A2 Milk Company Limited · NZX:ATM
A2 Milk — The a2 Milk Company — FY2016 Earnings Presentation
21 slides from A2 Milk's earnings presentation, Aug 24, 2016
Slide 1: FY16 Full Year Results
For personal use only FY16 Full Year Results Geoffrey Babidge August 24 2016 1 a2 Milk™, a2 Platinum™ and The a2 Milk Company™ are trademarks of The a2 Milk Company Limited
Slide 2: Agenda
• Results highlights For personal use only • Financial overview • Group infant formula highlights • Regional performance • Intellectual property and research & development • Strategy update 2
Slide 3: CEO quote on evolution to nutritional platform
For personal use only “The 2016 year brought significant progress in our evolution from a branded dairy products company to one increasingly focused on a broader nutritional platform.” Geoffrey Babidge Managing Director & CEO – The a2 Milk Company Limited 3
Slide 4: Group revenue, EBITDA, portfolio composition and operating cash flows
Group Revenue (NZ$ million) Group EBITDA1 (NZ$ million) For personal use only 54.6 352.8 155.1 94.7 110.8 10.6 3.6 4.8 FY13 FY14 FY15 FY16 FY13 FY14 FY15 FY16 H1 H2 H1 H2 Portfolio Composition (% Group Revenue) Net Operating Cash Flows (NZ$ million) 2% 10% 27% 21.5 61% 95% 88% 70% 3.6 34% 0.4 (8.1)
Slide 5: Financial overview
% NZ$ million FY16 FY15 change For personal use only • Revenue growth of 127.4% on pcp Revenue 352.8 155.1 +127.4% • EBITDA growth before non-recurring items of $49.8m on pcp Gross margin 151.0 54.4 +177.5% • Gross margin reflects change in product mix, with infant formula now Sales & distribution (
Slide 6: Segment results
NZ$ million FY16 FY15 Movement % For personal use only Segment Operating Segment Operating Segment Operating Operating Segment Revenue EBITDA1 Revenue EBITDA1 Revenue EBITDA1 Australia & New Zealand (ANZ) 296.3 84.7 149.1 30.0 99% 182% China & other Asia 38.2 9.2 4.1 (3.1) 832% (397%) Corporate and
Slide 7: EBITDA to net profit
NZ$ million FY16 FY15 For personal use only ANZ Segment EBITDA 84.7 30.0 China & other Asia Segment EBITDA 9.2 (3.1) USA & UK Segment EBITDA (20.5) (12.1) Corporate & other Segment EBITDA (18.8) (11.7) EBITDA1 54.6 3.1 EBITDA before non-recurring items 54.6 4.8 Depreciation/Amortisation (2.8) (1.9)
Slide 8: Cash flow and net cash movement
For personal use only • Significant improvement in net operating cash flow, increasing to $21.5m, up from ($8.1m) in pcp • Issue of equity comprises net funds from FY16 capital raising of $40.8m and amounts paid up on partly paid shares of $3.4m • Working capital movement reflects an increase in inv
Slide 9: Group infant formula highlights
® • Group revenue for infant formula was NZ$214.4 million, compared Growth in Group Infant Formula Sales (NZ$m) to NZ$41.7 million for FY15 For personal use only 140.5 • Infant formula accounted for 61% of group revenue, up from 27% on pcp • Continues to be the fastest growing Australian infant form
Slide 10: Infant formula supply chain
® • First half stock shortages remedied in second half with improved Infant formula supply chain inventory cover For personal use only • a2 Platinum® produced by Synlait Milk in New Zealand since launch in 2012 – State of the art nutritional powder production and canning facility Infant formula Expo
Slide 11: Australia and New Zealand
• Segment Revenue NZ$296.3 million / Operating EBITDA NZ$84.7 million For personal use only • Stand out performance for the ANZ business, in particular growth of a2 Platinum® in grocery and pharmacy • Exceptional growth of a2 Platinum® representing over 300% growth on pcp • Stock shortages of infant
Slide 12: China and other Asia
• Segment Revenue NZ$38.2 million / Operating EBITDA NZ$9.2 million For personal use only • Strong sales growth delivered a positive full year Operating EBITDA for the first time • Multi product, multi channel strategy incorporating China and ANZ label infant formula and milk powder • Progressing Ch
Slide 13: China regulatory changes
• A number of regulatory changes have been announced by the Chinese Government and further changes are likely For personal use only • a2MC continues to adjust its manufacturing and distribution model in response to evolving market circumstances New tax on China e-commerce bonded mode1 and cross bord
Slide 14: USA and UK: USA
• USA & UK Segment Revenue NZ$18.3 million / Operating EBITDA NZ$(20.5) million For personal use only • Initial launch of the a2 Milk™ brand into California from April 2015, recently extended to Pacific North West and Colorado • Sales behind original plan given slower distribution build, well positi
Slide 15: US milk category trends
• US$9.49bn grocery milk category down 7.7% with regular white milk sales down 12.3% For personal use only • Specialty milk category gaining share (+21.4%), currently holds ~5.5% value share of total milk category • Main driver of decline in regular milk is digestive related2 • Organic white milk gr
Slide 16: UK
• The UK business achieved positive Operating EBITDA for Q4 FY16, ahead of plan For personal use only • Anticipating positive Operating EBITDA for FY17 • Migrating from a fresh milk focus to a portfolio strategy encompassing liquid milk and infant formula • a2 Platinum® infant formula introduced to
Slide 17: Intellectual property and research & development
• The Company continues to develop its portfolio of brand assets, intellectual property and proprietary know-how, and participates in R&D associated with the benefits of the exclusive A2 beta casein protein type For personal use only – Breadth and depth of a2MC’s IP portfolio coupled with first move
Slide 18: Company evolution and revenue history
Today For personal use only 2012-2015 Dairy nutrition company 2007-2012 Dairy company profitably that also makes making a Branded dairy infant formula difference to 2000-2007 company peoples’ health IP Company challenging licensing the dairy knowledge industry to others Revenue FY07 FY12 FY15 FY16 N
Slide 19: Strategy update
For personal use only Continue to build a substantial Build a global infant Establish an advanced premium milk business nutrition business adult nutrition business • Strategic cornerstone of The a2 Milk Company • Extend from the nutritional start point of the • Extend from the nutritional star
Slide 20: Disclaimer
This presentation dated 24 August 2016 provides additional comment on the market release of the same date. As such, it should be read in conjunction with, and subject to, the explanations and views in those documents. For personal use only This presentation is provided for information purposes only.
Slide 21: For personal use only
For personal use only