A2 Milk Company Limited · NZX:ATM
A2 Milk — The a2 Milk Company — FY2022 Earnings Presentation
57 slides from A2 Milk's earnings presentation, Aug 29, 2022
Slide 1: 2022 Annual Results
For personal use only 2022 ANNUAL RESULTS The a2 Milk Company Limited 29 August 2022
Slide 2: Disclaimer
Disclaimer 2 R E S U L T S For personal use only A N N U A L This presentation dated 29 August 2022 provides additional factors, many of which are beyond the control of the Company and commentary on the Annual Report for the 12 months ended 30 June which may cause actual results, performance or achi
Slide 3: Agenda
Agenda 3 R E S U L T S For personal use only A N N U A L 2 0 2 2 Results overview 4 and strategy update Financial overview 15 Regional and product 23 performance Appendix 54
Slide 4: Significant progress implementing refreshed strategy and improving performance during the year
Significant progress implementing refreshed strategy and 4 improving performance during the year R E S U L T S For personal use only A N N U A L 1. Inventory management actions effective − Significant steps taken last calendar year to address excess IMF inventory have proven effective with channel i
Slide 5: a2MC returns to growth after COVID-19 related disruption in FY21
a2MC returns to growth after COVID-19 related disruption in FY21 5 R E S U L T S For personal use only IP Creators Australian branded fresh milk focus China IMF and US liquid milk expansion Adapting for growth A N N U A L Shift from Refreshes growth strategy licensing to and commences execution oper
Slide 6: FY22 result delivers double-digit growth in revenue and earnings in a challenging market
FY22 result delivers double-digit growth in revenue and earnings in 6 R E S U L T S a challenging market For personal use only • Group results in line with the Company’s expectations A N N U A L − Group revenue growth of 19.8% to $1,446.2 million (growth of 11.2% ex-MVM) with 2H22 up 18.9% on 1H22 (
Slide 7: Outlook for FY23 is positive with continued growth expected
Outlook for FY23 is positive with continued growth expected 7 R E S U L T S For personal use only A N N U A L See full outlook statement contained in results announcement dated 29 August 2022 including industry and business risks • Expecting high single digit revenue growth in FY23. 1H23 growth (on
Slide 8: Key priorities of refreshed growth strategy remain unchanged, with refinements to purpose and vision
Key priorities of a2MC’s refreshed growth strategy remain 8 unchanged, with refinements to purpose and vision R E S U L T S For personal use only A N N U A L Purpose We pioneer the future of Dairy for good Vision An A1-free world where Dairy nourishes all people and our planet 2 0 2 2 PEOPLE PLANET
Slide 9: Updated purpose and vision highlights the positive impact a2MC wants to have
Updated purpose and vision highlights the positive impact 9 a2MC wants to have on the world, inspiring its team and partners R E S U L T S For personal use only A N N U A L 2 0 2 2
Slide 10: Significant increase in sustainability targets, initiatives and impact
Significant increase in sustainability targets, initiatives and impact 10 R E S U L T S Targets and commitments For personal use only • Committed to more ambitious sustainability targets at Investor Day in October 2021 MVM manufacturing site, Southland, New Zealand A N N U A L • Updated climate scen
Slide 11: On track to achieve ambition to grow sales to $2 billion and improve EBITDA margins
On track to achieve ambition to grow sales to $2 billion and 11 improve EBITDA margins over time R E S U L T S For personal use only Medium-term revenue and EBITDA margin ambition Areas of planned revenue growth Comments A N N U A L EBITDA margin Revenue, NZ$ billions Growth ambition • $2 billion re
Slide 12: Encouraging progress against non-financial measures of success and key leading indicators
Encouraging progress against our non-financial measures of 12 success and key leading indicators R E S U L T S For personal use only A N N U A L People Sustainability Brand health Market share Innovation 1 2 3 4 5 2 0 2 2 GHG emissions China unprompted Access to ≥3 CL Safety TRIFR CL MBS share reduc
Slide 13: China new GB registration process update
China new GB registration process update 13 R E S U L T S For personal use only A N N U A L • a2MC and Synlait are working closely together in relation to the new GB registration process by China’s State Administration for Market Regulation (SAMR) for a2MC’s China label IMF product, a2 至初®. China la
Slide 14: On-market share buyback announced reflecting strong balance sheet
On-market share buyback announced reflecting strong balance 14 sheet and improved confidence in outlook R E S U L T S For personal use only A N N U A L • The Company regularly reviews its balance sheet position, consistent with its capital allocation framework, which prioritises investment opportuni
Slide 15: Financial Overview
For personal use only FINANCIAL OVERVIEW
Slide 16: Income statement reflects higher IMF revenue underpinned by increased marketing investment and MVM acquisition
Income statement reflects higher IMF revenue underpinned by 16 increased marketing investment and MVM acquisition R E S U L T S For personal use only A N N U A L $ million1 FY22 FY21 % change • Net sales revenue growth reflects strong IMF performance, Net Sales Revenue 1,443.7 1,205.0 19.8% incremen
Slide 17: Growth in China and USA segments with shift in ANZ revenue towards China
Growth in China and USA segments with shift in ANZ revenue 17 towards China due to route-to-market change R E S U L T S For personal use only A N N U A L China & Total 2 $ million ANZ Other Asia USA MVM Corporate Group Revenue 532.7 726.5 82.7 104.4 - 1,446.2 2 0 2 2 FY22 EBITDA 173.2 145.1 (36.7) (
Slide 18: Growth in IMF and other product categories overall
Growth in IMF and other product categories overall 18 R E S U L T S For personal use only A N N U A L Revenue China & Total 2 $ million ANZ Other Asia USA MVM Group IMF 328.8 693.4 - - 1,022.2 2 0 2 2 Liquid milk 172.0 11.1 82.4 - 265.4 FY22 Other 31.9 22.1 0.3 104.4 158.6 TOTAL 532.7 726.5 82.7 104
Slide 19: Like-for-like gross margin % reflects consistent product & label mix
Like-for-like gross margin % reflects consistent product & label mix 19 R E S U L T S For personal use only A N N U A L Gross margin drivers Revenue % by product category (ex MVM) IMF revenue % by channel/label • Gross margin of 46.0%, was up 3.7ppts 2 0 2 2 compared with prior year 5% 5% 6% 5% 5% 4
Slide 20: Marketing investment increased significantly consistent with growth strategy
Marketing investment increased significantly consistent with 20 growth strategy R E S U L T S For personal use only A N N U A L Marketing and SG&A drivers Marketing investment increased Administrative and other expenses • Marketing investment was up 36.3% $ million $ million 2 0 2 2 compared with pr
Slide 21: Balance sheet remains very strong post MVM acquisition
Balance sheet remains very strong post MVM acquisition 21 R E S U L T S For personal use only A N N U A L $ million FY22 FY21 % change • Closing cash and term deposits balance of $887.3 million driven by strong Cash and term deposits 887.3 875.2 1.4% operating cash conversion, offset by $213.7 milli
Slide 22: Strong operating cash flow reflects working capital timing benefit
Strong operating cash flow reflects working capital timing benefit 22 R E S U L T S For personal use only A N N U A L $ million FY22 FY21 % change Cash flows from operating activities • Cash flows from operating activities Receipts from customers 1,431.3 1,251.9 14.3% ‒ Relatively high operational c
Slide 23: Regional & Product Performance
For personal use only REGIONAL & PRODUCT PERFORMANCE
Slide 24: China IMF market challenging but still significant growth opportunity for a2MC
China IMF market dynamics China IMF market challenging but still significant growth 24 opportunity for a2MC R E S U L T S For personal use only A N N U A L • Number of births decreased by 11.5% in 2021 to 10.6 million1 and is expected to decline in 2022 in line with a2MC expectations • Market volume
Slide 25: China label key messages
China label IMF China label key messages 25 R E S U L T S For personal use only A N N U A L Strategic priorities Progress update Business impact • Increased investment in brand, further • Achieved new highs in brand health 2 0 2 2 1 Continue to invest in and integrating marketing campaigns with a me
Slide 26: China label IMF sales growth driven by execution of refreshed growth strategy
China label IMF China label IMF sales growth driven by execution of refreshed 26 growth strategy R E S U L T S For personal use only A N N U A L Strong underlying consumer demand China label net sales revenue $ million 438 • Net revenue of a2 至初® China label IMF was up 12.2% compared with FY21 to 2
Slide 27: Within China label channels, several dynamics are supporting growth
China label IMF Within China label channels, several dynamics are 27 supporting growth R E S U L T S For personal use only Increasing preference for strong brands – A N N U A L Continued mix shift to ultra premium segment Rapid growth in A2 protein category resulting in brand consolidation MBS retai
Slide 28: Distribution expanded with improvement in like-for-like sales
China label IMF Distribution expanded with improvement in like-for-like sales 28 R E S U L T S For personal use only A N N U A L Expanding store footprint Improvement in LFL store growth a2MC China distribution (store count ‘000)1 a2MC CL IMF distributor sell-out to stores (units)1 INDICATIVE 2 0 2
Slide 29: Growth reflected in MBS share gains in both Key&A and BCD cities
China label IMF Growth reflected in MBS share gains in both Key&A and BCD cities 29 R E S U L T S For personal use only A N N U A L National MBS value share Key&A MBS value share BCD MBS value share a2MC MBS MAT value share (%) a2MC Key&A 12-month MBS value share (%) a2MC BCD 12-month MBS value shar
Slide 30: DOL share growth in priority platforms Tmall and JD
China label IMF DOL share growth in priority platforms Tmall and JD 30 R E S U L T S For personal use only A N N U A L a2MC DOL sales growth DOL value share Tmall and JD value share a2MC CL online IMF sales from distributors to a2MC DOL MAT value share (%)2 a2MC Tmall and JD MAT value share (%)2 2 0
Slide 31: Share gains achieved across all stages in MBS and DOL
China label IMF Share gains achieved across all stages in MBS and DOL 31 R E S U L T S For personal use only Positive growth in early stage products A N N U A L (MBS+DOL) MBS share by stage DOL share by stage a2MC CL distributor sell out by stage (units)1 MAT value share by stage2 MAT value share by
Slide 32: Targeted brand investment driving consumer engagement and share
China label IMF Targeted brand investment driving consumer engagement 32 and share R E S U L T S For personal use only A N N U A L New integrated marketing campaign approach in FY22 Below the line activation stepped up in FY22 • Launched integrated marketing campaign in 4Q22, with investments across
Slide 33: New marketing campaigns are enhancing effectiveness and delivering improved brand metrics
China label IMF New marketing campaigns are enhancing effectiveness and 33 delivering improved brand metrics R E S U L T S For personal use only A N N U A L • Continuously optimising media mix through 2 0 2 2 precise targeting significantly uplifted un-aided awareness and increased trial • Clear fun
Slide 34: Partnered with Operation Smile in China
China label IMF Partnered with Operation Smile in China to provide corrective 34 surgeries and nutrition products R E S U L T S For personal use only A N N U A L • Approximately 25,000 babies born in China each year suffer from cleft lip palate 2 0 2 2 • Through our partnership with Operation Smile
Slide 35: Brand awareness reached new highs post 4Q22 campaign
China label IMF Brand awareness reached new highs post 4Q22 campaign 35 R E S U L T S For personal use only A N N U A L a2MC top of mind awareness % a2MC spontaneous awareness % a2MC total brand awareness % 2 0 2 2 54 54 49 47 47 45 43 9 21 33 16 25 25 6 15 14 5 5 13 13 12 4 4 4 10 3 6 5 1 1 Jan-22
Slide 36: Brand trial and loyalty also increased
For personal use only 8 8 Jan-19 Jan-19 China label IMF 7 Apr-19 7 Apr-19 Oct-19 12 Oct-19 12 Apr-20 16 Apr-20 16 Sep-20 17 Sep-20 17 Dec-20 17 May-21 18 Dec-20 17 Oct-21 17 May-21 18 Jan-22 19 Source: IPSOS China brand health quarterly tracker (n= 9750 respondents). a2MC ever trialed % Oct-21 17 Ju
Slide 37: English label IMF key messages
English label IMF English label IMF key messages 37 R E S U L T S For personal use only A N N U A L Strategic priorities Progress update Business impact • Rebalanced channel inventory and • Inventory reached targeted levels, 2 0 2 2 1 Maintain tight control of English simplified route-to-market, and
Slide 38: Underlying sales and market share impacted by shift in route-to market
English label IMF Underlying sales and market share impacted by shift in 38 route-to market R E S U L T S For personal use only A N N U A L English label sales have stabilised with channel mix shift in FY22 ANZ English label IMF net sales revenue • Net sales revenue of a2 Platinum® English label IMF
Slide 39: English label channels showing signs of stabilisation in 2H22
English label IMF English label channels showing signs of stabilisation in 2H22 39 R E S U L T S For personal use only Emergence of ultra-premium segment A N N U A L BCD cities leading the stabilization of EL Channel mix shift from Daigou to CBEC and O2O provides opportunity for growth EL value sale
Slide 40: English label market share increased in CBEC and O2O with Daigou trajectory improving
English label IMF English label market share increased in CBEC (2H22) 40 and O2O with Daigou trajectory improving R E S U L T S For personal use only A N N U A L CBEC market value share1 Daigou market value share2 O2O market value share2 Daigou share 2 0 2 2 CBEC share trajectory improved: increased
Slide 41: Inventory freshness amongst the best in the industry, with pricing returning to normal
English label IMF Inventory freshness is amongst the best in the industry, with 41 pricing returning to normal levels R E S U L T S For personal use only A N N U A L Age profile of distributor inventory holdings (Jun-22) EL Stage 3 market pricing (RMB/tin)1 2 0 2 2 28% 52% 31% 100% 100% 100% 100% 48
Slide 42: Upward momentum in English label brand awareness following two marketing campaigns
English label IMF Upward momentum in English label brand awareness following 42 two marketing campaigns in FY22 R E S U L T S For personal use only A N N U A L Total a2MC EL prompted brand awareness (%) 2 0 2 2 32% 29% 29% 27% 27% 25% 24% 21% 18% 16% Jan-19 Apr-19 Oct-19 Apr-20 Sep-20 Dec-20 May-21
Slide 43: Expanded support to Daigou network through events and outreach
English label IMF Expanded support to Daigou network through events and outreach 43 R E S U L T S For personal use only A N N U A L International Student Sports Day with Zhou Qi (China Basketball Player) a2 Brand Month – Feel the Difference 2 0 2 2
Slide 44: Continuing to build CBEC capability with promising 6/18 results
English label IMF Continuing to build CBEC capability with promising 6/18 results 44 R E S U L T S For personal use only A N N U A L 6/18 Activation overview – English label 6/18 Performance – English label 2 0 2 2 1.2m English label IMF tins sold through 6/18 sales period (+21% vs 6/18 2021) +57% G
Slide 45: First English label IMF brand to offer product delivery during Shanghai lockdown
English label IMF First English label IMF brand to offer product delivery during 45 Shanghai lockdown R E S U L T S For personal use only A N N U A L Partnered with Tmall Global to be first EL IMF available Immediate positive feedback from Shanghai parents 2 0 2 2 New service communicated via a2 Soc
Slide 46: ANZ liquid milk key messages
ANZ liquid milk ANZ liquid milk key messages 46 R E S U L T S For personal use only A N N U A L Strategic priorities Progress update Business impact • Continued investment in major • Achieved top three branded SKUs in 2 0 2 2 1 Maintain brand leadership broadcast media partnerships, with the categor
Slide 47: ANZ liquid milk sales marginally increase with strong brand leadership and share growth
ANZ liquid milk ANZ liquid milk sales marginally increase with strong brand 47 leadership and share growth R E S U L T S For personal use only A N N U A L Performance Liquid milk net sales revenue (Australia) • Australia liquid milk net sales revenue increased by 1.8% to $172.0 million $ million 2 0
Slide 48: Further innovation in Australia with first Lactose Free product
ANZ liquid milk Further innovation in Australia with our first ever 48 Lactose Free product R E S U L T S For personal use only • a2 Milk® Lactose Free launched in Australia in August 2022 A N N U A L • Extensive consumer and market research undertaken indicating strong interest in an a2MC lactose f
Slide 49: USA liquid milk key messages
USA liquid milk USA liquid milk key messages 49 R E S U L T S For personal use only A N N U A L Strategic priorities Progress update Business impact • Launched new marketing campaign to • Achieved growth in market value share 2 0 2 2 1 Educate consumers on the a2 drive increased awareness and new in
Slide 50: Strong revenue growth with significant cost headwinds
USA liquid milk Strong revenue growth with significant cost headwinds 50 R E S U L T S Performance For personal use only • Revenue increased by 30.0% to $82.7 million with strong 2H22 result A N N U A L • Higher revenue was driven by growth in core liquid milk (primarily in Grocery Revenue and EBITD
Slide 51: MVM acquisition completed and now focused on insourcing a2MC volumes
Mataura Valley Milk MVM acquisition completed and now focused on insourcing 51 a2MC volumes and future innovation R E S U L T S For personal use only A N N U A L Performance Revenue and EBITDA1 • Net sales revenue of $104.4 million and an EBITDA loss of $18.8 million recorded for the 11 months of a2
Slide 52: Questions
For personal use only QUESTIONS
Slide 53: Summary of key messages
Summary of key messages 53 R E S U L T S For personal use only A N N U A L 1. Inventory management actions effective − Significant steps taken last calendar year to address excess IMF inventory have proven effective with channel inventory at target levels, product freshness amongst the best in the i
Slide 54: Appendix
For personal use only APPENDIX
Slide 55: Reconciliation of non-GAAP measures
Reconciliation of non-GAAP measures 55 R E S U L T S For personal use only A N N U A L $ million FY22 FY21 Australia & New Zealand segment EBITDA 173.2 148.8 2 0 2 2 China & Other Asia segment EBITDA 145.1 75.6 USA segment EBITDA (36.7) (33.5) MVM segment EBITDA (18.8) - Corporate EBITDA (66.6) (67.
Slide 56: Standard a2MC glossary of terms
Standard a2MC glossary of terms 56 R E S U L T S Acronym Meaning Acronym Meaning Acronym Meaning For personal use only a2MC The a2 Milk Company Limited ESL Extended shelf life OOH Out of home A N N U A L ANZ Australia and New Zealand FX Foreign exchange OTT Over the top APCO Australian Packaging Cov
Slide 57: For personal use only
For personal use only www.thea2milkcompany.com