A2 Milk Company Limited · NZX:ATM
A2 Milk — The a2 Milk Company — FY2017 Earnings Presentation
32 slides from A2 Milk's earnings presentation, Aug 23, 2017
Slide 1: FY17 Full Year Results
For personal use only FY17 Full Year Results Geoffrey Babidge August 23, 2017 a2 Milk™, a2 Platinum™ and The a2 Milk Company™ are trademarks of The a2 Milk Company Limited
Slide 2: Contents
Contents For personal use only • Result highlights • Financial overview • Group infant formula highlights • Regional performance • Intellectual property and research & development • Strategic update • Outlook 2
Slide 3: CEO quote on continued growth
For personal use only “The Company’s continued growth reflects increasing consumer acceptance of the a2™ brand and the benefits of dairy-based products free from the A1 beta casein protein type”. Geoffrey Babidge Managing Director & CEO 3
Slide 4: Result highlights
For personal use only Result highlights 4
Slide 5: The year in charts
The year in charts For personal use only Group Revenue (NZ$ million) Group EBITDA1 (NZ$ million) Basic Earnings Per Share (Cents) 12.7 549.5 141.2 352.8 54.6 4.4 155.1 110.8 3.6 4.8 0.0 FY14 FY15 FY16 FY17 FY14 FY15 FY16 FY17 FY14 FY15 FY16 FY17 -0.3 H1 H2 H1 H2 EPS 1EBITDA is a non-GAAP measure and
Slide 6: FY17 highlights
FY17 highlights1 For personal use only • Group revenue $549.5m and Operating EBITDA2 $141.2m • EBITDA to sales margin 26% (FY16 15%) • Group a2 Platinum® infant formula revenue +84% • China revenue more than doubled and EBITDA +258% • ANZ business revenue +48% and EBITDA +83% • Infant formula consum
Slide 7: Financial overview
For personal use only Financial overview 7
Slide 8: Financial summary
Financial summary For personal use only NZ$ million FY17 FY16 % change Revenue 549.5 352.8 56% Gross margin 263.5 151.0 75% • Gross margin primarily reflects increased contribution from infant formula sales and lower infant COGS in FY17 Sales & distribution (21.3) (19.0) 12% Marketing (42.0) (33.0)
Slide 9: Geographic financial performance
Geographic financial performance For personal use only NZ$ million FY17 FY16 Movement % Segment Operating Segment Operating Segment Operating Operating Segment Revenue EBITDA1 Revenue EBITDA1 Revenue EBITDA1 Australia & New Zealand 439.6 155.3 296.3 84.7 48.3% 83.4% China & other Asia 88.9 32.8 38.2
Slide 10: Reconciliation of non-GAAP measures
Reconciliation of non-GAAP measures For personal use only NZ$ million FY17 FY16 ANZ segment EBITDA 155.3 84.7 China & other Asia segment EBITDA 32.8 9.2 US & UK segment EBITDA (22.5) (20.5) Corporate & other segment EBITDA (24.4) (18.8) EBITDA1 141.2 54.6 Depreciation & amortisation (2.7) (2.8) EBIT
Slide 11: Cash position
Cash position For personal use only Group Cash Movement (NZ$ million) +24.1 (22.8) (2.5) (48.7) +3.1 121.0 +7.8 +90.6 69.4 Cash on hand Group NPAT Inventory Other working Investments in Investment in Depreciation, FX and other Cash on hand (Jun-16) reduction capital PPE & Synlait amortisation & (Jun
Slide 12: Group infant formula highlights
For personal use only Group infant formula highlights 12
Slide 13: Continued strong growth in sales and market share for a2 Platinum
Continued strong growth in sales and market share for a2 Platinum® • Group infant formula revenue of NZ$394.0 million, compared to For personal use only Group Infant Formula Net Revenue (NZ$m) NZ$214.4 million for FY16 • Infant formula accounts for 72% of Group revenue 209.5 184.5 • Significant grow
Slide 14: Route to market pathways into China
Route to market pathways into China For personal use only A1 protein-free a2 Platinum® milk sourced from produced in Synlait’s dairy New Zealand by Australian grocery Daigou/ farmers, certified Synlait on & pharmacy gifting/ by a2MC, in behalf of a2MC personal New Zealand Wholesalers tourism1 CBEC1
Slide 15: China infant formula regulatory environment
China infant formula regulatory environment For personal use only English label product sold through CBEC platforms • China Ministry of Commerce (MoC) announcement (November) indicated an extension of CBEC the grace period for registration of goods imported through CBEC channel to the end of Decembe
Slide 16: Regional performance
For personal use only Regional performance 16
Slide 17: Regional growth underpinned by a targeted product portfolio
Regional Growth underpinned by a targeted product portfolio ANZ revenue (NZ$ million) China & Other Asia revenue (NZ$ million) UK & US revenue (NZ$ million) For personal use only 439.6 88.9 21.0 18.3 296.3 38.2 149.1 106.9 4.0 1.9 2.7 1.1 FY14 FY15 FY16 FY17 FY14 FY15 FY16 FY17 FY14 FY15 FY16 FY17 •
Slide 18: Australia & New Zealand
Australia & New Zealand • Exceptional performance for the ANZ business in FY17 For personal use only • Strong a2 Platinum® revenue growth of ~78% on pcp • a2 Milk™ branded fresh milk revenue growth of ~5.5% on pcp • a2 Milk™ is the only milk brand distributed through all six key grocery retailers in
Slide 19: China and other Asia
China and other Asia • Strong sales and earnings momentum For personal use only • Increased marketing and sales investment on prior year • Flexible multi-channel strategy incorporating China and English label infant formula and milk powder • Consumption share for a2 Platinum® infant formula brand gr
Slide 20: United States
United States • Progress on strategy to build brand awareness and expand footprint on a region-by-region basis For personal use only • Distribution increased to ~3,000 stores across the country: – Sales velocities grew in California with a number of key accounts now exceeding 30 units per store per
Slide 21: Momentum has continued to build in the US since launch
Momentum has continued to build in the US since launch For personal use only a2 Milk™ brand Launch into King Dairy supply Significant PR hits South East launch Ranging in launches in the US, Soopers (Denver), agreement with (LA Times, KTLA in Publix Whole Foods initially Southern Fred Meyer, Meijer
Slide 22: United Kingdom
United Kingdom • The UK business achieved its first annual operating profit in FY17 For personal use only • ‘a2tonishing™’ marketing campaign launched in May 2016 continues to resonate strongly with consumers • Distribution gains for fresh milk – Increased range in J Sainsbury and increased facings
Slide 23: Intellectual property and research & development
For personal use only Intellectual property and research & development 23
Slide 24: Intellectual property and R&D
Intellectual property and R&D For personal use only • The Company recognises increased interest in A1 protein-free products – Focus on patents, trade marks and proprietary know-how across chosen markets, building on first mover advantage – a2MC will continue to actively enforce its intellectual prop
Slide 25: Strategic update
For personal use only Strategic update 25
Slide 26: Growth strategy
Growth strategy OUR PURPOSE For personal use only As the a2 Milk™ pioneers we are determined to help people enjoy a better life OUR VISION To be the innovative and smart choice for dairy nutrition OUR AMBITION To be the most admired and commercially attractive dairy nutritional company OUR STRATEGIC
Slide 27: Dairy nutrition innovation continuum
Dairy nutrition innovation continuum For personal use only Further scope for innovation in existing & adjacent product segments Increasing level of product customisation 27
Slide 28: Strategic progress & agenda
Strategic progress & agenda • Continued build of Board and senior management capability For personal use only – Appointment of Warwick Every-Burns & Jesse Wu as non-executive Directors – Reorganisation of senior leadership team and new focus: Chief Executive Asia Pacific Executive Vice President
Slide 29: Conclusions and outlook
For personal use only Conclusions and outlook 29
Slide 30: Conclusions and outlook
Conclusions and outlook For personal use only • Exceptional FY17 result, with strong growth in nutritional products and increased awareness of the A1 protein-free proposition • a2MC expects continued growth in FY18 in particular infant formula and milk powders in Australia and China and improved mom
Slide 31: Disclaimer
Disclaimer This presentation dated 23 August 2017 provides additional comment on the market release of the same date. As such, it should be read in conjunction with, and For personal use only subject to, the explanations and views in those documents. This presentation is provided for information pur
Slide 32: thea2milkcompany.com
For personal use only thea2milkcompany.com