A2 Milk Company Limited · NZX:ATM
A2 Milk — The a2 Milk Company — H1 FY2020 Earnings Presentation
40 slides from A2 Milk's earnings presentation, Feb 27, 2020
Slide 1: Interim Results
For personal use only Results Interim
Slide 2: For personal use only
For personal use only This presentation dated 27 February 2020 provides additional comment on the Interim Report for the 6 months ended 31 December 2019 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 b
Slide 3: Agenda
For personal use only AGENDA Results highlights Financial overview Delivering on our strategic priorities and business objectives Group strategic updates Outlook & medium-term target
Slide 4: Results Highlights
For personal use only R E S U LT S H I G H L I G H T S
Slide 5: Results highlights
For personal use only • Total revenue of $806.7 million, an increase of 31.6% • EBITDA of $263.2 million, an increase of 20.5% • Net profit after tax of $184.9 million, an increase of 21.1% • Basic earnings per share (EPS) of 25.15 cents, an increase of 20.6% • EBITDA to sales margin of 32.6%, bette
Slide 6: Financial Overview
For personal use only FINANCIAL OVERVIEW
Slide 7: Financial overview
For personal use only NZ$ million (including discontinued ops) 1H20 1H19 % change • Result including the loss from discontinued operations (ie fresh milk operations in the UK) Revenue (including discontinued operations) 806.7 613.1 +32% • Revenue marginally above outlook provided for 1H20 EBITDA (in
Slide 8: Geographic and product segment revenue and EBITDA
For personal use only Geographic segment revenue & EBITDA Product segment revenue China & Total UK Liquid Infant Other NZ$ million ANZ USA Corporate other Asia Group (discontinued ops) milk nutrition nutritional Revenue 460.2 317.1 28.0 - 805.3 1.4 105.8 659.2 41.7 1H20 EBITDA 227.9 117.5 (30.0) (48
Slide 9: Cash balance movement
For personal use only • Cash balance of $618.4 million +184.9 • Increase due to strong performance +8.2 across the group, partly offset by increase (32.9) (1.9) (4.7) of working capital • Working capital increase of $32.9 million 618.4 to support continued growth, including 464.8 increase in invento
Slide 10: Group revenue, EBITDA and earnings per share
For personal use only Group revenue (NZ$ million) Group EBITDA2 (NZ$ million) Basic earnings per share (cents) 1,304.5 413.6 39.3 922.7 691.4 283.0 27.0 195.2 549.5 488.0 140.0 141.2 12.7 293.4 806.7 263.2 25.2 613.1 218.4 77.1 434.7 143.0 256.1 64.1 FY17 FY18 FY19 1H20 FY17 FY18 FY19 1H20 FY17 FY18
Slide 11: Delivering on our strategic priorities and business objectives
For personal use only DELIVERING ON OUR S T R AT E G I C P R I O R I T I E S AND BUSINESS OBJECTIVES
Slide 12: For personal use only
For personal use only 2020 Interim Results | 12
Slide 13: Strategic priorities
For personal use only Deliver Asia Reach Build towards Deliver the Pacific sales meaningful scale sustainable brand organisation of the strategy outcomes in the USA leadership future 2020 Interim Results | 13
Slide 14: Asia Pacific business
For personal use only Asia Pacific business ANZ China & other Asia • Revenue $777.4 million, up 30.0% and EBITDA of $345.4 segment revenue segment revenue million, up 30.2% • 30.0% growth in infant nutrition revenue across APAC, 842.7 423.5 driven by 76.7% increase in China – strong growth in all ch
Slide 15: Infant nutrition – China offline channels
For personal use only Infant nutrition – China offline channels China distribution (store count) • Sales in a2 Platinum® China label infant nutrition of $146.7 million, double the sales in the prior corresponding period 18.3k 16.4k • Expanded our footprint to 18,300 stores, up from 16,400 stores at
Slide 16: Infant nutrition – Cross border e-commerce
For personal use only Infant nutrition – Cross border e-commerce • Sales in a2 Platinum® English label infant nutrition of $158.7 million, up 57.8% • Positive results for 11:11 China e-commerce sales event ― JD.com: a2 Platinum® Stage 3 was the top selling infant nutrition product ― JD.com: second b
Slide 17: Infant nutrition – Australian retailers and resellers
For personal use only Infant nutrition – Australian retailers and resellers • Sales in a2 Platinum® English label infant nutrition of $352.0 million, up 9.5% • We remain the market brand leader in Australian grocery and pharmacy channels • We continue to invest behind our brand, with our level of ad
Slide 18: Growing revenue across all channels
For personal use only We are growing revenue across all our channels… …changing the shape of our business a2MC IMF revenue (NZ$m) a2MC IMF % revenue by channel 2% 1,063.8 6% 12% 16% 20% 22% 167.8 18% 22% 23% 724.4 243.1 24% 659.2 83.9 158.0 146.7 394.1 78% 158.7 76% 24.8 66% 71.5 61% 214.3 652.9 54%
Slide 19: China consumption share
For personal use only China consumption share (%)1 1.2ppts increase pcp2 6.6% 6.4% 5.4% 4.8% Jun-18 Dec-18 Jun-19 Dec-19 1 Kantar Infant Formula market tracking of China Key & A and BCD cities for 12 months, by value. 2 Prior corresponding period. 2020 Interim Results | 19
Slide 20: Liquid milk and other nutritional products
For personal use only Liquid milk Other nutritional products • Achieved double-digit revenue growth in Australian fresh milk, our • Overall revenue growth of 21.7% to $41.7 million the majority of most mature category which is recorded in our ANZ segment ― Revenue growth of 11.3% totalling $74.7 mil
Slide 21: Marketing activities
For personal use only Broadcast media to In-store education and Trade and retail build awareness activation to drive trial awareness building 2020 Interim Results | 21
Slide 22: New TV campaign and 11:11 singles day
For personal use only New TV advertising campaign and website “11:11 singles day” a success launched in Dec-19 2020 Interim Results | 22
Slide 23: USA business
For personal use only • We are gaining momentum as we execute on our US strategy ― Revenue up 116% to NZ$28.0 million ― EBITDA losses of NZ$30.0 million resulting from increased investment in 34.6 building brand awareness and distribution growth through marketing 28.0 • Building towards an initial m
Slide 24: USA distribution (store count)
For personal use only USA distribution (store count) 17.5k January 2018: southeast and northeast launch 13.1k 10.0k 6.0k December 2019: broad national 3.6k distribution 3.0k Legend Broad distribution Limited distribution Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 No distribution 2020 Interim Results
Slide 25: USA product and packaging launches
New packaging design launched Sep-19 with greater For personal use only Coffee Creamer launched Jul-19; new ad campaign launched Oct-19; and new consumer website launched Nov-19 impact and modernity 2020 Interim Results | 25
Slide 26: Organisation of the future
For personal use only Investing in more Step-changing our Investing in great people people experience technology 2020 Interim Results | 26
Slide 27: Group Strategic Updates
For personal use only G R O U P S T R AT E G I C U P D AT E S
Slide 28: Sustainability commitments
For personal use only • In August 2019 we announced goals and our formal commitments to: ― Support the global ambition of the Paris Agreement and a 2050 net zero emissions target; ― Work with our farmers to meet the standards set by the World Organisation for Animal Health and avoid practices that c
Slide 29: Key partners and supply updates
For personal use only • Strong partner for our infant nutrition • Foundational partnership for infant nutrition • Relatively new partnership spanning multiple products in mainland China since 2013 • Supply rights for defined infant nutrition products and emerging markets • Exclusive import agent for
Slide 30: Capital use and manufacturing evaluation
For personal use only • As part of the Board’s ongoing review of the most appropriate use of capital for the business, our intention has been to prioritise investment in growth initiatives ahead of returning capital to shareholders. • Due to the increasing scale of our infant nutrition business, the
Slide 31: Outlook & Medium-Term Target
For personal use only OUTLOOK & M E D I U M - T E R M TA R G E T
Slide 32: FY20 outlook
FY20 outlook For personal use only • Overall for FY20, we anticipate continued strong revenue growth across our key regions supported by increased marketing investment in China and the USA as well as the ongoing development of organisational capability to support the execution of our strategy. • Glo
Slide 33: Appendix
For personal use only APPENDIX
Slide 34: EBITDA to net profit reconciliation
For personal use only NZ$ million 1H20 1H19 Australia & New Zealand segment EBITDA 227.9 192.0 China & other Asia segment EBITDA 117.4 73.2 USA segment EBITDA (30.0) (17.3) Corporate EBITDA (48.9) (27.4) UK EBITDA (3.2) (2.1) EBITDA1 263.2 218.4 Depreciation/amortisation (1.8) (1.0) EBIT1 261.4 217.
Slide 35: Geographic and product segment revenue
For personal use only Geographic and product segment revenue UK China & Total NZ$ million ANZ USA (discontinued other Asia Group operations) Liquid milk 74.7 1.8 28.0 104.5 1.4 Infant nutrition 352.0 307.2 - 659.2 - 1H20 Other nutritional 33.5 8.1 - 41.6 - TOTAL 460.2 317.1 28.0 805.3 1.4 Liquid mil
Slide 36: Synlait Auckland facility registration
For personal use only • Synlait Milk’s Auckland blending and canning facility received infant formula registration: ― In December 2019, Synlait received the infant formula registration from the GACC1 for its Auckland-based blending and canning facility. Synlait can now progress brand registration pr
Slide 37: Consumer and market trends
For personal use only Growing consumer Growing focus on Rise of the demand for food safety, Rapid pace of middle class health and naturalness digitalisation in Asia wellness products and provenance 2020 Interim Results | 37
Slide 38: Value creation capitals
For personal use only Unique, Passionate and Capital Innovative and Responsible use Enriching premium brand thriving smart ethical of natural community and IP team approach supply chain resources wellbeing Intellectual capital Human capital Financial capital Manufacturing capital Natural capital Soc
Slide 39: Creating and sustaining value
For personal use only • The interrelationship between our macro consumer factors and our business strategy determines our ability to create and sustain value • As we grow, we are focused on having a positive impact on the world in which we operate, recognising that with scale comes greater responsib
Slide 40: For personal use only
For personal use only t h e a 2 m i l kc o m p a n y. c o m
The a2 Milk Company — H1 FY2020 Earnings Presentation on 6ix