A2 Milk Company Limited · NZX:ATM
A2 Milk — The a2 Milk Company — Investor Presentation (March 2016)
36 slides from A2 Milk's investor presentation, Mar 11, 2016
Slide 1: New York Investor Presentation
New York Investor Presentation 10 / 11 March, 2016 PRIVATE AND CONFIDENTIAL a2 Milk®, a2 Platinum® and The a2 Milk Company™ are trade marks of The a2 Milk Company Limited
Slide 2: Agenda
Agenda • Company overview • Financial information • Regional overview – Australia and New Zealand – China and other Asia – UK – USA • Trade mark and intellectual property • Summary • Appendix 2
Slide 3: Company overview
Company overview
Slide 4: 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 and infant formula products in targeted global markets • a2MC branded products contain only A2 beta-casein protein rather than both A1 protein and A2 protein w
Slide 5: Distinctive and premium product portfolio is expanding
Distinctive and premium product portfolio is expanding Australia China UK USA 5
Slide 6: Brief company history
Brief company history1 2000 2008 2014 The a2 Milk Company™ is founded Consumer and healthcare a2MC fully acquires UK JV. by scientist Dr. Corran McLachlan professional advocacy in Australia New management team and consumer and his business partner Howard accelerates brand growth proposition put in p
Slide 7: What is the a2 Milk difference?
What is the a2 Milk® difference? • The a2 Milk® brand is a naturally occurring cows’ milk and not a product of a technological process or genetic engineering A1/A1 A2/A2 protein protein → → All regular milk ~70% mix of A2/A2 protein A1 and A2 proteins A1/A2 protein Genetic variation occurred in Euro
Slide 8: What is the USA opportunity?
What is the USA opportunity? However Americans are drinking milk less often 2008 2014 71% Always 58% 17% Regularly 22% 6% Occasionally 10% 4% Rarely 6% 2% Never 4% 1 billion milk Digestive issues occasions each week… are the #1 cause (excluding tea & coffee) of the decline Source: Kanter World Panel
Slide 9: Consumer experiences are fundamental to success
Consumer experiences are fundamental to success “Well we have had a2 Milk for nearly 2 weeks and I have to say I have been pleasantly surprised. My kids “What a difference this milk are not complaining of tummy aches any more. They makes! It tastes the same and are actually asking for glasses of mil
Slide 10: Investment highlights
Investment highlights a2MC is not a conventional dairy company Premium brand and product range supported by an integrated intellectual property portfolio and growing 01 scientific evidence 02 Proven and profitable Australian business remains on a strong growth trajectory Outstanding success of a2 Pl
Slide 11: Scalable and flexible supply chain
Scalable and flexible supply chain 1. Milk supply 2. Processing 3. Distribution 4. Retail/consumer Milk sourced from Milk processed at a2MC Contractors distribute Products sold through a segregated dairy herds facilities or contracted 3rd products to outlets/ variety of channels party facilities who
Slide 12: Leveraging a2MC's fresh milk platform in Australia
Leveraging a2MC’s fresh milk platform in Australia • a2 Milk® branded fresh milk has achieved ~9.3% market share by value (grocery weighted scan 20 December 2015 MAT) • a2 Milk® brand is bigger than the fresh organic, lactose free and plant based milk segments combined • a2 Milk® branded fresh milk
Slide 13: a2 Platinum overview
a2 Platinum® overview Current position Infant formula supply chain • Infant formula accounts for ~53% of total group revenue • Compelling and unique point of difference Milk sourced Infant formula Imported into Distributed in ANZ sales focus on – The only infant formula naturally rich in the A2 beta
Slide 14: Focussed and consistent strategic growth map
Focussed and consistent strategic growth map STRATEGIC INTENT STRATEGIC PRIORITIES PORTFOLIO COMPOSITION¹ FY14 7% Continue to build a 1. Australian growth in liquid milk and other substantial premium dairy products dairy business in 2. Investigate NZ liquid milk opportunity 93% Australia and NZ FY15
Slide 15: Financial overview
Financial overview
Slide 16: Key consolidated financial results
Key consolidated financial results Movement • Gross margin increase reflects ongoing growth in NZ$ million FY14 FY15 FY14 – FY15 1H16 Australian fresh milk business and significant Revenue 110.8 155.1 +40% 139.2 acceleration of infant formula. Trend has continued strongly into FY16 Gross margin 39.8
Slide 17: Operating results by segment
Operating results by segment Movement Movement NZ$ million FY14 FY15 FY14 - FY15% 1H15 1H16 1H15 - 1H16% Revenue ANZ 106.9 149.1 40% 72.8 127.9 76% China and Other Asia 2.8 4.1 46% 1.1 8.4 681% UK and US 1.0 1.9 90% 0.9 2.9 222% Corporate and Other 0.1 0.0 NM 0.0 0.0 NM Group Revenue 110.8 155.1 40%
Slide 18: Conservative cash position
Conservative cash position Group Cash Movement: Jun-15 to Dec-15 (NZ$ million) • Working capital movement driven largely by an increase in inventories (in transit) and prepayments relating to infant formula • FX and other includes losses on foreign currency cash holdings due to strengthening of NZD
Slide 19: Regional overview
Regional overview
Slide 20: Australia and New Zealand business overview
Australia and New Zealand business overview Current position Growth strategy • Significant branded milk business with a reliable supply • Continue to enhance premium brand strength chain, continued sales growth and premium pricing • Build on core ANZ liquid milk business • Segment revenue grew by 76
Slide 21: China and Other Asia business overview
China and Other Asia business overview Current position Growth strategy • Launched a2 Platinum® in Nov 2013 with the intention • Build a high profile premium brand in China of establishing a position in China before expanding into • Educate consumers and health professionals about the other Asian ma
Slide 22: UK business overview
UK business overview Current position Growth strategy • Commenced sales in the UK in Nov 2012 through a JV • Continue to build targeted premium brand with Robert Wiseman Dairies which was then subject to a • Grow distribution in existing supermarkets (in-store and takeover by the Müller group online
Slide 23: USA business launch
USA business launch Current position • Initial launch commenced in Southern California region from April 2015, extended to Northern California • a2MC pleased with progress in building distribution in Southern and Northern California • Product format in ½ gallon carton, consistent with specialty milk
Slide 24: Intellectual property overview
33) Intellectual property overview
Slide 25: Integrated portfolio of IP and proprietary know-how
Integrated portfolio of IP and proprietary know-how • a2MC IP comprises Patents, Brands (incl. registered trade marks), proprietary processes and know how which collectively allow the successful commercialization of A1 protein free products • Under continual enhancement these components are integrat
Slide 26: R&D
R&D • Continuing to develop and enhance portfolio of brand assets, intellectual property and participate in R&D associated with the benefits of the A2 beta-casein protein and the absence of A1 • Research findings from recent completed studies: – Explains at the human cell level the mode of action an
Slide 27: Summary
aQ= Summary
Slide 28: Summary
Summary A proven, sustainable, profitable business model in ANZ delivering upper quartile returns on capital relative to the industry Establishing a premium infant formula brand and business synonymous with quality - targeting growth across multiple markets Business centered on continuing to b
Slide 29: Disclaimer
Disclaimer This presentation dated 10 and 11 March 2016 is provided for information purposes only. The information contained in this presentation is not intended to be relied upon as advice to investors and does not take into account the investment objectives, financial situation or needs of any par
Slide 30: www.thea2milkcompany.com
30 www.thea2milkcompany.com
Slide 31: Appendix
ber Appendix
Slide 32: 1H16 result highlights
Excerpt from 1H16 results presentation 1H16 result highlights • Total revenue of $139.1 million, an increase of 86% on pcp • Group a2 Platinum® infant formula revenue of $73.9 million, up 340% on pcp • Net profit after tax of $10.1 million • Group operating EBITDA1 of $18.7 million, up 472%2 on pcp
Slide 33: Financial summary
Excerpt from 1H16 results presentation Financial summary NZ$ million 1H15 1H16 % change Revenue 74.8 139.2 +86% • Revenue growth of 86% on pcp • Gross margin reflects increased contribution from infant Gross margin 26.1 57.0 +118% formula sales • Increases to administration, marketing and other refl
Slide 34: Reconciliation of non GAAP measures
Excerpt from 1H16 results presentation Reconciliation of non GAAP measures NZ$ million 1H15 1H16 Australia & New Zealand Segment EBITDA 4.9 9.3 China & other Asia Segment EBITDA (0.6) 1.0 UK & USA Segment EBITDA (1.9) (5.5) Corporate & other Segment EBITDA 0.1 13.9 EBITDA1 2.5 18.7 EBITDA before non
Slide 35: Other corporate initiatives
Excerpt from 1H16 results presentation Other corporate initiatives • Oversubscribed equity raising to fund increase in infant formula working capital and maintain conservative capital position: – $40 million raised from institutional investors –$3 million share purchase plan • Admission to ASX in Ma
Slide 36: The Milk You've Never Heard of That's Rocking the Dairy World
225 The Milk You’ve Never Heard of That’s Rocking the Dairy World “Since its debut in 2003, a2 Milk has challenged the common wisdom in dairy retailing, grabbing almost 10% of the fresh milk market in Australia with a product that sells for 175 about A$2.80 a liter ($2 a quart), more than double the
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