significant progress made against strategic priorities and goals 10 with some areas a work in progress R E S U L T S For personal use only PEOPLE PLANET CONSUMERS SHAREHOLDERS I N T E R I M BRAND MARKET INNOVATION SUPPLY HEALTH SHARE CHAIN 1 2 3 4 5 6 7 2 0 2 3 Safety GHG emissions China CL MBS Chin
Slide 11: On track to achieve ambition to grow sales to $2 billion
On track to achieve ambition to grow sales to $2 billion and 11 improve EBITDA margins over time R E S U L T S For personal use only Medium-term revenue and EBITDA margin ambition Areas of planned revenue growth Comments I N T E R I M EBITDA margin Revenue, NZ$ billions • $2 billion revenue goal imp
Slide 12: Innovation pipeline delivering significant new product launches
Innovation pipeline delivering significant new product launches 12 R E S U L T S For personal use only I N T E R I M 2 0 2 3 a2 Platinum® refreshed range launched a2 Milk® Lactose free launched a2™ Nutrition for Mothers™ 孕产妇配方奶粉 a2 Smart Nutrition® EL relaunched in in 1Q23 in ANZ and China in August
Slide 13: China label new GB registration process progressing
China label new GB registration process progressing 13 R E S U L T S For personal use only • a2MC’s current China label IMF product a2 至初® registration was renewed by SAMR in I N T E R I M September 2022, allowing Synlait to manufacture product until 21 February 2023 • Product manufactured up until
Slide 14: Continued progress made in sustainability across the business
Continued progress made in sustainability across the business 14 R E S U L T S Investing to significantly reduce GHG emissions Environment Southland sustainability award For personal use only • Commenced project for a new 100% renewable energy high pressure I N T E R I M electrode boiler at MVM whic
Slide 15: Financial Overview
For personal use only FINANCIAL OVERVIEW
Slide 16: Income statement reflects strong China IMF growth and increased investment
Income statement reflects strong China IMF growth and 16 increased brand and capability investment R E S U L T S For personal use only • Net sales revenue reflects strong growth in the China & Other Asia and I N T E R I M $ million1 1H23 1H22 % change USA segments, up 54.0% and 61.8% respectively, a
Slide 17: Growth in China and USA segments with continued shift from ANZ
Growth in China and USA segments with continued shift from ANZ 17 towards China & Other Asia R E S U L T S For personal use only I N T E R I M China & Total 1 $ million ANZ Other Asia USA MVM Corporate Group Revenue 213.7 471.6 52.4 45.7 - 783.3 2 0 2 3 1H23 EBITDA 62.0 111.5 (12.2) (13.4) (40.1) 10
Slide 18: Double digit growth across all product categories
Double digit growth across all product categories 18 R E S U L T S For personal use only Revenue China & Total 1 $ million ANZ Other Asia USA MVM Group I N T E R I M IMF 109.4 446.3 - - 555.7 Liquid milk 92.0 7.5 52.3 - 151.7 1H23 Other 12.3 17.8 0.2 45.7 76.0 2 0 2 3 TOTAL 213.7 471.6 52.4 45.7 783
Slide 19: Marketing and capability investment increased significantly
Marketing and capability investment increased significantly, 19 consistent with growth strategy R E S U L T S For personal use only Marketing and SG&A drivers Marketing investment increased1 Administrative and other expenses (SG&A) I N T E R I M • Marketing investment was up 46.0% $ million $ millio
Slide 20: Balance sheet remains strong post share buyback
Balance sheet remains strong post share buyback with stock 20 building ahead of China label IMF transition R E S U L T S For personal use only • Cash and term deposits balance of $777.2 million, with I N T E R I M $ million 1H23 2H22 % change consolidated net cash position of $707.2 million1. The lo
Slide 21: Operating cash flow reflects unwinding of working capital benefit
Operating cash flow reflects unwinding of working capital benefit 21 from 2H22 and stock building of China label IMF R E S U L T S For personal use only • Cash flows from operating activities I N T E R I M $ million 1H23 1H22 % change Cash flows from operating activities ‒ Lower cash conversion of 1
Slide 22: Regional & Product Performance
For personal use only REGIONAL & PRODUCT PERFORMANCE
Slide 23: China label IMF key messages
China label IMF China label key messages 23 R E S U L T S For personal use only I N T E R I M Strategic priorities Progress Business impact • Launched new brand proposition “a2™ • Continued to reach new highs in brand 1 Continue to invest in and Milk Base Matters” coupled with more health metrics, p
Slide 24: China label IMF sales growth driven by execution of growth strategy
China label IMF China label IMF sales growth driven by execution of 24 refreshed growth strategy R E S U L T S For personal use only Strong underlying consumer demand China label net sales revenue I N T E R I M • China label IMF business was the standout performer within the group during 1H23 $ mill
Slide 25: Distribution expanded with improvement in like-for-like sales
China label IMF Distribution expanded with improvement in like-for-like sales 25 R E S U L T S For personal use only Expanding store footprint Improvement in LFL store growth I N T E R I M a2MC China distribution (store count ‘000)1 a2MC CL IMF distributor sell-out to stores (units)1 INDICATIVE 2 0
Slide 26: Growth reflected in MBS share gains in Key&A and BCD cities
China label IMF Growth reflected in MBS share gains in both Key&A and BCD cities 26 R E S U L T S For personal use only National MBS value share Key&A MBS value share BCD MBS value share I N T E R I M a2MC MBS MAT value share (%) a2MC Key&A MBS MAT value share (%) a2MC BCD MBS MAT value share (%) 3.
Slide 27: Record performance in DOL share closing gap to MBS share
China label IMF Record performance in DOL share closing gap to MBS share 27 R E S U L T S For personal use only DOL value share Tmall and JD value share Commentary I N T E R I M a2MC DOL MAT value share (%)1 a2MC Tmall and JD MAT value share (%)1 • Online growth outpaced offline sales growth for a2M
Slide 28: a2MC has become a top three share gainer in MBS and DOL
China label IMF a2MC has become a top three share gainer in MBS and DOL 28 R E S U L T S For personal use only Market share movements by IMF brand owner in MBS channel Market share movements by IMF brand owner in DOL channel I N T E R I M Change in MBS value share (% pts)1 Change in DOL value share
Slide 29: Share gains achieved across all stages in MBS and DOL
China label IMF Share gains achieved across all stages in MBS and DOL 29 R E S U L T S For personal use only MBS share by stage DOL share by stage Commentary I N T E R I M MAT value share by stage1 MAT value share by stage2 • While a2MC seeks to recruit new users across all stages, given a2MC’s stro
Slide 30: Strong China label performance in Double 11
China label IMF Strong China label performance in Double 11 30 R E S U L T S For personal use only Double 11 activation overview – China label Double 11 performance – China Label I N T E R I M +76% China label IMF tins sold through D11 sales period (vs D11 2021) 2 0 2 3 #8 TMall DOL IMF Flagship sto
Slide 31: Relaunched brand proposition: a2 Milk Base Matters
China label IMF Relaunched brand proposition with a focus on why the 31 “a2 ™ Milk Base Matters” R E S U L T S For personal use only I N T E R I M • Following successful FY22 campaigns highlighting the functional benefits of a2 至初® China label IMF and a2 Platinum® English label IMF, relaunched brand
Slide 32: Total brand awareness, trial and loyalty at new highs
China label IMF Total brand awareness, trial and loyalty at new highs 32 R E S U L T S For personal use only a2MC top of mind awareness % a2MC spontaneous awareness % a2MC total brand awareness % I N T E R I M 63 54 54 47 49 47 43 45 9 9 23 21 2 0 2 3 33 6 15 16 14 13 13 5 5 12 4 4 4 10 3 Oct-19 Apr
Slide 33: English label IMF key messages
English label IMF English label IMF key messages 33 R E S U L T S For personal use only I N T E R I M Strategic priorities Progress update Business impact • Executed transition to refreshed • Inventory within targeted levels, pricing 1 Maintain tight control of English a2 Platinum® across all EL cha
Slide 34: Sharp market decline in Daigou channel and growth in CBEC channel
English label IMF Sharp market decline in Daigou channel and growth in CBEC channel 34 R E S U L T S For personal use only English label and other label IMF sales reflected continued channel mix shift English and other label IMF net sales revenue I N T E R I M Net sales revenue by half ($ million)3
Slide 35: English label market share has improved in CBEC and Daigou
English label IMF English label market share has improved in CBEC and Daigou 35 R E S U L T S For personal use only CBEC market value share1 Daigou market value share2 O2O market value share2 I N T E R I M 24.2% 24.8% 2 0 2 3 21.7% 22.2% 22.1% 22.2% 21.1% 21.0% 20.8% 19.5% 19.5% 20.0% 18.9% 19.0% 19
Slide 36: Encouraging English label performance in Double 11
English label IMF Encouraging English label performance in Double 11 36 R E S U L T S For personal use only Double 11 activation overview – English label Double 11 performance – English label I N T E R I M +4.8% English label IMF tins sold through D11 sales period 2 0 2 3 (vs D11 2021) #1 Tmall EL I
Slide 37: Multi-channel marketing campaigns to launch refreshed a2 Platinum
English label IMF Multi-channel marketing campaigns to launch refreshed 37 a2 Platinum® R E S U L T S For personal use only a2 Platinum® relaunch campaign in ANZ China consumer campaign I N T E R I M 2 0 2 3 China Key Visual Precise Digital Marketing across multiple touchpoints Video Testimonials fr
Slide 38: ANZ liquid milk key messages
ANZ liquid milk ANZ liquid milk key messages 38 R E S U L T S For personal use only I N T E R I M Strategic priorities Progress update Business impact • Increased marketing investment with a • a2 Milk® products achieved rankings in 1 Maintain brand leadership greater focus on social and digital the
Slide 39: ANZ liquid milk sales supported by innovation
ANZ liquid milk ANZ liquid milk sales supported by innovation 39 R E S U L T S For personal use only • Australia liquid milk net sales revenue increased by 5.6% to $92.0 million Liquid milk net sales revenue (Australia) despite several challenges I N T E R I M • In 1H22, the Company benefitted from
Slide 40: Lactose Free launch exceeded expectations
ANZ liquid milk Lactose Free launch exceeded expectations 40 R E S U L T S For personal use only Australian Lactose Free milk market value share1 • a2 Milk® Lactose Free launched in Australia in August 2022 I N T E R I M • 12.3% market share was achieved following the initial launch in key states of
Slide 41: USA key messages
USA USA key messages 41 R E S U L T S For personal use only I N T E R I M Strategic priorities Progress update Business impact • Marketing mix focused on driving • Household penetration increased from 1 Educate consumers on the 2.3% to 2.6% with high loyalty rates consumer understanding of the A2 2
Slide 42: Improved profitability from higher revenue growth and cost reductions
USA Improved profitability from higher revenue growth and 42 cost reductions R E S U L T S For personal use only Revenue and EBITDA I N T E R I M • USA premium milk category market value growth of c.10%1 $ million • Revenue increased 61.8% to $52.4 million • Sales growth driven by modest growth in c
Slide 43: USA IMF opportunity update
USA USA IMF opportunity update 43 R E S U L T S For personal use only USA IMF shortage and a2MC progress overview1 USA IMF market1 I N T E R I M • IMF supply shortages resulted from Abbott recall in CY22 • In November 2022, a2MC received confirmation from the FDA that its application for enforcement
Slide 44: MVM remains focused on in-sourcing a2MC volumes and future innovation
Mataura Valley Milk MVM remains focused on in-sourcing a2MC volumes 44 and future innovation R E S U L T S For personal use only Revenue and EBITDA I N T E R I M • Net sales revenue of $45.7 million • 1H23 increase versus 1H22 reflected 6-months under a2MC ownership versus $ million 5-months in 1H22
Slide 45: Questions
For personal use only QUESTIONS
Slide 46: Appendix
For personal use only APPENDIX
Slide 47: Reconciliation of non-GAAP measures
Reconciliation of non-GAAP measures 47 R E S U L T S For personal use only I N T E R I M $ million 1H23 1H22 Australia & New Zealand segment EBITDA 62.0 96.2 111.5 59.4 2 0 2 3 China & Other Asia segment EBITDA USA segment EBITDA (12.2) (16.4) MVM segment EBITDA (13.4) (10.0) Corporate EBITDA (40.1)
Slide 48: Standard a2MC glossary of terms
Standard a2MC glossary of terms 48 R E S U L T S Acronym Meaning Acronym Meaning Acronym Meaning For personal use only a2MC The a2 Milk Company Limited ESL Extended shelf life NZX New Zealand’s Exchange ANZ Australia and New Zealand FX Foreign exchange OOH Out of home I N T E R I M APCO Australian P
Slide 49: For personal use only
For personal use only www.thea2milkcompany.com