A2 Milk Company Limited · NZX:ATM
A2 Milk — The a2 Milk Company — Macquarie Ag Forum 2018
38 slides from A2 Milk's conference presentation, Mar 28, 2018
Slide 1: Macquarie AG Forum
Macquarie AG Forum Melbourne| 28 March 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 28 March 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 co
Slide 3: CEO quote on continued growth
“The Company’s continued growth reflects increasing consumer acceptance of our brand and the | benefits of dairy-based products free \\ from the A1 beta casein protein type” Geoffrey Babidge Managing Director & CEO a
Slide 4: Contents
Contents * Company overview * Group strategy update ¢ 1H18 results & regional highlights ¢ FY18 outlook ¢ Appendix
Slide 5: Company overview
Company overview
Slide 6: The a2 Milk Company at a glance
The a2 Milk Company at a glance * The a2 Milk Company (“a2MC") is in the business of producing, marketing and selling premium branded dairy nutritional products in AUD million’ NZD million targeted global markets rae . . ¢ All a2MC branded products contain only A2 beta casein protein type Market Cap
Slide 7: The a2 Milk Company proposition
The a2 Milk Company proposition a2 Milk™ Single-minded company focus on A1 protein-free products (pioneers and experts) Unique and effective marketing approach = Compelling and growing scientific evidence Clean and green Australia and NZ sourcing profile (strength in Asia) vl, Integrated IP portfoli
Slide 8: Evolving from pioneer to global leader
Evolving from pioneer to global leader 2000 - 2006 2007 - 2017 am IP mus [| Innovative creators pioneers + Emerging beta-casein science + Move from licensing to operating business model + IP development + Develop brand, IP and know-how + Licensing approach to market entry + Australian a2 Milk® brand
Slide 9: Leading the way in the A1 protein-free category
Leading the way in the A1 protein-free category * a2MC is the creator and pioneer of the A1 protein-free category ¢ The science in support of the A2 protein proposition continues to develop and consumer awareness is rapidly building in targeted markets ¢ The Company expects broader interest in the A
Slide 10: Group strategy update
Group strategy update J
Slide 11: 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 A1 protein-fr
Slide 12: Dairy nutrition innovation continuum
Dairy nutrition innovation continuum Pow dere, Pree an, serettition %, . < 4 Further scope for innovation in existing & adjacent product segments
Slide 13: 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 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: 1H18 results & regional highlights
1H18 results & v= regional highlights ==
Slide 18: 1H18 highlights
1H18 highlights ¢ Group revenue $434.7 million’ and Operating EBITDA? $143.0 million * Group a2 Platinum® infant formula revenue of $341.0 million, up 85% on pcp ¢ ANZ segment revenue +47% and EBITDA +65% ¢ China revenue and EBITDA more than trebled vs pcp ¢ Infant formula consumption market share i
Slide 19: Key financial charts
Key financial charts’ Group Revenue (NZ$ 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 20: 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 21: 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 22: 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 23: 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 24: 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 25: 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 26: 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 26
Slide 27: 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 28: 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 29: 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 30: Advertising and media exposure increasing brand awareness
Advertising and media exposure increasing brand awareness - .»** The TT “*=* 7 — 7 ¥ | ) { AN UDDER OPTION [A MILK EARNS ENDORSEMENTS & DAIRY INDUSTRY SKEPTICISM NY ENDORSEMENTS & DARY NDUSTRY XEPTICSM View advertising clip here: View news clip here: (https./a2milk. com/love-milk-again-tve) (att 1s/
Slide 31: Science developments
Science developments ¢ Animal and human studies! highlight there are potential benefits of a2 Milk® due to the complete exclusion of the A1 protein = Conventional milk is a combination of A1 and A2 protein — Aland A2 proteins are different in structure and hence digest differently — Consumption of A
Slide 32: FY18 outlook
FY18 outlook 32
Slide 33: 1H18 trading performance and FY18 outlook
1H18 trading performance and FY18 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$143.0 mill
Slide 34: thea2milkcompany.com
thea2milkcompany.com
Slide 35: Appendix
Appendix O) 35
Slide 36: Cash position
Cash position Group Cash Movement: 1H18 (NZ$ 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 37: Reconciliation of non-GAAP measures
Reconciliation of non-GAAP measures NZ$ million 1H18 FY17 1H17 Australia & New Zealand Segment EBITDA 116.4 155.3 70.4 China & other Asia Segment EBITDA 48.3 32.8 13.7 UK & USA Segment EBITDA (8.4) (22.5) (7.7) Corporate EBITDA (13.4) (24.4) (12.3) EBITDA' 143.0 141.2 64.1 Depreciation/Amortisation
Slide 38: thea2milkcompany.com
thea2milkcompany.com