A2 Milk Company Limited · NZX:ATM
A2 Milk — The a2 Milk Company — FY2021 Earnings Presentation
38 slides from A2 Milk's earnings presentation, Aug 26, 2021
Slide 1: Annual Results
For personal use only ANNUAL RESULTS 26 AUGUST 2021 THE a2 MILK COMPANY LIMITED
Slide 2: Disclaimer
R E S U L T S Disclaimer For personal use only A N N U A L This presentation dated 26 August 2021 provides additional While all reasonable care has been taken in relation to the comment on the Annual Report for the 12 months ended preparation of this presentation, none of the Company, its 30 June 20
Slide 3: Agenda
R E S U L T S For personal use only A N N U A L 2 0 2 1 Results overview 4 Financial overview 7 • AGENDA Regional performance 11 Group updates 24 Outlook 31 Questions 33 Appendix 34 3
Slide 4: Challenging year impacted by COVID-19
R E S U L T S Challenging year impacted by COVID-19 For personal use only • Unprecedented levels of uncertainty and volatility due to the prolonged A N N U A L impact of COVID-19 and a rapidly changing China infant nutrition market • China market growth has reduced significantly from globally high r
Slide 5: FY21 result overview and additional updates
R E S U L T S FY21 result overview and additional updates1 For personal use only • Revenue and EBITDA2 margin was within the guidance range provided in May A N N U A L ‒ Revenue down 30.3% to $1.21b ‒ EBITDA down 77.6% to $123m including stock write-down and MVM acquisition costs 2 0 2 1 ‒ EBITDA ma
Slide 6: Actions taken from 4Q21 are improving channel inventory dynamics
R E S U L T S Actions taken from 4Q21 are improving channel inventory dynamics For personal use only a2MC inventory A N N U A L • Inventory of $112.2 million at year-end, reflecting the impact of stock write-downs • Improvement in age of stock being sold to customers (China label and English label)
Slide 7: Financial Overview
For personal use only 7 FINANCIAL OVERVIEW 2 0 2 1 A N N U A L R E S U L T S
Slide 8: Key financials
R E S U L T S Key financials For personal use only A N N U A L • Revenue impacted by unprecedented levels of uncertainty and volatility due to COVID-19, challenges experienced in the English label infant NZ$ million (continuing operations)1 FY21 FY20 % change nutrition channels, and actions required
Slide 9: Gross margin decreased to 42.3% largely driven by English-label disruption
R E S U L T S Gross margin decreased to 42.3% largely driven by English-label disruption For personal use only A N N U A L FY21 gross margin drivers FY21 higher proportion liquid milk FY21 higher proportion of China-label infant nutrition • Stock write-down of $108.6m 2 0 2 1 5% 5% 5% 4% 5% • Higher
Slide 10: Robust balance sheet, investment in strategic assets
R E S U L T S Robust balance sheet, investment in strategic assets For personal use only A N N U A L +$21.0 $80.7 $21.4 ($24.5) ($39.8) ($12.7) ($4.1) 2 0 2 1 $854.2 $875.2 Cash on hand Group NPAT Working capital Investments in Investment in Synlait Depreciation, amortisation Financing activities &
Slide 11: Regional Performance
For personal use only 11 REGIONAL PERFORMANCE 2 0 2 1 A N N U A L R E S U L T S
Slide 12: China infant nutrition market structure is changing rapidly
INFANT NUTRITION R E S U L T S China infant nutrition market structure is changing rapidly For personal use only A N N U A L • Overall infant nutrition market in China decreased in volume1 during FY21 driven by a significant reduction in birth rates, particularly impacting early stage products, part
Slide 13: China label infant nutrition growth in FY21
INFANT NUTRITION – CHINA LABEL R E S U L T S China label infant nutrition growth in FY21 For personal use only Performance China-label revenue growth A N N U A L NZ$ millions • Sales of a2 至初® China label infant nutrition of $389.9 million, up 15.4% • Reduced rate of growth in 2H21 reflective of sub
Slide 14: Continuing to invest in our brand and engage with consumers in China
INFANT NUTRITION – CHINA LABEL R E S U L T S Continuing to invest in our brand and engage with consumers in China For personal use only Targeted advertising across Investment in mama classes Roadshows and in-store activations to engage A N N U A L various digital channels and in-store promotional pe
Slide 15: Continued investment in the brand driving increases in footprint and share in MBS
INFANT NUTRITION – CHINA LABEL R E S U L T S Continued investment in the brand driving increases in footprint and share in MBS For personal use only APAC marketing a higher proportion of A N N U A L Expanding store footprint Market share increasing overall group marketing spend China distribution (s
Slide 16: Challenging FY21 for English label infant nutrition
INFANT NUTRITION – ENGLISH LABEL R E S U L T S Challenging FY21 for English label infant nutrition For personal use only Performance: Australian daigou/resellers and retailers English and other label infant nutrition revenue A N N U A L • Sales of a2 Platinum® English label infant nutrition of $357.
Slide 17: Challenges in English label channels put pressure on market share
INFANT NUTRITION – ENGLISH LABEL R E S U L T S Challenges in English label channels put pressure on market share For personal use only A N N U A L CBEC market value share1 Daigou market value share2 2 0 2 1 24.3% 22.2% 24.0% 21.7% 22.4% 21.1% 20.6% 22.0% 19.0% 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% Jun
Slide 18: ANZ liquid milk growing strongly
ANZ LIQUID MILK R E S U L T S ANZ liquid milk growing strongly For personal use only Liquid milk revenue (Australia) Performance NZ$ millions 169 A N N U A L • Australia liquid milk revenue up 10.8% to $169.0 million 153 134 • Australia achieved a record market share of 12.2%1 82 78 67 • Increased l
Slide 19: Consistent brand investment has led to strong brand loyalty
ANZ LIQUID MILK R E S U L T S Consistent brand investment has led to strong brand loyalty For personal use only Build brand equity with investment in major TV Foster connections with community and Continuous physical availability powered by A N N U A L partnerships and ‘always on’ media campaign rei
Slide 20: Other nutritional segment also impacted by challenges in daigou/reseller channel
OTHER NUTRITION R E S U L T S Other nutritional segment also impacted by challenges in daigou/reseller channel For personal use only Performance A N N U A L • Overall revenue decline of 38.5% to $52.4 million • Significantly impacted by challenges in daigou/reseller channel 2 0 2 1 Growth potential
Slide 21: USA result driven by change in execution approach
NORTH AMERICA R E S U L T S USA result driven by change in execution approach For personal use only Performance Significantly improved EBITDA A N N U A L • Revenue decreased 3.7% to $63.6 million Chart Title • 2H21 decline in net revenue reflected higher planned trade spend in the period, reduced di
Slide 22: Continuing to invest in our brand and engage with consumers in USA
NORTH AMERICA R E S U L T S Continuing to invest in our brand and engage with consumers in USA For personal use only A N N U A L More affordable premium pricing Increased in-store activation Supported by digital activation and PR 2 0 2 1 22
Slide 23: Broad national distribution in over 26k stores in USA
NORTH AMERICA R E S U L T S Broad national distribution in over 26k stores in USA For personal use only A N N U A L USA distribution over time (store count*) 26.8 2 0 2 1 25.9 24.0 22.0 21.0 12.4 8.2 5.4 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 *Restated store count metrics based on e
Slide 24: Group Updates
For personal use only 24 GROUP U P D AT E S 2 0 2 1 A N N U A L R E S U L T S
Slide 25: Strengthening supply chain capability with MVM investment
R E S U L T S Strengthening supply chain capability with MVM investment For personal use only Overview A N N U A L • Completed the acquisition of a 75% interest in MVM in July for $268.5 million • Formed strategic partnership with China Animal Husbandry Group Strategic rationale 2 0 2 1 • Provides o
Slide 26: Capital allocation framework prioritises investment in growth initiatives
Capital allocation framework prioritises investment in growth initiatives R E S U L T S ahead of returning capital to shareholders For personal use only Operating cash flow generation A N N U A L Capital funding 2 0 2 1 Grow the core business in existing markets Expand the boundaries Balance sheet s
Slide 27: Capital planning is an ongoing activity guided by strategy and framework
Capital planning is an ongoing activity guided by the overall R E S U L T S strategy and capital allocation framework For personal use only Overview A N N U A L • Capital planning is an ongoing activity of the Board • Guided by the Company’s strategy and capital allocation framework • Framework prio
Slide 28: Growth strategy review underway with market update planned for late October
R E S U L T S Growth strategy review underway with market update planned for late October For personal use only Growth strategy review A N N U A L • Driving infant nutrition growth in China label • Evolving English label distribution channels • Advancing infant nutrition product portfolio and innova
Slide 29: Significant progress in sustainability
R E S U L T S Significant progress in sustainability For personal use only • Significant progress made in several focus areas including: A N N U A L ‒ Enhancing approach to animal welfare and farm environmental plans ‒ Continuing to invest, engage and support local communities 2 0 2 1 ‒ Advancing se
Slide 30: Executive Leadership Team appointments and Asia Pacific reorganisation
Executive Leadership Team appointments and Asia Pacific division reorganisation R E S U L T S to build capability and provide more dedicated management focus completed For personal use only A N N U A L 2 0 2 1 David Bortolussi Xiao Li Yohan Senaratne Kevin Bush Blake Waltrip Bernard May Managing Dir
Slide 31: Outlook
For personal use only 31 OUTLOOK 2 0 2 1 A N N U A L R E S U L T S
Slide 32: Outlook
R E S U L T S Outlook For personal use only See full commentary in results announcement A N N U A L • The Company is confident in the underlying fundamentals of the business and the growth opportunity remains strong with a positive long-term outlook • However, given the continuing uncertainty and vo
Slide 33: Questions
For personal use only 33 QUESTIONS 2 0 2 1 A N N U A L R E S U L T S
Slide 34: Appendix
For personal use only 34 APPENDIX 2 0 2 1 A N N U A L R E S U L T S
Slide 35: Reconciliation of non-GAAP measures
R E S U L T S Reconciliation of non-GAAP measures For personal use only A N N U A L NZ$ million FY21 FY20 Australia & New Zealand EBITDA 148.8 465.6 2 0 2 1 China & Other Asia segment EBITDA 75.6 224.9 USA segment EBITDA (33.5) (50.5) Corporate EBITDA (57.1) (88.0) UK EBITDA - (2.3) MVM transaction
Slide 36: Geographic and product segment revenue performance
R E S U L T S Geographic and product segment revenue performance For personal use only A N N U A L Revenue Total UK ANZ China & Other Asia USA (NZ$ million) Group (discontinued ops) Infant nutrition 357.0 556.8 - 913.8 - 2 0 2 1 Liquid milk 169.0 8.3 63.3 240.5 - FY21 Other nutritionals1 33.7 18.4 0
Slide 37: Geographic and product segment revenue performance
R E S U L T S Geographic and product segment revenue performance For personal use only A N N U A L Geographic segment revenue & EBITDA Product segment revenue1 China & Other UK Total Infant Liquid Other NZ$ million ANZ USA Corporate Asia (Discontinued ops) Group nutrition milk nutritional 2 0 2 1 Re
Slide 38: www.thea2milkcompany.com
For personal use only www.thea2milkcompany.com