A2 Milk Company Limited · NZX:ATM
A2 Milk — The a2 Milk Company — FY2024 Earnings Presentation
61 slides from A2 Milk's earnings presentation, Aug 19, 2024
Slide 1: 2024 Annual Results
For personal use only The a2 Milk Company Limited 2024 ANNUAL RESULTS We pioneer the future of Dairy for good 19 August 2024
Slide 2: Disclaimer
Disclaimer 2 R E S U L T S This presentation dated 19 August 2024 provides additional While all reasonable care has been taken in relation to the commentary on the financial results for the 12 months ended preparation of this presentation, none of the Company, its For personal use only A N N U A L 3
Slide 3: Agenda
Agenda For personal use only Results overview, outlook 4 and strategy update Financial overview 21 Regional and 29 product performance Appendix 58
Slide 4: Strong execution delivered positive FY24 result
Strong execution delivered positive FY24 result 4 R E S U L T S Delivered a positive full year result with revenue, EBITDA1 For personal use only A N N U A L 1 and EPS growth Became a top-5 China IMF brand growing total IMF sales 2 0 2 4 2 despite a double-digit decline in China market value Achieve
Slide 5: Revenue growth, earnings increase and cash generation in line with guidance
Revenue growth, earnings increase and cash generation in line 5 R E S U L T S with guidance Full year result consistent with medium-term plan Key financials For personal use only A N N U A L Revenue; $ millions • Revenue growth of 5.2% to $1,675.5 million • EBITDA up 6.9% to $234.3 million with an E
Slide 6: Result underpinned by important operational achievements (1/2)
Result underpinned by important operational achievements (1/2) 6 R E S U L T S Total IMF • Delivered total IMF sales growth of 4.6% in a challenging China IMF market down 10.7% in value For personal use only A N N U A L • Achieved top-5 brand position in China IMF market overall • Improved key busin
Slide 7: Result underpinned by important operational achievements (2/2)
Result underpinned by important operational achievements (2/2) 7 R E S U L T S ANZ liquid milk • Continued to drive a2 Milk® Lactose Free penetration, supported by brand relaunch For personal use only A N N U A L • Progressed major upgrade of Kyabram milk processing site in Victoria USA 2 0 2 4 • Im
Slide 8: Some improvement in challenging China IMF market conditions
Some improvement in challenging China IMF market conditions 8 R E S U L T S • Number of newborns in China1 in CY23 (9.0m, -6%) reflects an improvement Total China IMF market value vs pcp2 in trajectory over the past few years (ie CY22 -10%, CY21 -12%, CY20 -18%), For personal use only A N N U A L wi
Slide 9: China label IMF achieved record share and sales growth
China label IMF achieved record share and sales growth during year 9 R E S U L T S of major product transition China label upgrade and transition a2MC China label IMF market share For personal use only A N N U A L Share of total China IMF market value %1 ✓ Commenced shipping to distributors of the C
Slide 10: English label IMF performance improved
English label IMF performance improved as a2MC and total market 10 R E S U L T S returned to growth • In FY24 the total English label IMF market returned to growth, up 3.8% vs prior year, a2MC English label IMF market share For personal use only A N N U A L compared to the total China label IMF mark
Slide 11: a2MC achieved top-5 IMF brand position
a2MC achieved top-5 IMF brand position with increasing concentration of 11 R E S U L T S top-5 brands Total China IMF market share For personal use only A N N U A L Value % share by brand of total China IMF market (FY24)1 2 0 2 4 2 2 Var PCP +0.6ppts +0.1ppts +1.5ppts +1.3ppts +1.4ppts -0.2ppts -0.2
Slide 12: Other nutritionals and liquid milk growth driven by innovation
Other nutritionals and liquid milk growth driven by innovation and 12 R E S U L T S improved execution • Other nutritionals (ON) growth increased to 36.7% in FY24 Other nutritionals For personal use only A N N U A L • ON comprises plain and fortified milk powders, UHT and liquid milk in China and ot
Slide 13: Revenue and EBITDA guidance for FY25
Revenue and EBITDA guidance for FY25 13 R E S U L T S FY25 Outlook For personal use only A N N U A L ▪ China IMF market conditions remain challenging and the Company expects a further market value decline in FY25 ▪ At this stage, the Company is expecting mid single-digit revenue growth in FY25 versu
Slide 14: Growth strategy focused on capturing full potential of China market
Growth strategy focused on capturing full potential of China market 14 R E S U L T S with supply chain transformation a key priority For personal use only A N N U A L Purpose We pioneer the future of Dairy for good Vision An A1-free world where Dairy nourishes all people and our planet 2 0 2 4 PEOPL
Slide 15: Continued progress towards medium-term goals
Continued to make progress towards achieving medium-term goals 15 R E S U L T S reflected in measures of success For personal use only A N N U A L PEOPLE PLANET CONSUMERS SHAREHOLDERS BRAND MARKET INNOVATION SUPPLY HEALTH SHARE CHAIN 2 0 2 4 1 2 3 4 5 6 7 Safety GHG emissions China brand MBS share C
Slide 16: Incremental revenue since FY21 and EBITDA margin improvement
Since FY21 a2MC has delivered incremental revenue of $469m and 16 R E S U L T S EBITDA margin improvement Medium-term revenue and EBITDA margin ambition Areas of planned revenue growth Commentary For personal use only A N N U A L Revenue, NZ$ billions EBITDA margin EBITDA margin target in the teens
Slide 17: IMF portfolio expansion important to medium term ambitions
IMF portfolio expansion important to achieve medium term ambitions, 17 R E S U L T S with new EL IMF product to be launched in FY25 a2MC IMF portfolio segmentation Commentary For personal use only A N N U A L Market price segments based on Stage 1 average selling price (RMB/KG)1 CONCEPTUAL • Current
Slide 18: Resolution of Synlait arbitration disputes
Resolution of Synlait arbitration disputes improves IMF supply chain 18 R E S U L T S certainty and flexibility For further detail refer to a2MC’s announcement dated 16 August 2024 For personal use only A N N U A L Conditionality • Resolution of Synlait arbitration disputes subject to Synlait comple
Slide 19: Capital allocation focused on supply chain transformation
Capital allocation focused on supply chain transformation needs, 19 R E S U L T S including additional China label registrations Capital Capitalallocation allocationframework framework Commentary For personal use only A N N U A L • Transforming a2MC’s supply chain is a key Available capital + operat
Slide 20: Meaningful progress towards Planet related goals
Meaningful progress towards achieving our Planet related goals 20 R E S U L T S a2MC is pleased to release its first Climate Statement1 which has been prepared in accordance with the Aotearoa New Zealand Climate Standards (NZCS) issued by the External Reporting Board (XRB) For personal use only A N
Slide 21: Financial overview
For personal use only Financial overview
Slide 22: China revenue growth, SG&A leverage and interest income lift NPAT and EPS
China revenue growth, SG&A leverage and increased interest income 22 contributed to NPAT and EPS growth R E S U L T S $ million1 FY24 FY23 % change • Net sales revenue reflects strong growth in China & Other Asia and Net Sales Revenue 1,673.3 1,591.1 5.2% USA segments that were up 14.1% and 8.2% res
Slide 23: Double-digit China & Other Asia sales growth
Double-digit China & Other Asia sales growth reflects China focus 23 R E S U L T S and deliberate shift in EL IMF distribution strategy China & Total For personal use only A N N U A L $ million Other Asia ANZ USA MVM1 Corporate Group Revenue 1,143.1 317.3 113.7 101.4 - 1,675.5 2 0 2 4 FY24 EBITDA 29
Slide 24: China and Other Asia IMF achieved $1 billion sales
China and Other Asia IMF achieved $1 billion sales up 90% on FY21. 24 R E S U L T S Other nutritionals growth increased to 37% Net sales revenue China & Total 1 $ million Other Asia ANZ USA MVM Group For personal use only A N N U A L IMF 1,060.2 98.5 0.8 - 1,159.5 Liquid milk2 - 190.2 112.5 - 302.6
Slide 25: Gross margins flat excluding accelerated depreciation
Gross margins flat excluding accelerated depreciation of MVM's 25 R E S U L T S coal-fired boiler Gross margin drivers Gross margin % slightly lower For personal use only A N N U A L Gross margin ($ million) • Gross margin (GM%) was slightly lower due to accelerated depreciation of $10 million relat
Slide 26: Significant investment in marketing and capability
Significant investment in marketing to support GB transition and 26 R E S U L T S continued capability investment in China and supply chain Marketing investment increased Administrative & other expenses lower as % of sales For personal use only A N N U A L $ million 300 280 $ million 260 250 250 230
Slide 27: Strong cash conversion
Strong cash conversion benefited from prior year China label stock build 27 R E S U L T S and transition • Cash flows from operating activities For personal use only A N N U A L $ million FY24 FY23 % change ‒ Higher cash conversion of 126%1 (FY23: 58%) due to: Cash flows from operating activities Re
Slide 28: Operating cash flow and working capital strengthened balance sheet
Operating cash flow and working capital improvements further 28 R E S U L T S strengthened a2MC's balance sheet • Cash and term deposits balance and consolidated For personal use only A N N U A L $ million FY24 FY23 % change net cash position of $968.9 million1 with cash conversion Cash and term dep
Slide 29: Regional and product performance
For personal use only Regional and product performance
Slide 30: China label IMF key messages
China label IMF China label key messages 30 R E S U L T S For personal use only A N N U A L Strategic priorities Progress Business impact 2 0 2 4 • Successfully launched and transitioned • Continued to improve brand health 1 Continue to invest in brand to upgraded GB registered China label metrics,
Slide 31: China label IMF sales growth through GB transition
China label IMF China label IMF sales growth continued through new GB transition period 31 R E S U L T S Sustained growth despite wider market decline and GB product transition China label net sales revenue For personal use only A N N U A L $ million by half4 • CL IMF sales up 9.5% to $612.3 million
Slide 32: Campaign launch and marketing investment to support product transition
China label IMF Significant campaign launch and marketing investment during 2H24 32 R E S U L T S to support upgraded China label product transition Upgraded formula and packaging For personal use only A N N U A L • High-purity lactoferrin at increased levels • Contains innate nutrients such as HMO,
Slide 33: Strong execution with key MBS accounts
China label IMF Strong execution with key MBS accounts in store integrated with high 33 R E S U L T S impact marketing campaigns Collaboration with key Significant contribution from In-store activation leveraging For personal use only A N N U A L account customers in-store promotional team Octonauts
Slide 34: Omni-touchpoints online and offline including Octonauts collaboration
China label IMF Omni-touchpoints both online and offline to maximise exposure, 34 R E S U L T S including through Octonauts collaboration Significant campaign launch integrated across High impact sales channels exposure For personal use only A N N U A L traditional and digital channels to drive awar
Slide 35: Strong execution in DOL
China label IMF Strong execution in DOL driven by focus on new users, collaboration with 35 R E S U L T S key DOL accounts and utilisation of livestream events Focus on early Collaboration with key Using livestreaming and For personal use only A N N U A L stage products account customers online stor
Slide 36: Driving further improvement in China brand health metrics
China label IMF Driving further improvement in China brand health metrics 36 R E S U L T S 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 4 a2MC ever trialled % a2MC past 3 months trialled % a2MC brand used most often % S
Slide 37: Record MBS market share led by BCD cities
China label IMF Growth reflected in record MBS market share led by BCD cities 37 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 (%)1 a2MC Key&A MBS MAT value share (%)1 a2MC BCD MBS MAT value share (%)1 2 0
Slide 38: Distribution expansion in BCD cities continues
China label IMF Distribution expansion in BCD cities continues 38 R E S U L T S Improvement in LFL store growth with significant store network change BCD store expansion continues For personal use only A N N U A L INDICATIVE a2MC MBS stores Key&A versus BCD (%)1 a2MC China label IMF distributor sell
Slide 39: Record market share achieved in domestic online
China label IMF Record market share achieved in domestic online (DOL), now higher 39 R E S U L T S than MBS share 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 offlin
Slide 40: a2MC gaining share in MBS and DOL channels
China label IMF Resulting in a2MC gaining share in MBS and DOL channels 40 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 (% pts)1 Change in DOL value share (% pts)2 2 0 2
Slide 41: Share gains across virtually all stages
China label IMF Share gains achieved across virtually all stages in MBS and DOL with 41 R E S U L T S strong growth in early stages 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
Slide 42: English label IMF key messages
English label IMF and ON English label IMF key messages 42 R E S U L T S For personal use only A N N U A L Strategic priorities Progress update Business impact 2 0 2 4 • Invested in significant EL IMF brand • Steady overall EL market share and 1 Accelerate online growth campaign in 1H24 a2MC EL awar
Slide 43: English label IMF sales in line with prior year but up in 2H24
English label IMF and ON English label IMF sales in line with prior year but up in 2H24 43 R E S U L T S Sales reflected continued channel mix shift and refined operating model ANZ English label IMF net sales revenue $ million • EL IMF market grew by 3.8%1 in value in FY24 with further growth in CBE
Slide 44: Key&A cities driving English label market stabilisation
English label IMF and ON Key&A cities driving English label market stabilisation in FY24 primarily 44 R E S U L T S through CBEC and O2O channels Key&A: Daigou decline slowed, with CBEC and O2O growth1 BCD: CBEC maintained double-digit growth, Daigou in decline1 For personal use only A N N U A L EL
Slide 45: Continued channel mix shift towards CBEC
English label IMF and ON Continued channel mix shift towards CBEC channels with Douyin/TikTok 45 R E S U L T S a key emerging platform CBEC now over half of English label CBEC growth driven by JD and TikTok Commentary For personal use only A N N U A L Market MAT value sales by channel1 CBEC market M
Slide 46: English label market share stabilising across channels
English label IMF and ON English label market share stabilising across channels with high growth 46 in emerging online channels R E S U L T S Total English label market share CBEC market value share O2O and Daigou market value share For personal use only A N N U A L a2MC Total EL value share (%)1 a2
Slide 47: Integrated brand and e-commerce campaigns: JD Super Brand Day
English label IMF and ON Executing integrated Brand and e-commerce campaigns to drive 47 R E S U L T S awareness and trial Case example: JD Super Brand Day (April 2024) For personal use only A N N U A L Activation on major digital platforms … combined with … driving to in-store through paid and owne
Slide 48: Expanding reach and product portfolio in emerging markets
English label IMF and ON Actively expanding reach and product portfolio in emerging markets 48 R E S U L T S Korea Singapore Vietnam Expanding retail distribution Fresh milk launched in major retailers Launching IMF and macro milk portfolio For personal use only A N N U A L 2 0 2 4 UHT sales growth
Slide 49: First new English label IMF range since a2 Platinum
English label IMF and ON First new English label IMF range since a2 Platinum® launched in 2H24, 49 R E S U L T S a2 Gentle GoldTM, plus new fortified powders targeting adults and seniors English label IMF portfolio For personal use only A N N U A L • Overall focus on broadening IMF portfolio to appe
Slide 50: ANZ liquid milk key messages
ANZ liquid milk ANZ liquid milk 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 2 0 2 4 • Completed brand relaunch in Australia, • Achieved new highs in top-of-mind, 1 Maintain brand leadership with updated packaging and new TVC sp
Slide 51: ANZ liquid milk sales supported by Lactose Free growth
ANZ liquid milk ANZ liquid milk sales supported by strong growth from a2 Milk® 51 R E S U L T S Lactose Free Lactose Free growth supported by brand refresh Australia liquid milk net sales revenue For personal use only A N N U A L $ million • Australian liquid milk net sales revenue up 3.3% to $190.2
Slide 52: ANZ liquid milk sales growth supported by marketing investment
ANZ liquid milk ANZ liquid milk sales growth supported by marketing investment 52 R E S U L T S For personal use only A N N U A L 2 0 2 4 Refreshed milk packaging Launched new TVC Invested in a2 Milk® Lactose Free Incorporating digestion related Reinforcing naturally A1 protein free Including throug
Slide 53: USA key messages
USA USA key messages 53 R E S U L T S For personal use only A N N U A L Strategic priorities Progress update Business impact 2 0 2 4 • New Infant Formula Notification (NIFN) • Targeting NIFN submission to be filed 1 Obtain long-term FDA approval progressing to plan during 1Q25, with long-term approv
Slide 54: Improving liquid milk profitability while investing in IMF approval
USA Focus on improving liquid milk profitability while investing in IMF approval 54 R E S U L T S Accelerating the path to profitability remains a priority, alongside progressing IMF approval Revenue For personal use only A N N U A L $ million2 • Revenue increased 8.2% to $113.7 million • Sales grow
Slide 55: Progressing USA IMF opportunity and long-term approval
USA Progressing USA IMF opportunity and on track for long-term approval 55 R E S U L T S • In November 2022, a2MC received confirmation from the US Food and Drug Administration (FDA) that its application for enforcement discretion (ED) to For personal use only A N N U A L import, sell and distribute
Slide 56: MVM focused on building nutritional manufacturing capability
Mataura Valley Milk MVM remains focused on building nutritional manufacturing capability 56 R E S U L T S and reducing operating losses EBITDA improvements reflect sales mix and productivity gains Revenue For personal use only A N N U A L • Reported net sales revenue of $101.4 million down compared
Slide 57: Questions
For personal use only Questions
Slide 58: Appendix
For personal use only Appendix
Slide 59: Reconciliation of non-GAAP measures
Reconciliation of non-GAAP measures 59 R E S U L T S $ million FY24 FY23 For personal use only A N N U A L Australia & New Zealand segment EBITDA 63.0 93.5 China & Other Asia segment EBITDA 290.1 254.1 2 0 2 4 USA segment EBITDA (15.5) (23.3) MVM segment EBITDA (20.5) (26.5) Eliminations EBITDA (0.5
Slide 60: a2MC glossary of terms
a2MC glossary of terms 60 R E S U L T S Acronym Meaning Acronym Meaning Acronym Meaning a2MC The a2 Milk Company Limited GHG Greenhouse gas NZD/NZ$ New Zealand Dollar For personal use only A N N U A L ANZ Australia and New Zealand GM Gross margin OOH Out of home advertising ASP Average selling price
Slide 61: www.thea2milkcompany.com
For personal use only www.thea2milkcompany.com