A2 Milk Company Limited · NZX:ATM
A2 Milk — The a2 Milk Company — FY2020 Earnings Presentation
32 slides from A2 Milk's earnings presentation, Aug 19, 2020
Slide 1: Building from Strength: 2020 Annual Results
For personal use only BUILDING FROM STRENGTH 2020 Annual Results – 19 August 2020 The a2 Milk Company Limited
Slide 2: Disclaimer
Disclaimer This presentation dated 19 August 2020 provides additional comment on the Annual Report for the 12 months ended 30 June 2020 of The a2 Milk Company For personal use only Limited (the “Company” or “a2MC”) and accompanying information released to the market on the same date. As such, it sho
Slide 3: Agenda
For personal use only AGENDA Results highlights 4 Year in review 11 Group strategic updates 24 Outlook 27 Appendix 29
Slide 4: Results Highlights
R E S U LT S H I G H L I G H T S For personal use only Strong results across all markets and product groups
Slide 5: FY20 Highlights
FY20 Highlights • Total revenue of $1.73 billion, an increase of 32.8% For personal use only • EBITDA of $549.7 million, an increase of 32.9% • Net profit after tax of $385.8 million, an increase of 34.1% • Basic earnings per share (EPS) of 52.39 cents, an increase of 33.5% • EBITDA to sales margin
Slide 6: Significant earnings growth supported by healthy underlying gross margin
Significant earnings growth supported by healthy underlying gross margin NZ$ million (including discontinued ops) FY20 FY19 % change For personal use only Revenue (including discontinued operations) 1,732.5 1,304.5 +33% • Result including the loss from discontinued operations (i.e. fresh milk operat
Slide 7: Strong growth across all regions and all products
Strong growth across all regions and all products Geographic segment revenue & EBITDA Product segment revenue1 For personal use only China & Total UK Liquid Infant Other NZ$ million ANZ USA Corporate Other Asia Group (discontinued ops) milk nutrition nutritional Revenue 965.7 699.4 66.1 - 1,731.1 1.
Slide 8: Robust balance sheet with substantial cash balance
Robust balance sheet with substantial cash balance For personal use only • Operating cash flow of $427.4 million and closing cash balance of $854.2 million • Increase due to strong Group earnings • Improvement in working capital of $33.6 million due to timing of supplier payments • Increased shareho
Slide 9: Key financial charts
Key financial charts1 For personal use only Group revenue (NZ$ million) Group EBITDA (NZ$ million) Basic earnings per share (cents) 1,733 550 52.39 1,304 925 414 39.25 923 287 691 283 195 550 27.00 488 141 140 293 807 613 263 12.66 435 77 218 256 143 64 FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20 FY17 F
Slide 10: COVID-19 impact
COVID-19 impact • Staff safety, wellbeing programmes in place, and flexible and remote work practices enacted For personal use only • COVID-19 caused disruptions and changing consumer behaviour ‒ Shift from offline to online, in particular in China in 3Q20 ‒ Pantry stocking of infant nutrition in 3Q
Slide 11: Year in Review: Strengthening execution
For personal use only YEAR IN REVIEW Strengthening execution
Slide 12: Continued progress on strengthening our execution
Continued progress on strengthening our execution For personal use only MAXIMISE SUSTAINABLE BROADEN PORTFOLIO EXPAND IN OTHER GROWTH FROM CORE PRODUCTS IN CORE MARKETS TARGETED MARKETS IN CORE MARKETS BUILDING TOWARDS SUSTAINABLE BRAND LEADERSHIP DELIVERING THE ORGANISATION OF THE FUTURE 12 | FY20
Slide 13: Asia Pacific business delivering strong growth
Asia Pacific business delivering strong growth Asia Pacific in total For personal use only • Revenue $1.66 billion, up 31.5% and EBITDA of $690.5 million, ANZ China & Other Asia up 32.0% segment revenue segment revenue1 • 33.8% growth in infant nutrition revenue across APAC, driven by +65% 65.1% inc
Slide 14: China-based retail channels now account for 48% of total infant nutrition
China-based retail channels now account for 48% of total infant nutrition Revenue growing across all channels China-based channels strengthening For personal use only a2MC IMF revenue (NZ$m) a2MC IMF % revenue by channel 1,423.9 2% 6% 12% 16% 337.7 20% 24% 18% 1,063.8 22% 23% 167.8 341.1 24% 724.4 2
Slide 15: Focused on our "one brand, two labels" strategy
Focused on our “one brand, two labels” strategy for infant nutrition • Portfolio approach to developing ‘one brand with two labels’ across key consumer For personal use only retail channels: MBS, CBEC and resellers in ANZ • China label range delivers our super premium positioning, in particular in h
Slide 16: Significant growth in marketing investment
Significant growth in marketing investment supporting “one brand, two labels” • Marketing investment split between mass media to build awareness, and heavy localised activations (incl. in-store) to drive conversion to trial – For personal use only the combination has driven strong sales growth, in p
Slide 17: Growing market share positions in key China-based retail channels
Growing market share positions in our key China-based retail channels Nielsen MBS value share (%)1 Smartpath CBEC market share (%)2 For personal use only 21.5% 2.0% 1.7% 20.5% 1.3% 18.6% Jun-19 Dec-19 Jun-20 Jun-19 Dec-19 Jun-20 1 Nielsen MBS 12 month value share. 2 Smartpath CBEC 12 month value sha
Slide 18: Impressive China label infant nutrition growth
Impressive China label infant nutrition growth in line with strategy For personal use only • Sales of a2 至初® China label infant nutrition of $337.7 million, more than doubled the sales in the prior corresponding period, now accounting for China distribution (store count) 24% of portfolio • Increased
Slide 19: Continued strong growth of English label infant nutrition
Continued strong growth of English label infant nutrition Cross border e-commerce (CBEC) For personal use only • Sales of a2 Platinum® English label infant nutrition of $341.1 million, up 40.3% • Positive results across the key e-commerce selling events throughout the year, including “11/11 singles
Slide 20: Asia Pacific liquid milk & other nutritional products growing strongly
Asia Pacific liquid milk & other nutritional products growing strongly Australian liquid milk For personal use only • Achieved double-digit revenue growth in Australian fresh milk, our most mature category – revenue totalling $152.5 million, growth of 14.1% • Achieved a record market share of 11.3%1
Slide 21: USA driving towards meaningful scale
USA driving towards meaningful scale • Gaining momentum in the USA market For personal use only USA segment revenue ‒ Revenue up 91% to NZ$66.1 million ‒ Increased marketing investment and distribution growth delivered EBITDA losses of NZ$50.5 million 66 ‒ Brand awareness more than doubling and conv
Slide 22: Strong growth in distribution and national footprint of over 20k stores
Strong growth in distribution and national footprint of over 20k stores For personal use only Broad national distribution occurred from FY19 USA distribution over time (store count) April 2015: 20.3k Launch into the USA via California region 17.5k (~500 stores in FY15) 13.1k 10.0k From FY19: Broad n
Slide 23: New advertising, packaging and products
New advertising, packaging and products New advertising campaign building strong brand New packaging design and launch of Coffee Creamers For personal use only awareness foundation and growth driving impact and growth 23 | FY20 Annual Results
Slide 24: Group Strategic Updates
G R O U P S T R AT E G I C U P D AT E S For personal use only An integrated approach to building a sustainable future
Slide 25: Capital allocation framework prioritises investment in growth
Capital allocation framework prioritises investment in growth initiatives ahead of returning capital to shareholders For personal use only Operating cash flow generation Capital funding Grow the core business in existing markets Expand the boundaries Balance sheet strength & flexibility • Investment
Slide 26: Building a sustainable business for the future
Building a sustainable business for the future • Progress in FY20 included: For personal use only ‒ Preliminary impact assessment as part of our commitment to the objectives under the Taskforce on Climate-related Financial Disclosure (TCFD) ‒ Series of assessments regarding ethical supply chain and
Slide 27: Outlook: FY21 and medium-term target
OUTLOOK For personal use only FY21 and medium-term target
Slide 28: Outlook
Outlook FY21 For personal use only • Globally, there continues to be uncertainty resulting from COVID-19, and the potential for moderation of economic activity. This could impact consumer behaviour in our core markets, as well as participants within the supply chain, most notably in China • Notwiths
Slide 29: Appendix
APPENDIX For personal use only 29 | FY20 Annual Results
Slide 30: Reconciliation of non-GAAP measures
Reconciliation of non-GAAP measures NZ$ million FY20 FY19 For personal use only Australia & New Zealand EBITDA 465.6 388.2 China & Other Asia segment EBITDA 224.9 134.9 USA segment EBITDA (50.5) (44.0) Corporate EBITDA (88.0) (58.9) UK EBITDA (2.3) (6.6) EBITDA1 549.7 413.6 Depreciation/amortisation
Slide 31: Geographic and product segment revenue performance
Geographic and product segment revenue performance UK For personal use only Revenue China & Other Total ANZ USA (discontinued (NZ$ million) Asia Group operations) Liquid milk 152.5 3.4 66.1 222.0 1.4 Infant nutrition 745.1 678.8 - 1,423.9 - FY20 Other nutritional 68.1 17.2 - 85.2 - TOTAL 965.7 699.4
Slide 32: For personal use only
For personal use only www.thea2milkcompany.com