ATM - A2 Milk Corporation Limited

[NT001]

Their just reported earnings were 10k, they used all their dosh to jump into other markets, 3m in the UK alone for instance.

I wonder if they just stuck to Aus, what would their real profit be?

Not huge. Their reported earnings to date have been affected by exchange rates. But anyway, why limit yourself to just one market when by most accounts its potential has already been largely achieved? A2 is a niche product, not mainstream, and isn't going to do a hell of a lot better than 10% of Australian market share inthe near term.

Meanwhile there's known demand for A2 in the UK and US, both far bigger and more lucrative markets than Oz, and markets where a2MC already has experience from which it has learned a lot. And by going into those markets, a2MC benefits from both sales of actual product and exploitation of its IP. If it can make good money in California, there'll be others across the US queueing for access to the IP even if a2MC itself doesn't want to saturate the entire country in milk. And there's still Europe to come.

[BlackPeter]

Correct me if I am wrong, but is P/E a good measure with ATM who are using all the E side of the equation to grow sales (and doing so successfully)? Their just reported earnings were 10k, they used all their dosh to jump into other markets, 3m in the UK alone for instance.

I wonder if they just stuck to Aus, what would their real profit be?

agreed - P/E (and even PEG) might not be the best gauge to assess ATM's value. Question is - do you have something better? How do you compare the "goodness" of all these amazing growth companies swirling around us investors and all yelling "pick me"?

Just thinking the likes of DIL, PEB, XRO, OHE, ERD, WYN) ... aren't they all looking amazingly beautiful and promising lots of growth? What measure do you use to pick the one, and drop the other?

[blobbles]

agreed - P/E (and even PEG) might not be thje best gauge to assess ATM's value. Question is - do you have something better? How do you compare the "goodness" of all these amazing growth companies swirling around us investors and all yelling "pick me"?

Just thinking the likes of DIL, PEB, XRO, OHE, ERD, WYN) ... aren't they all looking amazingly beautiful and promising lots of growth? What measure do you use to pick the one, and drop the other?

That is why I use price to sales to indicate value of growth companies, factor in growth trajectory, potential market size/saturation, competition and current profitability. A rough set of rules that gives me a decent gut feel for their future.

With my comparison of DIL, they have a shrinking growth rate (seemingly saturated market?), decent competition (possibility of price war), and a price to sales of 5+. Now you may say" but they are delivering a profit", which is true, but to me that doesn't gel with their line of wanting to use their cash for increasing their market share. Why not have a huge sales team at least? Whereas for ATM, they are delivering on that same line (increased growth as they become more profitable).

The market for A2 is huge and it is a premium product (higher margin) being aimed at rich markets. It has zero competition and decent IP for the near future. And a price to sales today of 3.3 with increasing growth. Of other growth companies, that's not bad.

XRO=30,big market, entrenched competition, big growth
DIL=5,medium market, decent competition, low growth
WYN=24,big untapped market, low competition, medium-high growth
PEB=(not worth stating), tough market but huge, average competition, unknown growth

...

[BlackPeter]

That is why I use price to sales to indicate value of growth companies, factor in growth trajectory, potential market size/saturation, competition and current profitability. A rough set of rules that gives me a decent gut feel for their future.

With my comparison of DIL, they have a shrinking growth rate (seemingly saturated market?), decent competition (possibility of price war), and a price to sales of 5+. Now you may say" but they are delivering a profit", which is true, but to me that doesn't gel with their line of wanting to use their cash for increasing their market share. Why not have a huge sales team at least? Whereas for ATM, they are delivering on that same line (increased growth as they become more profitable).

The market for A2 is huge and it is a premium product (higher margin) being aimed at rich markets. It has zero competition and decent IP for the near future. And a price to sales today of 3.3 with increasing growth. Of other growth companies, that's not bad.

XRO=30,big market, entrenched competition, big growth
DIL=5,medium market, decent competition, low growth
WYN=24,big untapped market, low competition, medium-high growth
PEB=(not worth stating), tough market but huge, average competition, unknown growth

...

Good answer - Thanks!

One obviously can bring plenty more parameters into the game, like e.g. how likely is product validation? In ATM's case the question would be: will the science confirm their claims, will markets buy anyway or will it all go down the drain of history? Probably more difficult to assess, but how do they say - no risk, no fun ...

[Snoopy]

Well, I guess a buyer has typically a different perspective than a holder and / or a seller ...

Looking at the stock - yes some of the promises don't look too bad. However - if I look at the forward PE (60), than the share appears to be currently even at 30+ percent growth rate quite dear. Might be tempted though below 50 cents .. who knows, if the long term trend continues, maybe we get there before Christmas? :sleep:


Forecast PE of 60? I don't think so. PE is share price / eps , with eps measured from net profit. There is no net profit forecast for FY2015. The year just gone produced at net profit of $11,000. Based on the number of shares on issue being 660m this gives eps of:

$0.0011/660 = 0.0000016cps

Based on a share price of 60c, the PE was 36,000,000 (36 million)

I would suggest that ATM is now not only the most expensive food company in the world right now, it is also the most expensive food share in the whole history of the sharemarket globally.

Cash on hand is plummeting as the IP weakens. Markets outside of Australia consume more and more cash. Looks like a death spiral to me. I hope you shareholders have a plan B.

SNOOPY

[andrewm]

ATM has received snoopy's seal of approval now to watch the shareprice do what heartland did...

[blobbles]

ATM has received snoopy's seal of approval now to watch the shareprice do what heartland did...

For a while I have used Snoopy as a contrary indicator, looks like it will continue! Snoopy forgets that this is a growth company putting all its profits into new markets and driving sales! With potentially 40% growth next year I would say farmers may be struggling to keep up with demand...

They have repeatedly stated they are using the profits from the Australian market to push market share and hit new markets. So using their earnings (which should be near zero) as the denominator of any equation at the moment is probably a bit silly.

[NT001]

Cash on hand is plummeting as the IP weakens. Markets outside of Australia consume more and more cash. Looks like a death spiral to me. I hope you shareholders have a plan B.
SNOOPY

Don't need a plan B. There's no death spiral, cash on hand is not plummeting, there's enough there to fund market development outside Australia, and any weakening of IP doesn't even begin for another couple of years and the company has a strategy for handling that. Its share price is high (and will go higher), not because of current earnings but because of future prospects.

[winner69]

Talking of cash flows I note that customers take an average of 78 days to pay their bills

No wonder the likes of Coles don't need an overdraft

[BlackPeter]

Forecast PE of 60? I don't think so. PE is share price / eps , with eps measured from net profit. There is no net profit forecast for FY2015. The year just gone produced at net profit of $11,000. Based on the number of shares on issue being 660m this gives eps of:

$0.0011/660 = 0.0000016cps

Based on a share price of 60c, the PE was 36,000,000 (36 million)

I would suggest that ATM is now not only the most expensive food company in the world right now, it is also the most expensive food share in the whole history of the sharemarket globally.

Cash on hand is plummeting as the IP weakens. Markets outside of Australia consume more and more cash. Looks like a death spiral to me. I hope you shareholders have a plan B.

SNOOPY

Reuters gives for ATM a "consensus mean prediction" of 1 cts per share (predicted EPS, i.e. 2015). I used this number to come up with my EPS of 60 (and admittedly didn't do any further research, don't plan to buy right yet).

Another look at the Reuters page shows as well a PE of 30000 (based on the 2014 result).

Doesn't matter anyway, give that we seem to agree on this thread that PE might not be the most sensible gauge for this stock.

6500

[Xerof]

With potentially 40% growth next year I would say farmers may be struggling to keep up with demand...


This is the nub of my main issue with this "explosive growth, Coca cola-like" hype I keep reading on this thread. Does anybody have a detailed understanding of the supply side of this business, globally? I am very happy with demand growth and future prospects, but I can see major issues ahead if the supply cannot match it. Before I get back on board I'd be very interested in some facts on supply, if available

[MAC]

This is the nub of my main issue with this "explosive growth, Coca cola-like" hype I keep reading on this thread. Does anybody have a detailed understanding of the supply side of this business, globally? I am very happy with demand growth and future prospects, but I can see major issues ahead if the supply cannot match it. Before I get back on board I'd be very interested in some facts on supply, if available

It’s not so much a matter of supply side growth I don’t think Xerof, as it being a matter of supply side conversion.

As demand and thus market share grows for a2 milk, proportionally ATM solicit supply from the conversion of existing farms. The conversions are not financed by capital, but by a mark-up on delivered milk price at the farm gate.

ATM offers a premium on farm gate sales both to cover farmer’s conversion costs and also as an incentive. In Australia this margin is 8 to 10%, I understand the margin in the UK is presently 5%.

Notably, within the UK and US, fresh milk consumption overall is gradually dropping, and this may also possibly offer an incentive for existing dairy farmers to convert into a growing market for a2.

ATM told us recently that they will need to increase the number of conversions in NSW to supply the China fresh milk airfreight business which is expected to be 3M litres next year, and doubling beyond that for the next few years. I would agree that it will be interesting to watch that supply side growth for China in addition to the 38% p.a Australian supermarket sales growth.

I guess your question though is at what point would there be saturation, or at what point would dairy farmers no longer wish to convert, or not wish to convert at a rate required by ATM.

With market share at only 10% in Australia and with only 20 conversions thus far in the UK, it seems a long way off.

There are still 90% of Australian A1/A2 dairy farmers to draw from just yet. If demand side were to become explosive then ATM may have to increase the incentivisation, but overall in such a circumstance that may well be a good thing for the a2 milk company and shareholders alike.

Perhaps the answer is simply that farmers are business people, if the incentive is right they will take it.

[Ginger_steps_]

I am not 100% sure on how the company approaches this but I know many farms would already have a high number of A2 only producing cows.
The higher % of your existing herd that are A2 the higher % your replacement hiefers will be A2 so the quicker you can convert.
It would not be unusual for a full conversion to A2 to take place over a 2 year period.
Longer if the farmers existing % of A2 cows are low and shorter time period if the % is high.
Like I said there are plenty of herds around the world that will already have a very high % of A2 cows and those will be of more interest to ATM.
Don't be at all surprised that it only takes 12 months for a high % herd to go full A2 production however this would require some a2 replacement cows to be bought in(which is not hard) so no production losses occur.
I am very confident that there are an abundance of easy to convert farms around the world therefore supply of A2 milk is not going to be an issue.

The farmer I talked to a year back said that himself and other farmers in the area had no intention of going "full A2" in the short term. So it was not a matter of herd conversion as much as herd separation. Makes sense really, why burn the bridge with your current milk co while the A2 business is still in the risky stages. He also said his current purchasers had eased their policy on supplying both A1 and A2 to separate entities - I assume to protect their own supply long term, and to deal with the high demand from farmers.

[NT001]

The farmer I talked to a year back said that himself and other farmers in the area had no intention of going "full A2" in the short term. So it was not a matter of herd conversion as much as herd separation. Makes sense really, why burn the bridge with your current milk co while the A2 business is still in the risky stages.

There is a small cost factor in going full A2, and a farmer will only do it if there is a company offering above the standard Fonterra farmgate payout rate for it. Herd separation is certainly a factor, but there's no problem of "burning the bridge with your current milk co". Fonterra accepts full A2, in fact it doesn't even test the milk to see what kind it is.

[Ginger_steps_]

There is a small cost factor in going full A2, and a farmer will only do it if there is a company offering above the standard Fonterra farmgate payout rate for it. Herd separation is certainly a factor, but there's no problem of "burning the bridge with your current milk co". Fonterra accepts full A2, in fact it doesn't even test the milk to see what kind it is. Im referring to Australia - The company had a problem with the farmers supplying them as well as a2 milk co (eg the competition who are trying to prove a1 is harmful!), not what type of milk they were supplying. The burning the bridge statement was referring to the farmer ceasing to supply a milk co all together in order to supply only to a2 milk co - eg if a2 co were to collapse, the farmer would need to renegotiate supply with the original or a new milk co. My point was that they could have a finger in both pies for security, rather then solely rely on a2 co.


i think you will find conversion would only work for farmers which already had a high percentage of A2 cattle in their herd. Plenty of these around.........
I don't think you will get a great perception of the situation from talking to just one farmer......... and for the record most dairy farmers don't want to believe their precious A1 product has any health issue's.
Can't understand the burning of bridge's thing as all large dairy companies don't care if you supply them with A1 or A2 or a combination. Hows you tone Mr SNAPiti-knows-it-all. For the record........ the farmer was a MPI representative............. at a chamber of commerce meeting........., and as mentioned........., he referenced other farmers in his area............

[NT001]

From an item in today's Melbourne Age (business section):

A milk war at the bottom end of the market between Coles and Woolworths, coupled with the rise of A2 Milk at the premium end of the market, have affected dairy giants Lion and Fonterra. A2 now has the only two milk products listed among the top 20 food brands in the country.


As a result Lion, which supplies milk and soft drink products, saw its supermarket sales fall 3.8 per cent last financial year.

Fonterra's sales were even worse, down 8.3 per cent.

[mayday]

Ah well, the risk is always there (inevitably) in any kind of businesses. Whilst with 38% sales increase in Australia, momentum growth in Britain, fresh (official) entry into China, and prospective expansion in America, I believe that farmers would have their own judgement on what to choose. Again risk is always existing....so let figures speak

[Ginger_steps_]

so you are a dairy expert now you have talk to one member of MPI.... LOL.
Nope, never at any point said I was an expert, nor did i question if you were - but thanks for taking the time TO LET US ALLLLLL KNOW!! I was actually just adding a perpective passed on to me by a professional
sounds like you need to get out of the city more. Sounds like your a little lonely out there.

Snaps being a farmer should now a thing or two about the industry. Yes, and i imagine you are also the original source of the first four letters of the word "Cocky".

[see weed]

I mentioned to CEO at AGM about bringing out a2 chocolate milk. For the chocolate lovers, the chocolate comes first and the a2 can be mentioned at the end, as a healther choice. Just like Lewis Road Creamery chocolate milk, made from NZ's biggest organic dairy farm... Green Valley Dairy. 300ml bottle for $3.59 and 750ml bottle for $6.29. If you read page 12 & 13 of today's Sunday Herald -- that could be a2 chocolate milk, if they played their cards right.

[NT001]

See Weed, I'm not sure that A2 should try to copy someone else's idea which could turn out to be a two-year wonder. A2 has its own strong reason to appeal to consumers - it's the healthier choice, as you say - and that should not just come second to chocomania as the selling point.

The priority for us as ATM shareholders must be to see A2 established with 8-15% of the market in UK, NZ and parts of USA and Europe on the basis of consumer acceptance that it is healthier and therefore a premiium product worth paying more for, as in Australia. Then I'm sure there will be some baristas who will go A2-only as a marketing ploy, as well as other boutique opeerators, who will work out ways of producing chocolate milk with A2 milk that is not unlike the Lewis Road product - as a sideline - if there is still demand for it. You shouldn't need chocolate to sell the A2 story, and it would confuse the basic A1/A2 message. Also, Lewis Road uses organic milk, and A2 is not usually organic.

There will be more profit long run in supplying plain A2 milk (full and low-fat), UHT, yogurt, cream, ice cream etc than in trying to compete with Lewis Road. The one area where Lewis Road might teach ATM a thing or two is by using the experience and slickness of Saatchis. The science message can be a bit hard to get across to the media and public, especially given the regulations against making health claims for food and beverages. It's amazing, NZ fruit and vege shops are not even allowed to tell their customers the WHO officially recommends fresh fruit and veges to help protect against cancer.

[Ginger_steps_]

For now I think you should research more and post less.
I assure you no one from MPI would of been stupid enough to suggest dairy farmers could /should /would have a finger in both pies and you certainly did not hear it from any dairy farmer.

That was your own misguided suggestion that clearly shows you lack of knowledge and research about the industry.
:D:D how about no for a start, get over yourself second, take your head out of your live stocks backsides thirdly.
Are you suggesting a farmer cannot supply two different milk cos?

[NT001]

Please, Snapiti and Ginger steps, your childish ravings do nothing whatever to advance the purposes of this thread, and just show what total idiots both of you can make of yourselves. If you wish to continue, please use personal messaging.

[Ginger_steps_]

why don't you do your own research...... better still ask a few dairy farmers why it is not practical.
I would imagine the conversation will go two ways...... be very short cause they think you are an idiot or very lengthy because there are so many reasons why it is not practical.
But please don't be offended if they just laugh (at you) and do nothing else.
Personally I really can't be bothered explaining it to you but will refer you to my posts 2522 in which I have already listed 7 things for you to research about the subject.

I think you need to do your own research Snapiti because..... YOU ARE WRONG. Furthermore YOU DO NOT KNOW exactly what takes place for, and how individual farmers structure their supply agreements across Australia. I have relayed the information as it was delivered to me, by a farmer far superior to yourself, and therefore reiterate that the are just OUTRIGHT WRONG.

As proof that LARGE suppliers are using the format mentioned earlier i leave you with this extract from Fresh Agenda (http://www.freshagenda.com.au/about)

Supply arrangements for farmers in NSW
•In NSW as in other Australian regions, and most developed dairying regions around the world, there are generally exclusive supply arrangements between individual farmers and a single processor.
•Traditionally this has allowed dairy companies to specify and differentiate quality and delivery parameters based on their product requirements. It has also given farmers the ability to deliver all their milk to a single buyer.
•In NSW, drinking milk processors such as Lion and Parmalat, with generally much tighter requirements for quality and daily intakes have legally binding contracts with their suppliers, and allow for longer‐term agreements on price. They also tend to specify the volume of milk to be supplied.
•Manufacturers such as Bega and Murray Goulburn tend to have open‐ended agreements with farmers that can be terminated by farmers and do not specify the volume to be delivered.
•While exclusive supply arrangements have been the norm, some larger suppliers have negotiated delivery of their milk to different processors by segregating supply and maintaining separate infrastructure for pick‐up.

Did I say by the way YOU ARE WRONG?? Can i suggest you continue "farming" your large pile of bull*&%@, organise a multiple supply agreement for your ego, as well as your mouth, and proceed to consume your product to further illustrate my point that you are full of S%#T.

[biker]

I think you need to do your own research Snapiti because..... YOU ARE WRONG. Furthermore YOU DO NOT KNOW exactly what takes place for, and how individual farmers structure their supply agreements across Australia. I have relayed the information as it was delivered to me, by a farmer far superior to yourself, and therefore reiterate that the are just OUTRIGHT WRONG.

As proof that LARGE suppliers are using the format mentioned earlier i leave you with this extract from Fresh Agenda (http://www.freshagenda.com.au/about)

Supply arrangements for farmers in NSW
•In NSW as in other Australian regions, and most developed dairying regions around the world, there are generally exclusive supply arrangements between individual farmers and a single processor.
•Traditionally this has allowed dairy companies to specify and differentiate quality and delivery parameters based on their product requirements. It has also given farmers the ability to deliver all their milk to a single buyer.
•In NSW, drinking milk processors such as Lion and Parmalat, with generally much tighter requirements for quality and daily intakes have legally binding contracts with their suppliers, and allow for longer‐term agreements on price. They also tend to specify the volume of milk to be supplied.
•Manufacturers such as Bega and Murray Goulburn tend to have open‐ended agreements with farmers that can be terminated by farmers and do not specify the volume to be delivered.
•While exclusive supply arrangements have been the norm, some larger suppliers have negotiated delivery of their milk to different processors by segregating supply and maintaining separate infrastructure for pick‐up.

Did I say by the way YOU ARE WRONG?? Can i suggest you continue "farming" your large pile of bull*&%@, organise a multiple supply agreement for your ego, as well as your mouth, and proceed to consume your product to further illustrate my point that you are full of S%#T.

Why don't you tell him how you REALLY feel

[Casino]

I think you need to do your own research Snapiti because..... YOU ARE WRONG. Furthermore YOU DO NOT KNOW exactly what takes place for, and how individual farmers structure their supply agreements across Australia. I have relayed the information as it was delivered to me, by a farmer far superior to yourself, and therefore reiterate that the are just OUTRIGHT WRONG.

As proof that LARGE suppliers are using the format mentioned earlier i leave you with this extract from Fresh Agenda (http://www.freshagenda.com.au/about)

Supply arrangements for farmers in NSW
•In NSW as in other Australian regions, and most developed dairying regions around the world, there are generally exclusive supply arrangements between individual farmers and a single processor.
•Traditionally this has allowed dairy companies to specify and differentiate quality and delivery parameters based on their product requirements. It has also given farmers the ability to deliver all their milk to a single buyer.
•In NSW, drinking milk processors such as Lion and Parmalat, with generally much tighter requirements for quality and daily intakes have legally binding contracts with their suppliers, and allow for longer‐term agreements on price. They also tend to specify the volume of milk to be supplied.
•Manufacturers such as Bega and Murray Goulburn tend to have open‐ended agreements with farmers that can be terminated by farmers and do not specify the volume to be delivered.
•While exclusive supply arrangements have been the norm, some larger suppliers have negotiated delivery of their milk to different processors by segregating supply and maintaining separate infrastructure for pick‐up.

Did I say by the way YOU ARE WRONG?? Can i suggest you continue "farming" your large pile of bull*&%@, organise a multiple supply agreement for your ego, as well as your mouth, and proceed to consume your product to further illustrate my point that you are full of S%#T.


Somebody identified a gap in your knowledge/understanding and was kind enough to point it out to you. All you have to do is to say thank you and factor it in when you make investment decisions. Unfortunately, people who are drawn to high-risk investments are often cognitively jeopardised same as gamblers making healthy debate cumbersome if not pointless.

What you have laid out above is nothing but what is known as clustering illusion.

[Ginger_steps_]

Somebody identified a gap in your knowledge/understanding and was kind enough to point it out to you. All you have to do is to say thank you and factor it in when you make investment decisions. Unfortunately, people who are drawn to high-risk investments are often cognitively jeopardised same as gamblers making healthy debate cumbersome if not pointless.

What you have laid out above is nothing but what is known as clustering illusion.

there was nothing kind about snapitis condescending posts. Furthermore my knowledge is not what should be in question (never claimed I was knowledgable on dairy) but rather the accuracy of the information passed on by me - which I have provided proof the scenario exists and therefore is not incorrect. If it was "not practical what so ever - then why is it happening? Clustering illusion. Ha. Nice one. Bottom line, specific to my argument ginger = right, snapiti = WRONG.

[Casino]

there was nothing kind about snapitis condescending posts. Furthermore my knowledge is not what should be in question (never claimed I was knowledgable on dairy) but rather the accuracy of the information passed on by me - which I have provided proof the scenario exists and therefore is not incorrect. If it was "not practical what so ever - then why is it happening? Clustering illusion. Ha. Nice one. Bottom line, specific to my argument ginger = right, snapiti = WRONG.

That's known as overconfidence effect.
http://en.wikipedia.org/wiki/Overconfidence_effect

[winner69]

Besides clustering illusions I learnt a new word today

Apophenia

Thanks guys

[Snoopy]

Snoopy what do you mean by IP weakens ?


I am talking about the gradual expiry of different patents in different markets associated with A2 over time.

I am also talking about the reduction in cash balance from $20.2m to $16m over the past year and the minimal progress (in terms of market penetration) made in other markets over the last year. I am talking about the significant infrastructure needed to be created to support the supermarket supply chain in new markets. I am talking about the comparisons with growth software companies some here are using. Show me how to store milk on a hard drive and deliver it to the consumer via a modem and I'll take those comparisons serioiusly.

I am talking about Keith Woodford's view that ATM should not yet have gone into China, as they are already in more than enough markets to fully occupy the capital available to them. However, I do understand the urgency of the push to get A2 established before the wall of patent protection starts to expire. In my non-expert opinion, ATM are taking on more markets than they should because the expiry of patents is influencing their time frames for expansion.

I have probably gone too far calling it a 'death spiral' at this point. But if your capital growth cash requirements cannot be met by your growth in Australian revenue (the only market generating positive cash of significance), then you have a situation of your cash balance going backwards until.....

And that situation isn't changed by any positive spin coming out of Australia. I know ATM keep insisting they can fully fund their growth from Australia. To me this only rings true if they can bring a market like the UK into profitability as well. By my reckoning they only have a couple of years to do that. Conquering the world from Australia is not a credible long term plan IMO.

SNOOPY

[Ginger_steps_]

That's known as overconfidence effect.
http://en.wikipedia.org/wiki/Overconfidence_effect
Still WRONG. https://m.youtube.com/watch?v=Rb76sXEF4wM

[Casino]

1. Denial
2. Anger


..... YOU ARE WRONG. ... YOU DO NOT KNOW ... just OUTRIGHT WRONG.

...
Did I say by the way YOU ARE WRONG?? Can i suggest you continue "farming" your large pile of bull*&%@, organise a multiple supply agreement for your ego, as well as your mouth, and proceed to consume your product to further illustrate my point that you are full of S%#T.


Still WRONG. https://m.youtube.com/watch?v=Rb76sXEF4wM

3. Bargaining
4. Depression
5. Acceptance

I applaud you for being further down the path compared to many of your peers who are still in denial. Let's talk again when you made it to #3.

[couta1]

I think Sigmund Freud would find himself right at home on this thread, not sure if he was a milk drinker though.

[blobbles]

Thanks snoopy I appreciate your response.....I think that sums up ATM's position very well.
However on the point of the significant infrastructure needed to be created to support the supermarket supply chain in new markets I am hoping( would expect) in the future this would be overcome by significant licencing agreements...... far better than the one they have with Fresha in NZ.
I also see it as pivotal for ATM's future that they create a brand and healthy supply chain as quickly as possible.
They certainly have a great start with the first mover advantage and it seems they are doing all things possible to take advantage of this.
Maybe this indicates they should do a capital raising to speed things along.

The problem with snoopys comments are they almost always negative. If they are wildly successful in the UK this year, snoopy will go on to say that everyone should be extremely worried because they aren't yet successful in the US and that the UK and Australia are not good indicators.

I mean really. Their cash burn can go on for another 4 years at this rate (assuming no growth), so we should be pooping our pants because in 5 years we will have a capital raising? Plenty could happen in that time, I am picking success in the UK at least by then, probably China too.

I have read enough of his pessimism on the HNZ thread while watching the SP going north along with the companies prospects to know his comments are great contrary indicators... But I should thank him really, I realised this early on and have almost doubled my money in HNZ, more than doubled if I include dividends...

[Beagle]

I think it makes sense to do a cash issue with the Australian listing and look to turbocharge growth. Burning heaps of cash while chasing really high growth is all the rage apparently and the bigger your losses the higher the share price goes :D

[bull....]

I agree with snoopy and have always believed they are entering to many markets at once mainly because they dont have the capital to do this.

spreading resources across multiple markets generally reduces market power in any one market - mba concept

[NT001]

I agree with snoopy and have always believed they are entering to many markets at once mainly because they dont have the capital to do this.

Don't forget ATM has been in both the UK and US markets for some time and it's not like it's trying to break into new markets.

It launched in the UK a couple of years ago but was temporarily derailed by the unexpected takeover of its JV partner Wiseman Dairies by the German giant Muller, which did not share the vision of promoting a rival product to standard milik. So it is really just regrouping. It already has a good group of farmer suppliers in Wales and western England, a good understanding of the market and an established customer base eagerly waiting for it to come back.

Much the same in the US. ATM's already had operations running there but just didn't have the commercial structure right, relying too much on US partners I think, which was understandable initially. It's now using its quite deep knowledge of the market and access to motivated A2 farmer suppliers, and this time it will have better control of the whole operation as I understand it.

[bull....]

i have to respectively disagree nt001 as they are breaking into new markets and why they have been in the uk for a number of years now it has been a total disaster as is evident from there results and there repositioning now in that market is a announcement by the company they got it wrong.So back to square one.
You are only as strong as your strongest part, if that part weakens your whole strategy will fail. time will tell

[Ginger_steps_]

thanks winner..... Very apt

there is currently a controversial debate concerning whether unusual experiences are symptoms of a mental disorder, if mental disorders are a consequence of such experiences, or if people with mental disorders are especially susceptible to or even looking for these experiences. --dr. Martina belz-merk (http://www.igpp.de/english/counsel/project.htm)

yes me thinks some people do seek out an argument for the sake of a argument
me thinks i might be better off trying to teach my cattle something today.

wrong! Wrong wrong..... Wrong

[Ginger_steps_]

In my post I had been referring to the(as previously mentioned) average dairy farm not the large corporate dairy farms you are now conveniently referring too to prove your point and create the illusion of knowledge.
Please refer my post 2522 it clearly indicates the word average dairy farm.

Indeed a large scale dairy supplier has multiple farms and many separate milking system, in many different locations, with many different grazing platforms and may well be able to have a portion of his milk supply go to different buyers. But despite what a city slicker may think this is not the average dairy farmer.
Initially I was merely pointing out a major floor in your finger in both pies comment for the ( as stated) average dairy farmer.
I am sorry ginger that due to your self consciousness that you lost site of what I was discussing.
Take it for what it is...... good advice You cant read, and you're WRONG.

[MAC]

As far as I can see ATM have done really very well in the UK thus far !

It was unfortunate though perhaps that the takeover of their JV partner by Muller occurred, which was naturally outside of ATM’s control, unfortunatate timing also, but that aside all has gone well.

The Wiseman delay slowed the establishment a little in the UK, but is a one off event, and in no way is that delay indicative of the sales potential within that market.

ATM thus utilised Wiseman’s standing in the UK market as the largest retail fresh milk supplier to obtain approvals, establish the first 20 farm conversions, provide a foot in the door with the major supermarket retailers. I don’t think ATM could have achieved all this so quickly without the support of a respected partner.

The buyout of the 50/50 Wiseman JV is now complete leaving ATM with both a good foot hold within the UK market and now the full freedom to market the a2 product as they may choose, hence the re-launch.

And no, they have not been in the UK for long, they entered in late 2012 and are position even better now than when they entered.

Their target was to achieve a humble 1.8% market share by 2016, it seems to me that the Wiseman situation has cost ATM six months on that schedule.

However, from the FY14 report, the ATM guidance for the UK market looks very good in that context;

“We are targeting cash breakeven on a monthly basis during the second half FY16”

[NZSilver]

Where has mr big seller gone?





Bids






Quantity
No.
Price


96,057https://www.anzsecurities.co.nz/DirectTrade/images/spacer.gif
6
61


76,574https://www.anzsecurities.co.nz/DirectTrade/images/depth_before.gif
5
60


119,905https://www.anzsecurities.co.nz/DirectTrade/images/depth_before.gif
9
59


143,563https://www.anzsecurities.co.nz/DirectTrade/images/depth_before.gif
6
58

[psychic]

Where has mr big seller gone?





Bids






Quantity
No.
Price


96,057https://www.anzsecurities.co.nz/DirectTrade/images/spacer.gif
6
61


76,574https://www.anzsecurities.co.nz/DirectTrade/images/depth_before.gif
5
60


119,905https://www.anzsecurities.co.nz/DirectTrade/images/depth_before.gif
9
59


143,563https://www.anzsecurities.co.nz/DirectTrade/images/depth_before.gif
6
58



Lol. In the "ASKS" col? :)
But agree, maybe has moved up a tad, a rest maybe as bids reassemble. That 50K at .62 has a ring to it, lets see if it is reloaded...

[NZSilver]

I was thinking the same thing but often they have a rest day and you can be sure it is a monday or friday

wish I had rest days on M & F

[NZSilver]

goes to show, once they stop selling SP should appreciate

[Harrie]

Well if the AMP boys are dripping in 50k of shares a day could take a couple of years to get rid of the lot, if that is what they are intending. Lets wait and see if another SSH declaration pops up in the next week or so. By that time they could have dropped at least another 1%, however that is only around say 370,000 and a lot more than that have traded since their last SSH. If not then there is another big seller in the market

[Snoopy]

However, from the FY14 report, the ATM guidance for the UK market looks very good in that context;

“We are targeting cash breakeven on a monthly basis during the second half FY16”

Last year ATM burned through $4m in cash, while using Australian cashflow to support entry into the UK market. The cash balance decreased by $4m. They expect two more years before this turns around, so in rough figures another $8m. ATM will probably need to spend that much in the USA too over that time, another $8m. Two lots of $8m will exhaust the cash balance.

So the way I see it ATM is now on a knife edge. If anything goes wrong with their business plan from here, it's all over. Not for A2 milk itself of course. No doubt some canny player will rescue the A2 IP from the ashes and do very well. But existing shareholders will no longer be part of that picture. They will have lost their capital and get nothing. This doesn't look like an exciting investment prospect to me.

SNOOPY

[MAC]

Well after a year of knocking, some might well think that ignorance is bliss, but personally I've no comment to make on the matter

A really very good investment I would say, having been presented with an opportunity to buy out ones 50/50 JV partner simply because they have been taken over by a third party, and for as little cash as they did.

They're probably still rubbing their hands together at ATM HQ.

All that good establishment and kick starting underway, and now going forward ATM will reap 100% of profits.

[NT001]

Existing shareholders will no longer be part of the picture. They will have lost their capital and get nothing. This doesn't look like an exciting investment prospect to me.SNOOPY

Ok Snoopy - bye bye, sorry to lose you. But I think you overlook that revenues are actually increasing, the company is not just living off past earnings. And if more cash is needed there'll be shareholders happy to take up a rights issue, I would say. Me for one. That could happen when the company launches into the US, although capital costs for that operation won't be huge and are already budgeted for. And all this talk about ATM's IP being close to running out is thoroughly alarmist. If you think the company is on a knife edge, that's nothing to where it was a few years ago. Since then under Cliff Cook, it seems to me to have been very prudently run, nothing risky, and with a clear path towards higher profitability in well-chosen markets and greater global consumer acceptance.

[blobbles]

Last year ATM burned through $4m in cash, while using Australian cashflow to support entry into the UK market. The cash balance decreased by $4m. They expect two more years before this turns around, so in rough figures another $8m. ATM will probably need to spend that much in the USA too over that time, another $8m. Two lots of $8m will exhaust the cash balance.

So the way I see it ATM is now on a knife edge. If anything goes wrong with their business plan from here, it's all over. Not for A2 milk itself of course. No doubt some canny player will rescue the A2 IP from the ashes and do very well. But existing shareholders will no longer be part of that picture. They will have lost their capital and get nothing. This doesn't look like an exciting investment prospect to me.

SNOOPY

Please keep up these excellent alarmist posts snoopy, it tells me exactly where to put my money!

[see weed]

a2 Find......Countdown Onehunga has 12 bottles at 9.30pm.

[kiora]

Lining up China ?
https://nz.finance.yahoo.com/news/chinas-hope-invest-aust-dairy-062819894.html

[nextbigthing]

All aboard. Last minute ticket prices are increasing so get in now before the train departs. The wheels have started turning through 65rpm, don't miss out.

[BFG]

All aboard. Last minute ticket prices are increasing so get in now before the train departs. The wheels have started turning through 65rpm, don't miss out.

Do we need to repost the Chatanooga Choo-Choo video from Sparky on PEB days do we?

[nextbigthing]

Enlighten us

[kizame]

Uptrend has already started and is looking good.

[Beagle]

Well my 59c order was filled last Friday, hopefully that was indeed the last day we will see 59c :cool:

You're as cunning as a wily fox. Well done !! Sorted out your car choice yet ?, PM me I'm curious how you got on.

[NT001]

Well I'm not sure that spending money on a PR-Web revamp will be regarded by most shareholders as ATM's priority at this time, but who knows, in this digital age I guess a more ccooordinated and integrated strategy across markets is probably not a bad thing.

http://www.thedrum.com/news/2014/11/24/a2-milk-company-hands-global-digital-marketing-account-analogfolk

[BlackPeter]

Uptrend has already started and is looking good.

How do you measure that? Looks a bit early for me to say ...

[Snoopy]

I think you overlook that revenues are actually increasing, the company is not just living off past earnings.


But are revenues, and with it EBITDA margins in Australia increasing faster than the projected expenses are increasing? The answer to that question I think is no.



And if more cash is needed there'll be shareholders happy to take up a rights issue, I would say. Me for one. That could happen when the company launches into the US, although capital costs for that operation won't be huge and are already budgeted for.


The US is a big place, even bigger than - Australia ;-). But if you believe there are no vested interests there and the competition will roll over that's fine. The last ATM rights issue was made when the share price was 70c, and subscribers were asked to put up funds at 50c. And that was when the market was better disposed towards growth shares than today. If a rights issue of similar magnitude was declared today, the new share price would have to be less than 50c. I don't think ATM wants that, which is why no new rights issue has been declared. IMO ATM are rolling the dice for another year, trying to get that share price up.



And all this talk about ATM's IP being close to running out is thoroughly alarmist.


There is a difference between 'IP weakening' and 'running out'.



If you think the company is on a knife edge, that's nothing to where it was a few years ago. Since then under Cliff Cook, it seems to me to have been very prudently run, nothing risky, and with a clear path towards higher profitability in well-chosen markets and greater global consumer acceptance.


Higher profitability? ATM have given up on profits! They are reinvesting all their positive cashflow into developing new markets. Turning from a licensing company into a joint venture provider on the ground is much more capital intensive, even if it does (seemingly) work better. This change in strategy has introduced much more capital risk though. A company that doesn't make profits has to keep the capital tap turned on. That puts a life span on the company. I am calling the capital tank to be empty within two years if no capital raising is done. Doesn't matter how good the ideas behind ATM are. If they run out of capital, that's it - for current shareholders anyway.


well snoopy it looks like you don't like investing in a monopoly product with increasing demand and has the first mover advantage.


A2 may be a strong brand, but it is not a monopoly product. A2 has to compete with all the soy milk rice milk and almond milk products. And if you want identical rather than similar, all some smart US entrepreneur has to do is to start up 'Buffalo Milk' and market it as that. Since Buffalo milk is all A2, that is the end of the so called monopoly. You can't have a monopoly on what is a naturally occurring product in nature. Mind you, having a strong brand and first mover advantage may be enough to make things difficult for the competition, monopoly or no monopoly.



What do you expect them to be doing at this stage of their business cycle?


Raising more capital.

SNOOPY

[kizame]

How do you measure that? Looks a bit early for me to say ...

On both the daily and weekly charts it has passed through the down trendline and is making higher highs and lower lows.
If you look at the daily chart there is a reverse head and shoulders pattern,it has also passed through the neckline of this and is moving up,very bullish in my opinion,volume is also ticking over pretty nicely.Also for me very importantly it is above the 50 day moving average.

[NT001]

Hi Snoopy

I won't try to debate every point you raise, many of which simply demonstrate rather different points of view on what ATM is about. But a couple of points:


The US is a big place, even bigger than - Australia ;-). But if you believe there are no vested interests there and the competition will roll over that's fine. SNOOPY

No I don't think there are no vested interests there, but it's a huge and diverse market and a2 milk is not going to be a threat, just another consumer option. It may pose a bit of a challenge to soy, almond etc because it will be saying you may not need to switch to faux milk when there's a real milk that avoids some of the problems of apparent lactose intolerance for some consumers. But what are they going to do - close a2 down? Not when the science is so clear in favour of a2.

As for the threat from Buffalo Milk: if buffalo could be farmed economically as a competitor for cow's milk, I suspect we'd already be hearing about it. And ATM does not try to use its IP monopoly to stop people having a2 cows, a part of nature. It just says in effect that you can't market your milk as a2 unless you can prove it's a2, and the only way you can do that is by using our DNA test.

You say that ATM "have given up on profits! They are reinvesting all their positive cashflow into developing new markets". Lots of companies forego dividend payments in their early stages to reinvest in expansion. That doesn't mean they've given up on profits.

[blobbles]

Big volume day - 2.4m, probably 2m in the last hour. New floor for a bit one hopes...

[Harrie]

Not sure how many fund managers would own ATM snapiti. Given that they scrap into the top 50 I would think a few but probably not that much of an exposure as lifting the price would make any difference to overall fund performance. Would think that those funds running growth portfolios would have some exposure but that is not the majority of where most of the money is, rather more the conservative and balanced portfolios. In addition to this a lot of the fund managers tend to prefer dividend paying stocks and a number that I am aware of believe that in terms of ATM the "science is not proven" When it is they will be happy to pay twice the price than where they are currently...institutional mentality.

[mayday]

looks snapiti has got banned on ST

[Harrie]

Sucking in buyers at 66c for Mr Seller to offload another swodge today?

[janner]

Pleased to report that Count Down Mt. Wellington have increased the shelf space by 100%

Now have two rows by 5 or 6 bottles instead of the one row..

With a much less erratic supply ..

Slowly but surely :-)))

[Snoopy]

No I don't think there are no vested interests there, but it's a huge and diverse market and a2 milk is not going to be a threat, just another consumer option. It may pose a bit of a challenge to soy, almond etc because it will be saying you may not need to switch to faux milk when there's a real milk that avoids some of the problems of apparent lactose intolerance for some consumers. But what are they going to do - close a2 down? Not when the science is so clear in favour of a2.


The USA is the home of a million market niches. Ther is certainly a niche there for A2



As for the threat from Buffalo Milk: if buffalo could be farmed economically as a competitor for cow's milk, I suspect we'd already be hearing about it. And ATM does not try to use its IP monopoly to stop people having a2 cows, a part of nature. It just says in effect that you can't market your milk as a2 unless you can prove it's a2, and the only way you can do that is by using our DNA test.


I only mentioned buffalo because buffalo milk is all A2, so there is no need to take the A2 licensed test. What I am saying is you can market milk which chemically is the same as A2,without calling it A2,and it will have the same benefits as A2 because it is exactly the same thing!



You say that ATM "have given up on profits! They are reinvesting all their positive cashflow into developing new markets". Lots of companies forego dividend payments in their early stages to reinvest in expansion. That doesn't mean they've given up on profits.

I don't want to question the A2 strategy of spending all their spare cashflow on developing the brand. IMO that is the right thing to do at this stage of the product development cycle. The fact that A2 is on the cusp of profitability, or could be profitable if they wanted to be, is what attracted me to look at them. This is no mean achievement among growth companies. But what is important from here is the amount of capital required to develop the company from today, verses the current and likely capital available in the future. If Australia is not generating enough investable capital going forwards then ATM has a problem, notwithstanding their past success in Australia.

The point I was making is that if they were making regular profits of significance, like say Fonterra launching a new ice cream brand, there is no ticking clock for the business plan to succeed. A mistake may slow down maket development. But in the case of ATM, a mistake could kill the company. The A2 milk product itself can outlive a potential ATM company collapse. And should a collapse happen I think A2 milk would go on. But current shareholders would no longer be in the picture if that happened. What I am saying is the ultimate success of 'A2 milk' and the ultimate success of the 'A2 milk company' are different things. I am not sure that all investors here understand they are investing in the A2 milk company, which may or may not follow the fortunes of A2 milk itself.

SNOOPY

[winner69]

Excuse my ignorance.

How do ATM get the milk onto the supermarket shelves in Australia, physically that is.

They have farmers with a2 herds .....they say they have a network of independent processors (dairy factories?) who process the milk ......freight seems to be a big expense. That's about all I know

Do they pay these independent processors a set rate to process the milk and package the end product?

Does A2 have its own distribution centre / warehouses or do they utilise the infrastructure of the independent processors to get the product to the likes of Coles?

From a value chain perspective I assume that what A2 Corp makes is what they sell it to Coles et al less want they pay the farmer for the raw milk less the independent processing cost less all distribution and delivery costs? Sales and marketing on top that.

Just trying to fine tune my financial model

[NT001]

How do ATM get the milk onto the supermarket shelves in Australia, physically that is......they say they have a network of independent processors (dairy factories?) who process the milk ......

A part of the answer to your question is contained in the following two items. The fact is that a2MC in Australia still has a variety of processing and distribution arrangements cobbled together. But it has had quite a big plant of its own in Sydney since 2012, and its new deal in Western Australia illustrates how it is expanding away from that facility.

http://www.headliner.co.nz/news/12957.html

http://www.voxy.co.nz/business/a2-commissions-sydney-processing-plant/5/119801

[see weed]

Uptrend has already started and is looking good.

If you look at the last 6 weeks graph, it is starting to look good, just a couple of big sellers to go.

[Tsuba]

If you look at the last 6 weeks graph, it is starting to look good, just a couple of big sellers to go.

I will have a milkshake with you. God it is getting boring over at the PEB Cafe.

[see weed]

Quiet day today , time to go and weed some more garden. Enjoy your a2 milk shake. Thats given me an idea. Someone should start an a2 milk shake bar.

[iceman]

W69, I think this is a really interesting and fundamental question. I have been thinking about it in relation to the UK. In northern Europe, you have countries with herds that are largely A2. These countries are geographically very close to the UK and within the European Economic Area (not all in the EU). Who says the A2 milk sold in the UK needs to be produced in the UK ? Maybe conversion costs and issues are not as cumbersome as we tend to think.


Excuse my ignorance.

How do ATM get the milk onto the supermarket shelves in Australia, physically that is.

They have farmers with a2 herds .....they say they have a network of independent processors (dairy factories?) who process the milk ......freight seems to be a big expense. That's about all I know

Do they pay these independent processors a set rate to process the milk and package the end product?

Does A2 have its own distribution centre / warehouses or do they utilise the infrastructure of the independent processors to get the product to the likes of Coles?

From a value chain perspective I assume that what A2 Corp makes is what they sell it to Coles et al less want they pay the farmer for the raw milk less the independent processing cost less all distribution and delivery costs? Sales and marketing on top that.

Just trying to fine tune my financial model

[NT001]

Someone should start an a2 milk shake bar.

Not sure how commercially successful that would be. A better approach, I think, would be to persuade milk shake bar operators who are already doing well to offer "ordinary" milk shakes at normal price and a2 milk shakes at a premium price - they would have to be at a significant premium to cover costs. That would get people asking "what's with this a2?". You could then hand out your info material explaining the health benefits of a2 and where it can be bought in your area.

[NT001]

W69, I think this is a really interesting and fundamental question. I have been thinking about it in relation to the UK. In northern Europe, you have countries with herds that are largely A2. These countries are geographically very close to the UK and within the European Economic Area (not all in the EU). Who says the A2 milk sold in the UK needs to be produced in the UK ?

a2MC UK already has farms in Wales and western England supplying a2 milk and I don't think supply is a problem. Remember, it's a niche product, not requiring massive quantities. And transport across the water would add big costs. The question will become more interesting when a2MC moves into the US. It's starting its sales in California, better known for i8ts wine than its dairying, and my guess would be that milk may be brought in from the midwest (eg Nebraska) which is cow country two states away. There are already a2-only farms there, and in the US it's nothing to cart milk thousands of km.

[Harrie]

W69, I think this is a really interesting and fundamental question. I have been thinking about it in relation to the UK. In northern Europe, you have countries with herds that are largely A2. These countries are geographically very close to the UK and within the European Economic Area (not all in the EU). Who says the A2 milk sold in the UK needs to be produced in the UK ? Maybe conversion costs and issues are not as cumbersome as we tend to think.
Isn't it all about the brand though? If A2 milk is going to be imported into the UK from european neighbours they certainly will not be able to use the A2 branding. So what do they do to differentiate when all the marketing has been centred around A2. "A1 free" doen't seem to ring through or variations of that because most consumers wouldn't draw the relationship between the two. All they know is that A2 is good and non A2 isn't so good. Any branding with anything to do with A2 would be a breach of copyright.
Finding it difficult therefore to see snoopys death spiral for A2 milk company Ltd should the marketing effort promoting the A2 brand in the UK and USA not gain any traction. Sure, the shareprice would be battered but I guess the company would reconsolodate back to Australia and then start paying dividends.
At least at that point there would be no debt accrued to repay. I suspect that ATM will prudently determine its effectivemness going fwd with the marketing outlay committed to developing marketing share without going into debt.

[iceman]

Isn't it all about the brand though? If A2 milk is going to be imported into the UK from european neighbours they certainly will not be able to use the A2 branding.

Harrie I am looking at it as a positive for a2mc. I am considering whether it may be an option for a2mc to more quickly and less costly certify and convert farms in the Nordic countries, to supply the very large UK market with fresh 100% A2 milk. All under the A2 brand of course. Just pondering why it needs to be produced in the UK

[Harrie]

NT doesn't think that there would be a supply problem but I guess with so much natural supply of A2 milk in the nordic countries its a good supply fall back position. I suspect though as sales of A2 gain traction in the UK more farmers will be willing to convert especially if they can see a maintainance of premium price as the popularity of A2 milk consolidates and grows market share.

[Ginger_steps_]

Harrie I am looking at it as a positive for a2mc. I am considering whether it may be an option for a2mc to more quickly and less costly certify and convert farms in the Nordic countries, to supply the very large UK market with fresh 100% A2 milk. All under the A2 brand of course. Just pondering why it needs to be produced in the UK

I was living in norway for 2 years, 2 years ago. Milk there costs between 3-4 nzd a litre. I guess their expenses are much higher as the majority of the country is under snow 8-9 months of the year. Norway may not be the best example however as sweden and finland are about 30-40% ish cheaper with less snow year round.

[Ginger_steps_]

Heres a photo i took at my nearest Aldi 2 days ago - hard to see all the labels but basically every milk product you can see in the photo is "Farmdale" milk (the ALDI brand) except of course a2 (in the top left corner). It retails for $4.40 (60c cheaper than anywhere else). https://www.dropbox.com/s/thvqi5pm7vlhmfp/2014-11-25%2014.06.15.jpg?dl=0

And heres an article to go with it: http://www.abc.net.au/news/2014-11-26/woolworths-ready-for-tough-questions-at-agm/5920380?section=business

Just as Costco is a great partner when taking a2 to the states, I imagine Aldi will prove an excellent partner for introducing a2 to the rest of Europe. The future looks bright!

[klid]

Bought a lil at $0.64 - had to use some spare cash up before I did something stupid, I almost bought PPL with it, gosh.

[NT001]

Heres a photo i took at my nearest Aldi 2 days ago. And heres an article to go with it: http://www.abc.net.au/news/2014-11-26/woolworths-ready-for-tough-questions-at-agm/5920380?section=business

Great stuff, very interesting thanks GS. I wonder if Aldi were using a2 as a promotional loss leader. 60c cheaper than the competition is a lot.

[Ginger_steps_]

Great stuff, very interesting thanks GS. I wonder if Aldi were using a2 as a promotional loss leader. 60c cheaper than the competition is a lot.

Im pretty sure that is their standard price, it didnt have the red tag they usually do for specials. Possible answer to your question..... A friend of mine works for a large food company, and Aldi ripped off one of their products - The food company threatened legal action unless Aldi removed the product, to which Aldi offered to stock their product instead. The food company thought they wouldnt be able to make their margins and sell at Aldi's prices, but as it turned out Aldi is a super efficient company that does things VERY diferently to other supermarkets (distribution, logistics, warehousing, shelf stocking practices etc) which is why their products are so cheap, rather than pounding down their suppliers prices (although im sure that probably happens a bit too). End story is, I think, a2 still makes the same margin and Aldi still makes their normal margin - consumer wins (which is why Aldi is growing so quickly) - hence the $4.39 for a tasty bottle of a2!

Will keep an eye on it however in-case it was just a special...

[NT001]

The mystery surrounding the identity of Equity Casa Grande, the Delaware-registered company that owns 30 million shares in ATM and is its sixth biggest shareholder with a 4.55% stake, turns out not to be such a mystery after all.

It is the investment vehicle of colourful US billionaire Sam Zell, who is a close friend and business associate of ATM’s chairman Cliff Cook. He was the guy who famously created America’s biggest property empire, Equity Group and cleverly sold it off for US$39bn just before the Global Financial Crisis, whereupon the US property market turned to mush and most of the group’s properties became worth less than the mortgage debt they carried. He also famously bought the Chicago Tribune media group which included the Los Angeles Times for US$8.2bn and then put them into bankruptcy protection a year later (the papers now survive under different ownership structures).

Zell is estimated to be worth about $5bn and his current major investment vehicle, Equity International (owned through Equity Casa Grande LCC), specialises in identifying and partnering companies outside the US, usually by investing in real estate-related opportunities. He is a co-investor in London-based LifeCare Residences, a luxury international retirement village operator set up by Cliff Cook, who had founded and then sold off NZ listed retirement village operator Metlifecare. LifeCare has retirement villages on Waiheke and in Remuera.

Zell received ATM shareholders’ approval at the shareholders’ meeting in 2008 to purchase 50 million shares. It’s interesting now to look back at what happened then, as reported by The Independent:

“It was through retirement home connections that A2 Corporation chairman and substantial shareholder Cliff Cook and his right-hand man Greg Hinton met Zell and his executives, culminating in the fund's investment in A2.
“A2 shareholders also voted on Friday in favour of a placement of 28 million shares to AMP Capital for 10c a share, (bringing its total stake in the company to 40.015 million shares, or 12.85% of A2) as well as the issue of 13.915 million shares to the Child Health Research Foundation in exchange for it agreeing to terminate an agreement it entered into with A2 in April 2004 for entitlement to a portion of future royalties. This agreement related to a jointly held patent between the two parties for processing milk from cows with only A2 beta-casein protein, free of the A1 casein linked to illnesses such as heart disease, diabetes, autism and schizophrenia.”

In July this year, Dairy Farms NZ Ltd, which is a US-NZ JV 62.8% owned by Zell, received OIO approval to buy 434.4ha of dairy farmland at Lowcliffe in Canterbury for $22.3m. Whether this is connected with the ATM-Synlait operation I don’t know.

[BFG]

NT001,

Clavell Capital, the Auckland based investment advisors behind A2 Milk are also behind Dairy Farms NZ, who boast Sir Henry Van Der Heyden (ex Fonterra) as an advisor to the company.

There are indeed possibilities for Dairy Farms NZ (who anticipate listing in mid 2015) to increase their*revenue by converting some of their herds to A2.

The Companies Office website is down for maintenance, but a casual examination of the Dairy Farms NZ shareholder list on the NZCO website would reveal some*interesting names...

[kizame]

NT001,

Clavell Capital, the Auckland based investment advisors behind A2 Milk are also behind Dairy Farms NZ, who boast Sir Henry Van Der Heyden (ex Fonterra) as an advisor to the company.

There are indeed possibilities for Dairy Farms NZ (who anticipate listing in mid 2015) to increase their*revenue by converting some of their herds to A2.

The Companies Office website is down for maintenance, but a casual examination of the Dairy Farms NZ shareholder list on the NZCO website would reveal some*interesting names...

Good work Moosie.Argh sorry BFG...

[Jasemc]

Pleased to report that Count Down Mt. Wellington have increased the shelf space by 100%

Now have two rows by 5 or 6 bottles instead of the one row..

With a much less erratic supply ..

Slowly but surely :-)))

yes same in local count down another row added. A2 is quietly taking over the world

[Jasemc]

Like lada cars

[winner69]

Still trying to get a real feel for the A2 financials, mainly because I struggle to get any DCF to give me anywhere near 90 cents / $1

Is this slide really meaningful (from annual results preso) - like say for Australia is the intercompany charges and license fees of $14.2m a real cost or just a lot of smoke and mirrors to confuse mere mortals like me. Upon consolidation it probably has no impact and A2 have put this disgram in to try to show how much money is made in each segment.

Reading all this stuff it appears as A2 say that 'investment for growth' was $7.5m - does that imply normalised earnings were about $7.5m pre-tax then?

[janner]

Like lada cars


But you do not have to wear Terelyne to drink A2 :-))

[BFG]

with Pepsi CO being the owner of Danone (a European dairy giant) perhaps A2 is a great fit for COKE.
Not the SUGARY DRINK scenario again!!!

[Trigger]

Still trying to get a real feel for the A2 financials, mainly because I struggle to get any DCF to give me anywhere near 90 cents / $1

Is this slide really meaningful (from annual results preso) - like say for Australia is the intercompany charges and license fees of $14.2m a real cost or just a lot of smoke and mirrors to confuse mere mortals like me. Upon consolidation it probably has no impact and A2 have put this disgram in to try to show how much money is made in each segment.

Reading all this stuff it appears as A2 say that 'investment for growth' was $7.5m - does that imply normalised earnings were about $7.5m pre-tax then?


I missed this slide earlier in the year. It's quite interesting. Intercompany charges are normally run pro rata to reflect physical things like volume of work (perhaps litres or kg's consumed) or staff headcount, or a combination of several parameters. Done properly, and with the appropriate documentation in place, it's a tax efficient mechanism.

The figure I find interesting on the slide is the charge being costed to the NZ operation ($10.6M). Its massive relative to the size of the operation here (notwithstanding see weed's ongoing efforts!!!), and presumably mainly reflects the licensing arrangement with FV. Another good reason to see FV gone and fees reinvested in an alternate growth mechanism.

Still thinking about your final question w69.

Cheers,

Trigger

[MAC]

There’s been quite an increase in intercompany charges over the last two years.

It reflects the company having gone from operating within a single market, Australia, to having opening up two new markets in the UK and China and the overhead and support staff required for those markets. I’ve allowed for a further step when the US market is opened next year.

At the end of the day Trigger, although intercompany charges are an overhead, in this instance they are also an investment in growth and although they may seem a bit large at present they probably will stabilise off a little next year once the US entry is initiated.

The revenue growth from the three opened markets UK, China and US, are all at the very bottom of the curve, and in a couple of years those intercompany charges will seem much much less as a percentage of gross.

[Trigger]

There’s been quite an increase in intercompany charges over the last two years.

It reflects the company having gone from operating within a single market, Australia, to having opening up two new markets in the UK and China and the overhead and support staff required for those markets. I’ve allowed for a further step when the US market is opened next year.

At the end of the day Trigger, although intercompany charges are an overhead, in this instance they are also an investment in growth and although they may seem a bit large at present they probably will stabilise off a little next year once the US entry is initiated.

The revenue growth from the three opened markets UK, China and US, are all at the very bottom of the curve, and in a couple of years those intercompany charges will seem much much less as a percentage of gross.

Yep I'm comfortable with all that Mac. And have no issue with the mechanism. What I hadn't appreciated in the past was the high charge attributed to the NZ operation. I doubt this reflects the size of the operation here, though its a little hard to tell with physical consumption kept away from the market. So I can I only put it down to the second element of cost in winner's slide - i.e. license (Fresha's) fees. My point being, once Fresha leave the building in early 2017 we should see a positive knock on for the consolidated business. Am I barking up the wrong tree?

Trigger

[winner69]

Trigger, I don't think I misread you but you seem to say nz carries $10.6m in inter company charges

I actually think it is actually a "credit" - the offset in the charges made to Australia etc.

I assume this is admin cost recovery and some license fee/royalty arrangement bring profits back to NZ. In other parts of the accounts NZ is reported as making lots of money on hardly any sales.

Is that how you see it?

[Trigger]

Trigger, I don't think I misread you but you seem to say nz carries $10.6m in inter company charges

I actually think it is actually a "credit" - the offset in the charges made to Australia etc.

I assume this is admin cost recovery and some license fee/royalty arrangement bring profits back to NZ. In other parts of the accounts NZ is reported as making lots of money on hardly any sales.

Is that how you see it?

Yes you're right sorry guys. In my mind the model was Australian Head Office as hub, supporting the regional offices (UK, China, NZ and soon to be US) and inter company charges for services being made to each region on, for instance, a volume basis. Thanks.

Trigger

[NT001]

Couple of small points

Australia has become the business hub but some staff are still in Auckland, and since the company is listed in NZ, a lot of corporate expenses would be picked up here, including listing costs, accounting/auditing, strategic advice, IP legal advice and executive travel costs.

Regarding Fresha Valley, my guess is that the situation will change before 2017. MAC reported from the ASM that the FV deal is not exclusive, and that the company is aware of impatience among NZ shareholders. I'm sure the Synlait operation offers options for ATM to start up its own NZ distribution system at least south of Auckland, and there are also other options, such as farms in Waikato that have already converted to A2-only, just waiting. FV could be allowed to continue looking after the Auckland market meantime. It has its own big market in Auckland for standard milk, which is its main priority, and might be pretty happy to be relieved of its current obligation to distribute A2 milk nationwide.

On the other hand, shareholders who are already questioning whether ATM can afford to simultaneously break into the UK, China and the US would be reluctant to see resources being diverted to market development in NZ, at best a minor market, as well.

[nextbigthing]

Winner or anyone,

Has anyone tried going through the accounts and cutting out all the money estimated to be spent on growth etc and worked out an underlying 'profit' for Australia for the $110m of sales?

Cheers

[MAC]

Winner or anyone,

Has anyone tried going through the accounts and cutting out all the money estimated to be spend on growth etc and worked out an underlying 'profit' for Australia for the $110m of sales?

Cheers

Yeah, I've given it a go for the last few reports, there's not really enough information to do that accurately I've found, although you can get close from evaluating the profitability of the Australian segment, which is basically close to most of the operating revenue.

Australian operating EBITDA at FY14 was $18.7M,

Gross margins are a good indicator generally though of underlying performance;

6542

[Snoopy]

Yeah, I've given it a go for the last few reports, there's not really enough information to do that accurately I've found, although you can get close from evaluating the profitability of the Australian segment, which is basically close to most of the operating revenue.

Australian operating EBITDA at FY14 was $18.7M,

Gross margins are a good indicator generally though of underlying performance;


I can take it one step further than that.

$18.7m is the EBITDA earnings from Australia before licence fees and less investment in new market development of $7.5m and the undeclared 'corporate costs' which reduce EBITDA to $3.6m. So licence fees and corporate costs must be:

$18.7m - ($7.5m + $3.6m) = $7.6m

If we assume that 1/4 of corporate costs relate to Australia, while the other 3/4 go to developing China, UK and USA, then underlying EBITDA for Australia is:

$18.7m - ($7.5m + 0.25($7.6m))= $9.3m

Since Australia is the only developed market we can assume that all the Depreciation and Amortization relates to that market.

So NPBT = $9.3m - $1.9m = $7.4m

Tax that result at 30% and you get NPAT of $5.18m. There are 660m shares on issue. So this gives earnings per share of:

$5.18m / 660m = 0.00785cps

A reasonable growth multiple might be 20 if ATM finds itself an Australian only brand in the future.
So fair value for ATM Australia is.

20 x 0.00785 = 15.7c

At 63c, ATM has an awfully long way to fall to get back to fair value. There is some chance, say 25%, that ATM will become an Australia only company in a few years. So such a scenario needs to be factored in to what ATM is worth.

SNOOPY

[Snoopy]

The revenue growth from the three opened markets UK, China and US, are all at the very bottom of the curve, and in a couple of years those intercompany charges will seem much much less as a percentage of gross.


I hope when you guys are making your growth forecats in other markets you are taking out the inflated fake growth that was achieved in Australia due to the supermarket milk price wars.

I notice that ATM quote their achievements by measuring their market share in terms of gross market value. If the price of an ordinary one litre of milk goes from $2 to $1 and sales remain constant then the gross value of those sales in the market halves. If the price of A2 milk representing say 2% of market share by volume does not change, that means:

1/ The gross market value of retail milk sales approximately halves.
2/ By value, the gross market share of A2 milk will double, with no increase in A2 volume.
3/ That in turn means that A2 will roughly double their market share percentage, by selling exactly the same amount of milk.

Since this milk price war between Coles and Woolies started early in CY2011 just as A2 was getting established, I believe that A2s growth by volume is probably only about half the market share growth by value.

That means that if A2 goes into a new market which doesn't start a milk price war when they appear on the scene, the market share gains with time are likely to be only half what has been seen in Australia, all things being equal. In other markets we know that all things are not equal because there is no duopoloy which guarantees that once A2 milk was established that the single other player had to follow suit. It therefore seems logical that annual growth in other new overseas markets is likely to be only half that seen in Australia. But all you growth gurus are already aware of that, so have built it into your growth modelling - right?

SNOOPY

[MAC]

Gawd, it’s all so misguided and in so many colourful ways, it flummoxes one actually as to where to start to even consider putting it all straight.

I think Snoopy, and I am genuinely sorry to have to admit it, but after over a year now of not getting it, despite many having kindly trying to help you with it, I really don’t think there is any hope for you mate.

[Ginger_steps_]

Gawd, it’s all so misguided and in so many colourful ways, it flummoxes one actually as to where to start to even consider putting it all straight.

I think Snoopy, and I am genuinely sorry to have to admit it, but after over a year now of not getting it, despite many having kindly trying to help you with it, I really don’t think there is any hope for you mate.
Is there any weight to the milk war pricing/market share comments? To a newbie like myself, this may make sense. On second thought however, the milk price has been $1 per litre here for 2 years at least, in which time a2's growth has steadily gained - so i've answered my own question i guess!

[MAC]

Is there any weight to the milk war pricing/market share comments? To a newbie like myself, this may make sense. On second thought however, the milk price has been $1 per litre here for 2 years at least, in which time a2's growth has steadily gained - so i've answered my own question i guess!

Hi Ginger,

I think you answered your own question, ATM seems to have prospered in Australia during the price wars, don't you reckon, I moved back to NZ two years ago now, but at that time the price wars going were exactly at the time when a2 was really taking off.

This chart which I kept tells the story better;

regards, Mac

6543

[Snoopy]

I moved back to NZ two years ago now, but at that time the price wars going were exactly at the time when a2 was really taking off.

This chart which I kept tells the story better;


There is something wrong with that chart. It doesn't show the relative popularity of each kind of milk and how it changes with time. If sales for each of Homebrand, Pauls and Dairy Farmers were roughly constant over that time, and the price drop only applied to a (say) 25% market share held by Homebrand, then the drop in market value overall with the price war might be something like 12.5%.

However:

1/ I suspect the market share of Homebrand was higher than 25% before the price war.
2/ I suspect that many buyers of ordinary Branded milk switched to Homebrand when the big pricing differential opened up.

OK, perhaps it was an exaggeration to say that the overall fresh milk market shrunk by 50% in dollar value with the price war. I would have to know what the home brand market share was over the period to determine that. But I don't think it is unreasonable to suggest the overall market size shrunk by 30%. That plus the greater difficulty in penetrating overseas markets with A2 milk, due to those markets being non duopoly, would suggest to me that a volume growth rate in the UK and USA of around half that 'headline rate' achieved in Australia is reasonable. It is for this reason, the extra delay, that I believe A2 will run out of expansion capital within two or three years. I would expect a cash issue at 40c will be made to those who still want to be part of the A2 milk company dream well before then.

There is also the stunning debut of health software firm Orion which presumably will knock ATM out of the NZX50 at the next review period. Forget what AMP have been doing. At that point index funds will be forced to sell too and in the short to medium term, that means the ATM share price will only head one way.

SNOOPY

[Snoopy]

I think you answered your own question, ATM seems to have prospered in Australia during the price wars,


I agree with the above, but it neatly sidsteps the point I was making. The milk price wars started in Januray 2011. A2 was certainly in Australia at that time. IIRC 2011 was the first year A2 made an EBITDA positive return in Australia. The market shrunk early in CY2011, but ATM was already on their growth trajectory by then. ATM deliberately talked up their growth rate by highlighting the market share they had by value. If they had talked about their market share increase by volume, the shareholders would still have been impressed, but less impressed.

The price chart posted by Mac is clear proof that if market share by value is 10%, then market share by volume is less than 5%. Don't get me wrong, 5% is still impressive. But ATM chose to hype their market share by value. There is nothing wrong with that, if you are looking at dollar returns. But, it would be incorrect to use a timeline for a market share by value figure in Australia, to extrapolate a timeline for market share by value figure in other markets (UK, USA). That is because Australia's milk market overall was fundamentally altered by the supermarket price war back then in a way other overseas markets are not being disrupted now.

SNOOPY

[winner69]

I agree with the above, but it neatly sidsteps the point I was making. The milk price wars started in Januray 2011. A2 was certainly in Australia at that time. IIRC 2011 was the first year A2 made an EBITDA positive return in Australia. The market shrunk early in CY2011, but ATM was already on their growth trajectory by then. ATM deliberately talked up their growth rate by highlighting the market share they had by value. If they had talked about their market share increase by volume, the shareholders would still have been impressed, but less impressed.

The price chart posted by Mac is clear proof that if market share by value is 10%, then market share by volume is less than 5%. Don't get me wrong, 5% is still impressive. But ATM chose to hype their market share by value. There is nothing wrong with that, if you are looking at dollar returns. But, it would be incorrect to use a timeline for a market share by value figure in Australia, to extrapolate a timeline for market share by value figure in other markets (UK, USA). That is because Australia's milk market overall was fundamentally altered by the supermarket price war back then in a way other overseas markets are not being disrupted now.

SNOOPY

But it is that high market share by value that drives whatever underlying profitability in Australia is.

Not that transparent the A2 accounts but I would hazard it a guess that the profit margin is anything between 3% to 10% (the accounts show 3.1% before tax)

Even at say a 10% profit margin they need Coles to be selling it at $4.99 for 2 litres else there wouldn't be any cash left to reinvest for growth.

[winner69]

Mac, do you get those prices in your chart off the Coles online shopping site?

Seem pretty static over h last few years

[Ginger_steps_]

Thanks MAC - then the growth is REEEAL AZ bro!

[Snoopy]

But it is that high market share by value that drives whatever underlying profitability in Australia is.

Not that transparent the A2 accounts but I would hazard it a guess that the profit margin is anything between 3% to 10% (the accounts show 3.1% before tax)

Even at say a 10% profit margin they need Coles to be selling it at $4.99 for 2 litres else there wouldn't be any cash left to reinvest for growth.

Yes value not volume is what is important for profitability. Volume is interesting in that the volume demand for fresh milk is only elastic to some extent. There is only so much milk a Weetbix can absorb. I don't have an issue with ATM reporting results by value. I would guess that accounting rules require them to do just that.

My only issue is using the 'value growth' pattern in Australia to forecast the 'value growth' pattern in other markets.

SNOOPY

[Snoopy]

Where do you think Coles got the idea of starting a milk war from? The UK of course. This market dynamic is already well established in the UK, and it was the new British boss of Coles that brought it to Aus.
http://www.news.com.au/finance/business/uk-shows-danger-of-coles-supermarket-price-war-dairy-farmers/story-e6frfkur-1226056585833


Thanks for that KW. I wasn't aware of that English milk price war pre 2011. I think though that my previous message was not clear.

My issue is that the milk price war in Australia, where home brand prices effectively halved in Australia, has reduced the value of the entire retail fresh milk market significantly - by around 30%. This in itself is nothing to do with ATM, which has continued to grow its own A2 volumes at high value, albeit from a low base if we go back to 2009. The issue here is that A2 started its push into Australia before the Coles-Woolies price war started in January 2011, and has continued to push onwards and upwards as the Coles-Woolies price war continues. At one level this Coles -Woolies price war is irrelevent to ATM, because A2 milk itself is not part of this price war. But ATM have made it relevent by quoting their sales in terms of market share by value. My point is that the market by value has changed significantly during the period that ATM was ramping up its Australian sales.

If there had been no Coles-Woolies price war, then A2 volumes would probably be as they are now, ATM profitability would be as it is now, but ATM market share by value would be less, because the whole comparative market would be larger in dollar terms. The overall market by value would not have shrunk without a prolonged retail market discounted milk price. It is the fundamental shrinking in overall fresh milk market value, during the period when A2 sales are ramping up, that has caused the distortionately high market value share quoted by A2. This isn't a problem, unless you use this same value growth path in other markets where there has not been the same market distortion by value that occurred in Australia.

Britain may have had a supermarket price war in milk. But because it occurred before A2 milk marketing started in earnest, it is not relevent to the projected ATM market growth by value in the UK (unless a new milk price war at a lower level starts!). To get an estimate on the timeline of what the market penetration by value will be in the UK going forwards, with the Australian market experience behind us, is a useful exercise. I contend that for comparative purposes, you have to imagine what would have happened to the market share by value if the Coles-Woolies price war did not happen as A2 was being established in Australia. Only then will you get a realistic predictor of what the market growth by value might be as the UK market develops.

SNOOPY

[winner69]

Snoopy-you done some snooping around. What you think of my 3% to 10% net profit margin in Australia?

Any comments that if margin is say 10% they need to Coles to sell it at $4.99 for 2L or else not much left for A2 Milk

[winner69]

The retail price in Costco is $3.99 and the Costco fixed mark up is no more than 15% so you can work it out from there what the wholesale price is.

Good

So $3.63 exc GST suggests a $3.15 wholesale price.

If A2 net margin is say 10% they make 32 cents per 2L

I assume Coles mark up is more for them to sell at $4.99

Lets hope all milk, even the best never gets to $1 a litre

[Snoopy]

It changed in 2011. It hasnt changed since. So if you set end of 2011 as your baseline then growth from there is normalised and thus repeatable.


Yes, you could certainly model growth by market share value of A2 as repeatable if a step change in overall market size is outside the window in which you start to market A2. I agree. And if A2 had only started to be marketed in calendar year 2011 in Australia, you could model a similar market value growth in the UK, for investor modelling purposes. The only problem KW is that marketing of A2 in Australia didn't begin in 2011! It was years before that. I don't believe you can arbitrarily choose to say 'year zero' for A2 was 2011, just to avoid the start of the discount wars.

SNOOPY

[NT001]

[Growth} should be faster in the UK as they would have learnt a lot of lessons from the Australian market - eg. who is the customer, what is the best message, how to promote it. They also have more clinical evidence to support their claims now than they did pre-Australia market entry. Consumer trends for better foods is also more advanced now than back then. As is Facebook viral marketing and messaging. Lots of things have changed since 2011 - most of them for the better for ATM.

I totally agree, KW. I'm not an accountant, but it seems to me you can't extrapolate much financially from the Australian experience to what can be expected in UK (or USA). When A2 entered the market in Australia it did not have a clearly defined marketing strategy. It knew it was legally prohibited from making any health-related claims, so it more or or less just went into the general milk market, and the word got around, largely anecdotally, that it gave health benefits. It's now in the UK defining itself cleverly as a niche milk that has been shown both anecdotally and by clinical trial to be easier to digest, and is therefore not in competition with mainstream milk but presents a route back to milk consumption for those who've walked away from it or find it indigestible. The whole strategy is different and very smart, plus they've got great PR.

Incidentally, although it was launched amid great ballyhoo on November 19 as being available in all Sainsbury outlets, A2 has also been available and remains so in Tesco, Ocado, Morrison and Waitrose. Not sure
how much this varies from store to store and region to region.

And a friend I was talking to who is fairly familiar with the UK industry expressed the opinion that ATM is being "rather conservative" in not forecasting cash breakeven in the UK until FH16.

[see weed]

Last week got a2 at Green Lane Countdown with use buy date 6/12/14. Good, I have about 13 or 14 days to go. Had half a cup left on the 2/12/14 and on the 3/12/14 it was starting to look a bit thicker with odour. Went to Mt. Wellington Countdown last night. They had the same milk use buy date 6/12/14 for $2.50.:( They should not sell old milk. But in saying that, I told a stranger, this is the best milk and it is on sale now, but you will have to drink it within 2 days. He said that is ok, took my flyer and milk and off he went. I walked out of shop with Soy milk.

[Jasemc]

Last week got a2 at Green Lane Countdown with use buy date 6/12/14. Good, I have about 13 or 14 days to go. Had half a cup left on the 2/12/14 and on the 3/12/14 it was starting to look a bit thicker with odour. Went to Mt. Wellington Countdown last night. They had the same milk use buy date 6/12/14 for $2.50.:( They should not sell old milk. But in saying that, I told a stranger, this is the best milk and it is on sale now, but you will have to drink it within 2 days. He said that is ok, took my flyer and milk and off he went. I walked out of shop with Soy milk.

See weed I was going to join Destiny church but I think your cult is better!

[janner]

See weed I was going to join Destiny church but I think your cult is better!


And probably cheaper !!..

[blobbles]

Last week got a2 at Green Lane Countdown with use buy date 6/12/14. Good, I have about 13 or 14 days to go. Had half a cup left on the 2/12/14 and on the 3/12/14 it was starting to look a bit thicker with odour. Went to Mt. Wellington Countdown last night. They had the same milk use buy date 6/12/14 for $2.50.:( They should not sell old milk. But in saying that, I told a stranger, this is the best milk and it is on sale now, but you will have to drink it within 2 days. He said that is ok, took my flyer and milk and off he went. I walked out of shop with Soy milk.

Soy milk??? Traitor! :-p

[see weed]

I came up with a good cult... I mean idea. Bottle of a2 milk for christmas present in a gift basket with a few little nic nacs around the edges like biscuits, chocolate, milo etc. And you could put in a little brochure or flyer on the benefits of a2 milk. What do you think?:D Merry xmas everyone.

[klid]

me thinks it would not taste very good after being under the christmas tree for a couple of days:p
Santa better keep that in the fridge and come down the chimney right before the kids wake up and stash it under the tree.

[NT001]

Interesting piece indicating restraints on ATM's formula exports to China continue:

http://www.stuff.co.nz/business/farming/dairy/63847068/infant-formula-priority

[see weed]

Soy milk??? Traitor! :-p

All good now. Went to Green Lane Cd today and bought two bottles of a2, one for me and one for a good old customer of mine. The use by date is in 13 days time, which is good. Noticed sp back down to 60c, but not surprised.

[blobbles]

All good now. Went to Green Lane Cd today and bought two bottles of a2, one for me and one for a good old customer of mine. The use by date is in 13 days time, which is good. Noticed sp back down to 60c, but not surprised.

Seller back? Wouldn't surprise any of us I don't think...

[janner]

Seller back? Wouldn't surprise any of us I don't think...

Think you are correct blobbles..

Was going to throw a little more at it last Monday.. Just to bring DOWN my average.. :-((((

Decided that the " point " difference was not worth it..

So went for DPC " .29 " ..

So much to buy !!!..

So little money :-))

But still well positioned ... aye percy :-))

[see weed]

Seller back? Wouldn't surprise any of us I don't think...

If sp goes below 60c, I'll be in like mastitis up a titty, to go with my udder ones. Gave a bottle of a2 and some knick knacks to my great neice for her birthday.

[BFG]

Choose The Moose - Drop The Reindeer:

http://youtu.be/QmeYVPuuxCo

[winner69]

If sp goes below 60c, I'll be in like mastitis up a titty, to go with my udder ones........

That could be painful ......on the wallet

[couta1]

Choose The Moose - Drop The Reindeer:

http://youtu.be/QmeYVPuuxCo
What a classic and yes I'm choosing the moose over the Big Fat Guy.

[Harrie]

Small investors bailing at 60c on a 20000 volume?
On the basis that freedom foods are tipped to be a big winner out of the FT deal with china you may wonder what it has for A2 in that equation may be.
If A2 is going to be a reasonable beneficiary of their distribution and marketing foray into this market you may expect that they might want to increase their holdings at this price? Maybe they have better investment opportunities with building their own business over there with higher expected returns than with further investment in ATM?

[see weed]

Small investors bailing at 60c on a 20000 volume?
On the basis that freedom foods are tipped to be a big winner out of the FT deal with china you may wonder what it has for A2 in that equation may be.
If A2 is going to be a reasonable beneficiary of their distribution and marketing foray into this market you may expect that they might want to increase their holdings at this price? Maybe they have better investment opportunities with building their own business over there with higher expected returns than with further investment in ATM?

Yes, looks like smaller holders getting the christmas spooks and extra funds for their holidays. Mainly smaller holders selling 5,000 to 10,000 each. Getting close to top up time again. Not too worried, my av price is .609c.

[BFG]

Yes, looks like smaller holders getting the christmas spooks and extra funds for their holidays. Mainly smaller holders selling 5,000 to 10,000 each. Getting close to top up time again. Not too worried, my av price is .609c.

Is the selling in rounded 5,000 or 10,000 lots in a consistent mannet? That's an instant hallmark of instos, not retailers!!!

[NT001]

No the sales were not in rounded multi-thousand lots like that but there were some oddities in among the transactions. For example in the quarter-hour between 16.23pm and 16.38pm there were six trades of exactly 4,009 ATM shares each (interspersed among others). Why would that be? And at 16.40pm there were three trades of 772 shares, and at 16.41pm there were three trades of 596 shares each. Several other instances of the same kind of thing. Can anyone explain?

There were a total of 135 trades for the day and all except seven occurred after 3pm.

[blobbles]

How do you know a large seller is in control of a companies SP?

They announce virtually doubling their growth in their main market, SP retreats.

Sorry, just annoyed at the lack of traction from such a promising company!

[BFG]

No the sales were not in rounded multi-thousand lots like that but there were some oddities in among the transactions. For example in the quarter-hour between 16.23pm and 16.38pm there were six trades of exactly 4,009 ATM shares each (interspersed among others). Why would that be? And at 16.40pm there were three trades of 772 shares, and at 16.41pm there were three trades of 596 shares each. Several other instances of the same kind of thing. Can anyone explain?

There were a total of 135 trades for the day and all except seven occurred after 3pm.

Insto sell allotment of the day being broken down into smaller lots to get best market price and not to swamp the market. As broker rates do not apply per sale it doesn't matter how many trades they do. Could be an insto testing buy strength as well. All just one big, hidden chess game...

[see weed]

How do you know a large seller is in control of a companies SP?

They announce virtually doubling their growth in their main market, SP retreats.

Sorry, just annoyed at the lack of traction from such a promising company!

Thought the same about AIR 3 to 3 1/2 years ago and started buying at .845c to 1.13c, scatter gun approach. So don't be annoyed, be patience and buy some more more more at lower lower prices.:)

[Harrie]

Your avg buy in price is 1.4c below me see weed. I'm underwater at the mo.
I'm getting the distinct impression that the selling is coming out of Aussie. NZ FMA legislation arounf SSH disclosure requires immediate, or as soon as practical notification but this can't be enforced against Aussy investors unless there is reciprocal transtasman arrangements. I'm only guessing but if there is a big Auusy insto selling which has more than 5% of the company shares, the disclosure could be being witheld until a more appropriate time.

[winner69]

Your avg buy in price is 1.4c below me see weed. I'm underwater at the mo.
I'm getting the distinct impression that the selling is coming out of Aussie. NZ FMA legislation arounf SSH disclosure requires immediate, or as soon as practical notification but this can't be enforced against Aussy investors unless there is reciprocal transtasman arrangements. I'm only guessing but if there is a big Auusy insto selling which has more than 5% of the company shares, the disclosure could be being witheld until a more appropriate time.

Harrie, I still think you are seeing things that don't exist

[ziggy415]

Harrie, I still think you are seeing things that don't exist

winner...something does exist...just what were not sure.....someone keeps knocking us down just as we seem to be getting traction

[Harrie]

Sue as eggs its 3pm and come on in big seller! Its got to be insto selling doesn't it? Its becoming pretty predictable.
I reckon they are happy to get anything above 0.59c until they are all sold.

[winner69]

winner...something does exist...just what were not sure.....someone keeps knocking us down just as we seem to be getting traction

Maybe all we are seeing at the moment (and for the past month or so) is the normal ebb and flow of the market around the price at which most participants (bigger players) see as a reasonably fair valuation.

Maybe just this and nothing else, after all $400m odd market cap is pretty lofty.

[see weed]

Your avg buy in price is 1.4c below me see weed. I'm underwater at the mo.
I'm getting the distinct impression that the selling is coming out of Aussie. NZ FMA legislation arounf SSH disclosure requires immediate, or as soon as practical notification but this can't be enforced against Aussy investors unless there is reciprocal transtasman arrangements. I'm only guessing but if there is a big Auusy insto selling which has more than 5% of the company shares, the disclosure could be being witheld until a more appropriate time.

Stay cool to after school. I'm underwater to, but tend to float around. You could be right. But it might be smaller Aussi holders selling out getting funds ready for the ASX listing in less than 14 weeks time. Not to worry, just buy another $10,000 worth every time it goes down 1c, thats my theory, and take advantage of $30 brokerage fee.

[bull....]

looks like new lows coming a close below 58c very bearish

[theace]

Maybe of some interest: http://www.just-food.com/interview/scott-wotherspoon-ceo-of-a2-milk-uk_id128634.aspx

[winner69]

Trading halt or something, no trades yet

Bugger, forgot there's usually no action until the magic hour of 3

[MAC]

Maybe of some interest: http://www.just-food.com/interview/scott-wotherspoon-ceo-of-a2-milk-uk_id128634.aspx

A good read, thanks for that Theace.

[NT001]

Maybe of some interest: http://www.just-food.com/interview/scott-wotherspoon-ceo-of-a2-milk-uk_id128634.aspx

Excellent interview, very informative and it answers a lot of the questions that have been raised by contributors to this thread. Thanks Ace.

[Harrie]

Maybe of some interest: http://www.just-food.com/interview/scott-wotherspoon-ceo-of-a2-milk-uk_id128634.aspx

Increasingly it appears that the SP is going to languish until proven penetration into the UK Market is acheived. That then reconfirms the possibility that success will also be replicated in the USA market, which then feeds into further demand for ATM shares.
Its all up to you Mr Wotherspoon....no pressure.

[Harrie]

Trading halt or something, no trades yet

Bugger, forgot there's usually no action until the magic hour of 3

Thats right W69. The aussy boys go out for lunch at midday, decide how many shares they can flog off to overly optimistic kiwi shareholders, have a few beers and then phone the orders through around 1 pm their time , 3pm our time and if the market looks a bit stronger shove a few more in around 5pm our time. Very predicable eh!

[Cowboy]

Excellent interview, very informative and it answers a lot of the questions that have been raised by contributors to this thread. Thanks Ace.

This fellow certainly 'talks the right talk' - now for the walk...

[Harrie]

The selling all looks a bit systematic doesn't it W69? As predicted another little flurry at 5pm as predicted! Stuffed if I know what's going on though but it seems a little more than what you would expect the natural gyrations of the market to produce.
The nice thing is that there also seems to be a steady stream of buyers willing to back the company at these prices.
Is Wotherspoon a man of action or just a pontificating DH? if the latter, I suspect we are off into the mid 30's. IMO the future SP is highly dependent on the UK success. If there is none, the chances of marketing into the US market also look tenuous. The growth in Aussy is already largely discounted into the SP

[NT001]

IMO the future SP is highly dependent on the UK success. If there is none, the chances of marketing into the US market also look tenuous. The growth in Aussy is already largely discounted into the SP

I don't quite follow that reasoning Harrie. The funding is basically in place for the US operation, which is initially very modestly costed. Its success is going to depend on the publicity it generates, which will be related to health and suchlike issues that are very important to a certain high-income subset of US consumers. The company's US market development strategy is not at all dependent on, or modelled on, the UK operation. The latter will obviously take a year or two to mature, but judging from the Wotherspoon interview is being well planned and not rushed. Californians aren't going to give a hoot about what happens in UK.

The ATM SP will presumably continue to be influenced for a while by the activities of the mystery seller, but I would assume the company has some ideas on how to promote the shares when they float in Aussie, taking advantage of consumer loyalty there. It wouldn't look good if the SP fell flat. ATM may be a big company in terms of capitalisation in NZ, but not in Aussie. It'll be interesting to see if Freedom foods release any of their ATM holding into the float. I don't believe Aussie investors are going to be much influenced by preliminary results from the UK. They have their own perceptions of A2 milk, and if looking externally would be more interested in what's happening in China than in the UK.

I also understand there are some further interesting scientific results coming up for release in coming months. I don't see the company facing any resource crisis, and I was heartened by Wotherspoon's suggestion that the first real foray into Europe is some way off.

[MAC]

Valuation and fundamentals always trump sentiment over the long run Harrie, try to relax a bit.

The China fresh milk market and infant formula market(s) are more immediate, and I don’t think the market will really appreciate that until HY15 reporting. The UK and US are longer term investments and we must patiently let them initiate, mature and grow over the next few years, just as intended.

There are so many more a2 product revenue streams now than just 18 months ago, and the savvy folk at ATM are very good at recognising new opportunities, many of which are in addition to the 2012 strategic plan, which provide for quite good continuity in growth.

The product mix provides both diversification and continuity, from the FY14 report;

“Whilst revenue growth in China and the UK are presently well behind original plan, this shortfall should be compensated by sales of infant formula in Australia and other products in both Australia and Asia.”

You may just do your head in watching the share price every day, day in day out, try putting ATM in the bottom draw for a few months and forget it’s there, you’ll feel better.

Analyst consensus is presently $0.80 (+40%), I think this is quite low as they have not altered since the China fresh milk market has opened up, my FY15 valuation, granted a bit further out, is $1.10, let’s see.

[Harrie]

Thankyou NT and Mac for keeping me on track. Totally accept all that however I must have let my frustration get the better of me last night over a wine or two! I was just throwing a few comments out there for a bit of reaction...and it all reconfirms my own thinking.

[NT001]

India, which is the world’s second most populous country and has the world’s second highest cows-milk output (after USA), is to introduce new milk quality standards, with possible implications for the global A1-A2 debate.

Should we be interested? Well it’s not going to affect the ATM share price this week, but it could be significant longterm in hammering home the case for A2 milk.

http://www.newindianexpress.com/cities/chennai/India-to-Come-Up-With-New-Standards-of-Milk-Says-NDRI-Chief/2014/12/10/article2564881.ece

Note the specific reference to A2.

Apart from addressing issues of milk hygiene and the widely varying nutritional quality of milk, there is talk of enforcing a ban on cross-breeding European cows that carry the A1 gene with the indigenous Indian hump-backed cow (bos indicus) which is (or was) pure A2.

http://www.newindianexpress.com/cities/chennai/article1516842.ece

Indian scientists and officials have declared A1 milk a health hazard, and the Indian public is far better informed on the A1-A2 issue than consumers elsewhere. Yet without quality standards, the Indian consumer doesn’t know what he/she is buying.

Much cross-breeding has already taken place to boost Indian per-cow milk output, and crossbred cows carrying the A1 gene are now thoroughly mixed into the national herd. So much so, in fact, that there’s now a shortage of pure indigenous A2 stock to breed from.

The cross-bred (mostly Friesian-Holstein) cows produce more milk but require more and better feed and are less resistant to local insect pests and diseases, and the nutritional value of their milk is markedly lower than that of the local breeds.

A lot of this is not directly relevant to the A2 issue and ATM.

But what if the new regulations require a label stating the A1-A2 status of milk offered for public sale? That’s what a lot of people are pressing for.

http://devinder-sharma.blogspot.co.nz/2013/11/a2-milk-is-what-india-needs-to-drink.html?q=a2

It would be a world first and could potentially involve having to utilise ATM’s tailhair-testing IP. It could also put Fonterra, which sells dairy products into India but refuses to recognise A1-A2 as an issue, in a rather awkward position.

And any step taken by the Indian government to officially endorse A2 over A1 on health grounds would add support to the a2MC position globally. Worth watching, I think

[Harrie]

Done a bit of research over the weekend I see NT?
Thanks for that, potential upside for ATM in all that, certainly no negatives for them. More education = More sales

[NT001]

Done a bit of research over the weekend I see NT?
Thanks for that, potential upside for ATM in all that, certainly no negatives for them. More education = More sales

I've been following the debate in India for some time, wondering if the government was going to really come to grips with some of these issues, so when the announcement finally came it was just a matter of pulling some of the material together. There's been some good A1-A2 scientific research done in India. You're right, all upside rather than downside for ATM.

[see weed]

looks like new lows coming a close below 58c very bearish

Time to top up again? Purchased some yesterday at 58c, but have never bought any at 57c before. Exciting times roller coaster ride. Buy buy buy.

[NT001]

Has anybody seen any preliminary assessments by Australian analysts as to what ATM shares might be worth when they float there? The company said this should occur about end of March and benefit all shareholders.

[winner69]

Has anybody seen any preliminary assessments by Australian analysts as to what ATM shares might be worth when they float there? The company said this should occur about end of March and benefit all shareholders.

Maybe dual listing will end up like Summerset, EBOS, Nuplex etc dual listings - a non event

Even heavy weights like Spark, Air NZ and Xero have relatively light volumes.

I wouldn't hang my hat on a ASX listing boosting the shareprice just because its listed.

However being the mechanism for Freedom selling down might be another matter.

[nextbigthing]

Maybe dual listing will end up like Summerset, EBOS, Nuplex etc dual listings - a non event

Even heavy weights like Spark, Air NZ and Xero have relatively light volumes.

I wouldn't hang my hat on a ASX listing boosting the shareprice just because its listed.

However being the mechanism for Freedom selling down might be another matter.

Interesting point Winner. If the seller who has been dumping here can now supply whatever Australian demand there is instead taking some sell pressure off, then we may see some appreciation in the shareprice here finally?

[Beagle]

WOW, only 57....Has Norah been appointed to the board or something :eek2: Getting bloody close to my 15% stop loss which will be enforced ruthlessly if tripped.
Your buck looking a long way away now Winner69.

[MAC]

Probably something to do with the AUD ranging from 0.89 to 0.95 in just six weeks, I’m far from being a currency trader, but that doesn’t seem like a sustainable move to me.

Question is what will the SP do if the AUD drops back down to 0.89 over the next six weeks ?

For the long term investor, it may all be summed up as, well who really gives a toss, noise is noise.

[winner69]

WOW, only 57....Has Norah been appointed to the board or something :eek2: Getting bloody close to my 15% stop loss which will be enforced ruthlessly if tripped.
Your buck looking a long way away now Winner69.

55 was good buying last time around .....might wait to 50 cents his time around, that way a buck is double your money time.

Seems a strange sort of stock for you to be holding Roger, doesn't seem to fit your modus operandi

[Beagle]

55 was good buying last time around .....might wait to 50 cents his time around, that way a buck is double your money time.

Seems a strange sort of stock for you to be holding Roger, doesn't seem to fit your modus operandi

Yep, looks like I got sucker-punched into this this pup. Some clown told me it was worth a dollar, I wonder who that was.:ohmy:
Just dipped one little toe into the water...easy enough to chop it off so to speak.

[winner69]

Yep, looks like I got sucker-punched into this this pup. Some clown told me it was worth a dollar, I wonder who that was.:ohmy:
Just dipped one little toe into the water...easy enough to chop it off so to speak.

Just shows you should stick to your usually disciplined investing approach mate, and not get 'sucker-punched' into the rhetoric and hype and excitement that often happens

Hype is good for traders in the short term but as MAC points out real fundamental value always prevails in the end, in this about 60 cents plus or minus a bit.

[Beagle]

Just shows you should stick to your usually disciplined investing approach mate, and not get 'sucker-punched' into the rhetoric and hype and excitement that often happens

Hype is good for traders in the short term but as MAC points out real fundamental value always prevails in the end, in this about 60 cents plus or minus a bit.

Rome wasn't built in a day. No point crying over spilt milk...and oh yes, DYOR :)

[couta1]

Just another sell down day across most of the market following the US lead, nothing new here move right along folks. PS-Holding at a lot more than 15% down currently.

[NZSilver]

Price down to 57 cents, but hopefully UK roll out performs well.

http://www.sainsburys.co.uk/shop/gb/groceries/get-ideas/features/features/a2-milk-company

[aquaman]

Price down to 57 cents, but hopefully UK roll out performs well.

http://www.sainsburys.co.uk/shop/gb/groceries/get-ideas/features/features/a2-milk-company


I hope so too but whilst there is a chance of our dollar gainng further on the Aussie dollar I feel the share price will continue to decline.... Ill top up when it gets to 50 and then wait for the hopeful rebound

[janner]

Just another sell down day across most of the market following the US lead, nothing new here move right along folks. PS-Holding at a lot more than 15% down currently.

Such faith !!..

Disc. Holding .

[winner69]

Market cap $370m still seems rather rich

Maybe approaching fair value?

[bull....]

54c next test which was previous lows

[see weed]

54c next test which was previous lows

Looks like a2 has gone a bit sour lately at 20 month lows. No worries, more good buying opportunities at these lower prices after christmas. Bought 3 bottles of a2 and knocked a big bottle of a1 onto the floor, it broke open and went everywhere up my leg and up the other shoppers legs. I said, it's ok don't cry over spilt milk, it's only a1, which was a good opening line to tell more people about a2 and hand out my a2 flyer. What a laugh :D Have a merry christmas to all readers. Drive carefully and let that tail gater pass, they are in a hurry.

[BFG]

Haha you are a always good for a laugh See Weed.

Could be a possible double bottom forming with a nice overarching up and down pattern. 55 was big resistance/support many months ago, with 50 being even bigger.

Hope there is some good news to come for all shareholders. Merry Christmas :D

[see weed]

Haha you are a always good for a laugh See Weed.

Could be a possible double bottom forming with a nice overarching up and down pattern. 55 was big resistance/support many months ago, with 50 being even bigger.

Hope there is some good news to come for all shareholders. Merry Christmas :D

Yeah, looks like support at 55c . Got some today at 56c and hoping it stays down here until next year.

[MAC]

“Further gains in the index were capped by a 3.5 percent slide in A2 Milk to NZ$0.56, as the specialised milk processor remained under selling pressure due to sliding global dairy prices”

http://uk.reuters.com/article/2014/12/30/markets-australia-stocks-idUKL3N0UE11F20141230

Hmmm well, that is an interesting comment, and I guess is a debatable one too, I suspect it may be representative of un-researched short term sentiment too.

Should investors not anticipate that a slide in global dairy prices is net beneficial to ATM given that the company largely pays at the farm gate for milk supply as an input cost in Australia, New Zealand and in the UK.

It may take time but lower global prices over time should translate to lower farm gate contract prices for ATM as a lower input cost to their business.

A2 retail milk prices did not rise during the dairy boom and have not fallen during the dairy bust.

And, this is also true throughout the ‘milk wars’ in Australia. In fact the retail price of a two litre A2 bottle of milk has been priced unwaveringly at A$4.99 since 2009.

Thus, lower input costs + steady retail pricing = prosperity

So, perhaps we have a share market anomaly as far as I’m concerned, and an ever prospective opportunity for long investors, just hope it holds for a short while as I’ve no cash at present.

[Harrie]

New year, new opportunities.

interesting comments stemming from the mis placed fact that some market commentators think that ATM is a milk processor? I'm thinking that even if it was, is that actually relevant anyway?The cost of proscessing is still the cost of processing irrespective of what the input prices (prices at the farm gate) are. The only potential downside to a processor is volume and in this enviroment demand can only go up as total cost falls ( all things being equal). The only losers are the farmers or milk suppliers as far as I can see.
as is already pointed out ATM's profit is unaffected if ATM thinks that prices need to fall to remain at a similar price differential to standard milk or increase if they maintain the same price

[NT001]

I really think short term discussion about the relationship between the current market/processing price of milk and the share price and fundamental value of ATM is a bit beside the point, given that a2MC occupies a unique position in the spectrum of dairy product suppliers and is really only on the start of a longterm trajectory that will not have much to do with those factors. Much more significant over the next few months will be the Aussie market's response to the upcoming dual listing, plus ATM's success or otherwise in China, Britain and USA, and the publicity impact of further scientific test results due in the near future.

[Harrie]

Yes that as well NT, accept I agree with previous posters that the dual listing in itself will not do anything much to help the SP

[NT001]

You may well be right Harrie, I'm not predicting that the Aussie dual listing will necessarily help the ATM share price, especially as I have a strong hunch that it will continue to be manipulated at least to some extent by whoever has obviously been working hard to keep it confined within an unnaturally restricted price range recently. What I am saying is that there are players capable of making the SP behave in ways that have little to do with milk prices, at least in the short term. And in the longer term the SP will have more to do with offshore market performance plus new scientific test results.

Incidentally I notice that elsewhere MAC has forecast ATM is a candidate for takeover at its present price. I wouldn't rule this out, except that you have to ask who would want to acquire it, and for what purpose. It's a speculative investment involving a lot of unknowns and requiring a special kind of faith and dedication that is obviously possessed by some of its current holders but not necessarily by others, and I can't see the present owners letting go at anything like recent levels. And I don't see a logical commercial or strategic reason for anyone else wanting to buy it.

[kizame]

You may well be right Harrie, I'm not predicting that the Aussie dual listing will necessarily help the ATM share price, especially as I have a strong hunch that it will continue to be manipulated at least to some extent by whoever has obviously been working hard to keep it confined within an unnaturally restricted price range recently. What I am saying is that there are players capable of making the SP behave in ways that have little to do with milk prices, at least in the short term. And in the longer term the SP will have more to do with offshore market performance plus new scientific test resu


Incidentally I notice that elsewhere MAC has forecast ATM is a candidate for takeover at its present price. I wouldn't rule this out, except that you have to ask who would want to acquire it, and for what purpose. It's a speculative investment involving a lot of unknowns and requiring a special kind of faith and dedication that is obviously possessed by some of its current holders but not necessarily by others, and I can't see the present owners letting go at anything like recent levels. And I don't see a logical commercial or strategic reason for anyone else wanting to buy it.

What about Fontera? Would it not suit them to have a chunk of something thats eating into their market share(or potentialy),plus markets they aren't in at the moment for fresh milk,ie. UK,USA and Europe eventually?

[NT001]

What about Fontera? Would it not suit them to have a chunk of something thats eating into their market share(or potentialy),plus markets they aren't in at the moment for fresh milk,ie. UK,USA and Europe eventually?

I don't think so. The key point to understand is that sales of A2 Milk are ultimately going to depend on consumers coming to understand that the milk products sold by Fonterra are hazardous to health since they contain A1 milk which generates the dangerous BCM7 opioid peptide that is linked to a range of major human diseases including diabetes, heart disease, autism and schizophrenia.

At one stage Fonterra (and its predecessor the Dairy Board) saw merit in joining up with what was then A2 Corporation and converting NZ's dairy industry to A2 to gain a market edge over the rest of the world's dairy industry on health grounds. It even took out joint patents with A2Corp for this purpose. But it then flagged this option away on the grounds that such a conversion would take a decade, which farmers wouldn't wear, and could even raise questions among litigious overseas consumers as to why it had previously been marketing a hazardous product without warning anyone.

That position has since become more firmly cemented in, and Fonterra's public position is that the whole A2 milk hypothesis is scientifically flawed. It cannot now turn around and say it accepts the science behind A2. It has been speculated by some that Fonterra might want to buy up a2MC and put it out of business to silence it, but the scientific research on this is now so far advanced in A2's favour that such a move would cause a huge worldwide scientific controversy that would only draw more attention to the known hazards of the A1 milk it is marketing worldwide.

I would strongly advise anyone who is invested in a2MC to buy and read Professor Keith Woodford's book "Devil in the Milk", which explains the history and science behind A2. Without that background, conventional market analysis really gives no clue as to what A2 is all about and what its future is - huge, but not something the conventional dairy industry wants to be part of, especially Fonterra.

[nextbigthing]

What about Fontera? Would it not suit them to have a chunk of something thats eating into their market share(or potentialy),plus markets they aren't in at the moment for fresh milk,ie. UK,USA and Europe eventually?

Exactly. Or how about Nestlé?

[NT001]

Exactly. Or how about Nestlé?

Nestlé and all the other mainstream dairy operators are in the same position as Fonterra. All of them sell milk containing A1, and to turn around now and espouse A2 milk would involve huge conversion costs plus an admission that the A1 milk they're currently selling is hazardous.

For some years, a2MC and its predecessor A2 Corporation tried to avoid an expensive all-out confrontation with mainstream dairy by not emphasising that A1 milk is dangerous, and just saying A2 is a healthier and preferable choice. But this is changing, for two reasons. Firstly, the science is now becoming more and more incontrovertible, that A1 milk is hazardous. So there's no risk of a2MC being sued by its rivals for saying so. And secondly, some Australian rivals of a2MC foolishly made the mistake of advertising that their milk contained some A2 milk and therefore had the benefits of A2. This forced a2MC to come out openly and say a mixture of A1 and A2 is no good - you have to have pure A2 milk with no A1 to avoid the health risks.

[kizame]

So, I'm thinking it would still be an attractive buy for one of the giants,a foot in both theories so to speak,and... say a year down the track they either protect what market share they have or let the fledgling break in new markets (as for Fontera)for them.
If consumers were going to be litigous with Fonteras purchase,then what would happen to the other big dairy companies? Even if they weren't necessarily a believer,wouldn't they be seen as guilty of pushing the same A1 milk as Fontera?
Just throwing this stuff out there really.
Would Fontera still have those patents and would they still be valid now?

[MAC]

Seems to still be some sector consolidation talk in Australia;

“New Zealand minnow a2 Milk is seeking an ASX listing in 2015, and investors will soon have a number of investment options to get exposure to dairy”

http://www.theland.com.au/news/agriculture/agribusiness/general-news/farmers-to-milk-asia-cash-cow-in-2015/2720412.aspx?storypage=0

It may just simply be that ATM have been approached by one or more Australian insto’s and see no issue in providing a dual listing for them, must be a high profile sector interest for them.

Although one could also presume that any Australian dairy company wishing to take a stake in ATM may well want their investment listed on the Australian exchange.

Page 18: https://www.nzx.com/files/attachments/204015.pdf

[NT001]

So, I'm thinking it would still be an attractive buy for one of the giants,a foot in both theories so to speak.
Would Fontera still have those patents and would they still be valid now?

Think I just got in ahead of you about the situation of other operators.

Re patents, no, I don't think any of the joint patents still exist. Fonterra did try to exert a joint ownership of the patent for testing the A1/A2 status of cows by analysing the DNA in their tail-hairs, but this claim was thrown out by the patents registry. a2MC has got the relevant patents well sewn up, and Fonterra has explained publicly why it no longer claims them - it doesn't believe there's a health risk in A1 to worry about. If it admitted otherwise it could expose itself to legal risks down the line. Just like the tobacco industry refused for a long time to accept publicly that smoking caused cancer - it just had to stick to that line as a defence against subsequent damages claims, saying it honestly didn't believe its products caused disease.

[kizame]

Thanks NT001 you are well researched,and Mac too great info.

[MAC]

Here we go, UHT milk now selling in China at Y28 (NZ$5.86) per litre. ATM advice was “easily supply 10 million litres (to China) within two years and 20 million after that with fresh milk being the flagship”

http://item.jd.com/1288669.html

Fresh milk now retailing in China for Y59 (NZ$12.35) was previously Y49 (NZ$10.26). ATM advice is “could be pushing toward three million litres for 2015, according to its Asian general manager, Phil Wohlsen” and “expects demand to at least *double each year.”

http://item.jd.com/1199167.html

Well let’s see.

http://www.theaustralian.com.au/business/aussie-a2-selling-milk-to-china-online/story-e6frg8zx-1227061975865?nk=8ee4689e3a8a5c11f4c202509ea753bc

http://adf.farmonline.com.au/news/magazine/industry-news/general/demands-fresh-for-a2/2713426.aspx

[nextbigthing]

Nestlé and all the other mainstream dairy operators are in the same position as Fonterra. All of them sell milk containing A1, and to turn around now and espouse A2 milk would involve huge conversion costs plus an admission that the A1 milk they're currently selling is hazardous.

For some years, a2MC and its predecessor A2 Corporation tried to avoid an expensive all-out confrontation with mainstream dairy by not emphasising that A1 milk is dangerous, and just saying A2 is a healthier and preferable choice. But this is changing, for two reasons. Firstly, the science is now becoming more and more incontrovertible, that A1 milk is hazardous. So there's no risk of a2MC being sued by its rivals for saying so. And secondly, some Australian rivals of a2MC foolishly made the mistake of advertising that their milk contained some A2 milk and therefore had the benefits of A2. This forced a2MC to come out openly and say a mixture of A1 and A2 is no good - you have to have pure A2 milk with no A1 to avoid the health risks.

They could continue to run it as a premium priced alternative, using their size to dominate.

[MAC]

Well it seems the US website is all ready, just add cows. Good though to see the wheels turning first thing in the new year already.

“A2 milk is coming to America soon – we’re busy working with our local farmers to select pure bred cows to bring you fresh and natural a2 milk”

http://www.a2milk.com/

[NZSilver]

Here we go, UHT milk now selling in China at Y28 (NZ$5.86) per litre. ATM advice was “easily supply 10 million litres (to China) within two years and 20 million after that with fresh milk being the flagship”

http://item.jd.com/1288669.html

Fresh milk now retailing in China for Y59 (NZ$12.35) was previously Y49 (NZ$10.26). ATM advice is “could be pushing toward three million litres for 2015, according to its Asian general manager, Phil Wohlsen” and “expects demand to at least *double each year.”

http://item.jd.com/1199167.html

Well let’s see.

http://www.theaustralian.com.au/business/aussie-a2-selling-milk-to-china-online/story-e6frg8zx-1227061975865?nk=8ee4689e3a8a5c11f4c202509ea753bc

http://adf.farmonline.com.au/news/magazine/industry-news/general/demands-fresh-for-a2/2713426.aspx

more of the same http://www.farmonline.com.au/news/agriculture/agribusiness/general-news/chinas-aussie-milk-thirst/2712968.aspx?storypage=2

[NZSilver]

Here we go, UHT milk now selling in China at Y28 (NZ$5.86) per litre. ATM advice was “easily supply 10 million litres (to China) within two years and 20 million after that with fresh milk being the flagship”

http://item.jd.com/1288669.html

Fresh milk now retailing in China for Y59 (NZ$12.35) was previously Y49 (NZ$10.26). ATM advice is “could be pushing toward three million litres for 2015, according to its Asian general manager, Phil Wohlsen” and “expects demand to at least *double each year.”

http://item.jd.com/1199167.html

Well let’s see.

http://www.theaustralian.com.au/business/aussie-a2-selling-milk-to-china-online/story-e6frg8zx-1227061975865?nk=8ee4689e3a8a5c11f4c202509ea753bc

http://adf.farmonline.com.au/news/magazine/industry-news/general/demands-fresh-for-a2/2713426.aspx

more of the same http://www.farmonline.com.au/news/agriculture/agribusiness/general-news/chinas-aussie-milk-thirst/2712968.aspx?storypage=2

[kizame]

Well it seems the US website is all ready, just add cows. Good though to see the wheels turning first thing in the new year already.

“A2 milk is coming to America soon – we’re busy working with our local farmers to select pure bred cows to bring you fresh and natural a2 milk”

http://www.a2milk.com/


Awesome! This is one of my pics for this year and beyond.

[NT001]

They could continue to run it (A2 Milk) as a premium priced alternative, using their size to dominate.

It’s been suggested previously that Fonterra or some other mainstream milk producer might want to take over a2MC in order to market A2 Milk as an alternative to standard milk for consumers, especially those who experience digestive discomfort from drinking normal milk containing A1. The theory is that this might allow the buyer to gain a market niche and to some extent limit the damage to mainstream milk caused by the A1 debate.

This scenario has its surface attractions, but it would involve a raft of difficulties.

For a start, it could not be done without acknowledging that the BCM7 peptide generated by A1 milk presents health problems. Not something the mainstream industry wants to do, certainly not Fonterra which is on record as rejecting the the A2 proposition as scientifically flawed.

According to Prof Woodford’s book “Devil in the Milk”, Fonterra is said to have a fallback strategy that it could adopt if necessary to confront A2. But he notes that Fonterra sees A2 as a risk rather than an opportunity for the NZ dairy industry, which he says “seems a huge pity”.

This position could only change if Fonterra did a major scientific back-flip. Of course nothing is impossible, and the scientific evidence against A1 beta-casein is certainly going to increase the pressure – in fact it is building up already in a quiet way that doesn’t get attention in the media.

But there are problems.

1. The takeover cost: a2MC’s market capitalisation is currently close to $400m and likely to increase, especially if there is takeover talk. Would it be worth it just to offer an alternative digestion-friendly niche product at a steep premium price that will always deter the majority of consumers? Even if consumers know that A2 milk is better for them, most of them won’t understand why and will continue buying the standard A1-contaminated mix at half the price.

2. Converting output to A2. There’s a difficult decision to be made – is it intended that A2 would just be a niche line, or would it be pushed to become a mainline product? It’s not too hard for a few dedicated farmers to create pure A2 herds for a relatively small player like a2MC by swapping their unwanted A1 cows for A2 ones, as some have already done in NZ, Australia, Britain and the US, but larger-scale conversion is another matter. It would take years. NZ is actually well placed to do it, as most of its breeding bulls are already pure A2, but it would take a lot to convince debt-ridden farmers that converting their herds to A2 is an appropriate idea at this time. It would involve significant loss of production as they cull their A1 cows, and extra work in managing split herds in the milking sheds.

3. Political considerations. Farmers who decided against switching to A2 would object to A2 being promoted as “safer” and more “consumer-friendly” than their product and meriting a premium price. There’s no sign of a desire by grassroots Fonterra suppliers to convert to A2 although a small handful are doing so. Fonterra’s commercial decisions are made by a board of directors elected by its farmers at large, and will reflect broad farmer sentiment.

4. Economic damage. One of the main reasons Fonterra opposes the A2 hypothesis is that it is based on the assertion that standard milk presents health risks. If Fonterra were to adopt the A2 line, it would effectively be announcing to global consumers that it has concluded standard milk is risky. Remember Sanlu, melamine, and the botulism scare and the economic and reputational damage these affairs caused Fonterra. There would be a costly global consumer backlash against Fonterra products, reducing NZ’s dairy income while other producers such as Nestle would of course mount campaigns defending the safety of their products. It would be incredibly hard to spin such a decision in favour of NZ’s dairy production.

5. Scientific advances. Just as the global public eventually came to realise that smoking can be lethal, the links between A1 milk and medical problems such as autism, diabetes, heart disease and cot death will gradually become more widely recognised. A dairy producer would need a clever strategy indeed to manage this market dilemma. At present they all choose to just ignore it, knowing that food safety authorities in NZ, Australia and Europe still continue to say incorrectly that it’s not an issue. It will become an issue.

Any dairy outfit contemplating a takeover of a2MC would have to have a well-thought-out plan as to what to do with it.

That’s not to rule out some offshore dairy operators adopting A2 Milk as a niche product, but I think not by means of a takeover. There are people in the industry who buy the A2 proposition and see merit in offering it as a premium specialty. But this could be done under licence. Interestingly, the current chairman of Dairy UK, the British dairy industry organisation, is actually a member of a2MC’s British board and a supporter of A2 as a niche player in the market. That seems to make more sense.

[kizame]

1. The takeover cost: a2MC’s market capitalisation is currently close to $400m and likely to increase, especially if there is takeover talk. Would it be worth it just to offer an alternative digestion-friendly niche product at a steep premium price that will always deter the majority of consumers? Even if consumers know that A2 milk is better for them, most of them won’t understand why and will continue buying the standard A1-contaminated mix at half the price.

Yes why wouldn't it be worth it?
If Fonterra picked up A2 mc at say 600million,if the sales to date in Aus are anything to go by,what could happen with the rest of the world?
Why would it not be a great strategy to let the company run as a seperate entity and continue its growth story,the big advantage to Fonterra is that they gain NEW fresh milk markets otherwise out of reach,plus the opportunity factor for alternate products such as cheeses,yoghurts etc.AND they get the filip on any loss of sales to A2,therefor being no loss of sales.
In my very simple way of thinking,I would have thought it would be very advantageous.
They wouldn't be backing down on their view that A1 is a totally healthy product,they would be adding a premium alternate way of thinking to their stable.
Plus if we think there is huge potential with this company,why on earth would they not.I think maybe they could be left OUT STANDING IN THEIR FIELD while someone else snaps it up, maybe.

[Snoopy]

It does seem that from today’s announcement that a confident plan is now in place for the Chinese regulatory changes and inventories will cover any disruption, I’ve taken some further confidence from this and recent news coverage.

I like to invest in companies with good management and bold goals, it just seems to focus a company internally and drives a positive culture.

$280M in revenues by 2016
$60M and a 1% market share in Chinese infant formula sales by 2016
A 1.8% market share in UK milk sales by 2016
A 10% market share in Australian milk sales, recently pulled forward to mid-2015.

And of course there are new initiatives presently rolling out in Australia, UHT, yoghourt, cream products, and the entry into the US is just kicking off.


Can anyone explain why inventories have jumped from $0.742m as at 30-06-2013 to $5.583m as at 30-06-2014 (AR2014 note 8)?

Is it only related to the production interruptions at Synlait affecting the A2 infant formula market in China that Mac refers to above? Or is there something else?

SNOOPY

[Snoopy]

I would have thought it would be the infant formula stock which was a product only launched end of 2013. Regardless of Synlait production runs I expect they only ship stock periodically in order to save on freight costs, meaning that stock will be held on hand.

Net jump in inventory for the year was:

$5.583m - $0.742m = $4.841m

If all that increase relates to China Infant Formula, then based on forecast 2016 sales of $60m, $4.841m is only around one month of stock. Not a lot in 2016 context. However, I don't know what A2's China 2014 sales were. Was $4.841m significant in 2014 China sales terms?

SNOOPY

[blobbles]

Here we go, UHT milk now selling in China at Y28 (NZ$5.86) per litre. ATM advice was “easily supply 10 million litres (to China) within two years and 20 million after that with fresh milk being the flagship”

http://item.jd.com/1288669.html

Fresh milk now retailing in China for Y59 (NZ$12.35) was previously Y49 (NZ$10.26). ATM advice is “could be pushing toward three million litres for 2015, according to its Asian general manager, Phil Wohlsen” and “expects demand to at least *double each year.”

http://item.jd.com/1199167.html

Well let’s see.

http://www.theaustralian.com.au/business/aussie-a2-selling-milk-to-china-online/story-e6frg8zx-1227061975865?nk=8ee4689e3a8a5c11f4c202509ea753bc

http://adf.farmonline.com.au/news/magazine/industry-news/general/demands-fresh-for-a2/2713426.aspx

So at around $180m in revenue next year (not including any sales in US/UK). A solid revenue increase on the cards then. Good work ATM!

[nextbigthing]

It’s been suggested previously that Fonterra or some other mainstream milk producer might want to take over a2MC in order to market A2 Milk as an alternative to standard milk for consumers, especially those who experience digestive discomfort from drinking normal milk containing A1. The theory is that this might allow the buyer to gain a market niche and to some extent limit the damage to mainstream milk caused by the A1 debate.

This scenario has its surface attractions, but it would involve a raft of difficulties.

For a start, it could not be done without acknowledging that the BCM7 peptide generated by A1 milk presents health problems. Not something the mainstream industry wants to do, certainly not Fonterra which is on record as rejecting the the A2 proposition as scientifically flawed.

According to Prof Woodford’s book “Devil in the Milk”, Fonterra is said to have a fallback strategy that it could adopt if necessary to confront A2. But he notes that Fonterra sees A2 as a risk rather than an opportunity for the NZ dairy industry, which he says “seems a huge pity”.

This position could only change if Fonterra did a major scientific back-flip. Of course nothing is impossible, and the scientific evidence against A1 beta-casein is certainly going to increase the pressure – in fact it is building up already in a quiet way that doesn’t get attention in the media.

But there are problems.

1. The takeover cost: a2MC’s market capitalisation is currently close to $400m and likely to increase, especially if there is takeover talk. Would it be worth it just to offer an alternative digestion-friendly niche product at a steep premium price that will always deter the majority of consumers? Even if consumers know that A2 milk is better for them, most of them won’t understand why and will continue buying the standard A1-contaminated mix at half the price.

2. Converting output to A2. There’s a difficult decision to be made – is it intended that A2 would just be a niche line, or would it be pushed to become a mainline product? It’s not too hard for a few dedicated farmers to create pure A2 herds for a relatively small player like a2MC by swapping their unwanted A1 cows for A2 ones, as some have already done in NZ, Australia, Britain and the US, but larger-scale conversion is another matter. It would take years. NZ is actually well placed to do it, as most of its breeding bulls are already pure A2, but it would take a lot to convince debt-ridden farmers that converting their herds to A2 is an appropriate idea at this time. It would involve significant loss of production as they cull their A1 cows, and extra work in managing split herds in the milking sheds.

3. Political considerations. Farmers who decided against switching to A2 would object to A2 being promoted as “safer” and more “consumer-friendly” than their product and meriting a premium price. There’s no sign of a desire by grassroots Fonterra suppliers to convert to A2 although a small handful are doing so. Fonterra’s commercial decisions are made by a board of directors elected by its farmers at large, and will reflect broad farmer sentiment.

4. Economic damage. One of the main reasons Fonterra opposes the A2 hypothesis is that it is based on the assertion that standard milk presents health risks. If Fonterra were to adopt the A2 line, it would effectively be announcing to global consumers that it has concluded standard milk is risky. Remember Sanlu, melamine, and the botulism scare and the economic and reputational damage these affairs caused Fonterra. There would be a costly global consumer backlash against Fonterra products, reducing NZ’s dairy income while other producers such as Nestle would of course mount campaigns defending the safety of their products. It would be incredibly hard to spin such a decision in favour of NZ’s dairy production.

5. Scientific advances. Just as the global public eventually came to realise that smoking can be lethal, the links between A1 milk and medical problems such as autism, diabetes, heart disease and cot death will gradually become more widely recognised. A dairy producer would need a clever strategy indeed to manage this market dilemma. At present they all choose to just ignore it, knowing that food safety authorities in NZ, Australia and Europe still continue to say incorrectly that it’s not an issue. It will become an issue.

Any dairy outfit contemplating a takeover of a2MC would have to have a well-thought-out plan as to what to do with it.

That’s not to rule out some offshore dairy operators adopting A2 Milk as a niche product, but I think not by means of a takeover. There are people in the industry who buy the A2 proposition and see merit in offering it as a premium specialty. But this could be done under licence. Interestingly, the current chairman of Dairy UK, the British dairy industry organisation, is actually a member of a2MC’s British board and a supporter of A2 as a niche player in the market. That seems to make more sense.

Thanks for a well thought out reply NT001. I disagree with a major assumption you're making however.

You say that by aquiring A2 and selling it themselves, Fonterra would be admitting regular milk is bad. That's not true. Is a supermarket that sells organic vegetables admitting that 'normal' veges are bad? No. They're just offering a premium product for those who want it. Now imagine that supermarket chain having the exclusive rights to organic goods. The concept is similar.

You also mention the $400m MCap. Sure, but they're aquiring the current company with all the cashflows etc with it, as well as the IP. You could argue it's a no brainer as the company eventually pays for itself and the IP is free!

A simple option for someone like Nestle would be to continue to run it as a separate company in the eyes of the public (therefore not having to admit their standard product is bad) however lever the existing distribution networks etc.

Anyway, if the shareprice stays down here, MAC, Seeweed and myself will soon be announcing our combined takeover bid.

Good debate anyway. Much better than that circus on the PEB thread. Cheers, NBT

[NT001]

Thanks for a well thought out reply NT001. I disagree with a major assumption you're making however.

You say that by aquiring A2 and selling it themselves, Fonterra would be admitting regular milk is bad. That's not true. Is a supermarket that sells organic vegetables admitting that 'normal' veges are bad? No. They're just offering a premium product for those who want it. Now imagine that supermarket chain having the exclusive rights to organic goods. The concept is similar.

You also mention the $400m MCap. Sure, but they're aquiring the current company with all the cashflows etc with it, as well as the IP. You could argue it's a no brainer as the company eventually pays for itself and the IP is free!

A simple option for someone like Nestle would be to continue to run it as a separate company in the eyes of the public (therefore not having to admit their standard product is bad) however lever the existing distribution networks etc.

Anyway, if the shareprice stays down here, MAC, Seeweed and myself will soon be announcing our combined takeover bid.

Good debate anyway. Much better than that circus on the PEB thread. Cheers, NBT

Thanks NBT. Of course nothing's impossible. A while back, I was worried stiff that a cheap takeover was in the wind and this was the reason someone was manipulating the SP downwards. But then I went through the analytical process outlined in my over-long post, and concluded it wasn't on.

I disagree with your organic analogy, as no one is saying "normal" veges are "bad", whereas the evidence against A1 is mounting. And I think some of the other factors I mentioned need addressing. Why buy the company when you could offer a premium product under licence without taking on all the other problems?

Good luck with your combined T/O bid!

[nextbigthing]

Fair enough,

What did you decide the shareprice slide was down to? Purely just the market revaluing to fair value in your opinion?

Cheers

[NT001]

Fair enough,

What did you decide the shareprice slide was down to? Purely just the market revaluing to fair value in your opinion?
Cheers

No, it has looked to me as if there is a deliberate attempt to set the price at a certain level, which doesn't look like leaving market forces to play out naturally to find a "fair value".

[nextbigthing]

No, it has looked to me as if there is a deliberate attempt to set the price at a certain level, which doesn't look like leaving market forces to play out naturally to find a "fair value".

I agree. But if not for a takeover, then why manipulate the shareprice down?

(edit; I appreciate it would make capital raising harder but I doubt someone would spend all that money for this)

[kizame]

Personally I don't think anybody is manipulating the share price.(for takeover that is,just normal traders trying to buy at the cheapest price)
The weakness comes down to the dairy prices in my opinion and the downturn the industry is going through,it can't help but rub off on ATM.
Remember there are lots of shareholders and potential shareholders who don't have the expertise and knowledge that some of you guys do,they see that company selling milk and dairy prices are down,the whole negative roll on effect from the media.
Who cares anyway,if your conviction is the company will be a huge winner,buy more.

[NT001]

I agree. But if not for a takeover, then why manipulate the shareprice down?

Very good question, to which I don't have a real answer. That's why I've been giving the whole issue a lot of thought. So is it you, MAC and Sweeweed manipulating the price? Remember, my minimum asking price is $1.50. Can you meet that?

If there's a potential T/O (other than yours) it's always seemed to me the most obvious logical candidate might be Perich in Australia. He's loaded, is very much involved in a2MC already, has a very big A2-only dairy farm, is looking to expand heavily into selling dairy into China, and controls Freedom Foods which already has a big stake in a2MC and is "clean" already as far as the A1 problem is concerned. I'd be curious to know if there's any way to monitor his transactions as I gather Australian investors are not subject to NZ reporting rules . I see more logic in him trying to take over ATM than in it being done by one of the big players like Fonterra, Nestle etc, and fewer problems.

[winner69]

?....might be Perich in Australia ......... I'd be curious to know if there's any way to monitor his transactions as I gather Australian investors are not subject to NZ reporting rules .......

I believe they are.

[nextbigthing]

So is it you, MAC and Sweeweed manipulating the price? Remember, my minimum asking price is $1.50. Can you meet that?


Hey MAC, Seeweed, their expectations are still too high, they want $1.50. We'd better hammer it down some more. What say we get it to high fourties and try again. Get on to the PR guys and have them release some article that A3 has been discovered and is better than A2 or something.

[see weed]

Hey MAC, Seeweed, their expectations are still too high, they want $1.50. We'd better hammer it down some more. What say we get it to high fourties and try again. Get on to the PR guys and have them release some article that A3 has been discovered and is better than A2 or something.

I'm happy with sp at the moment. As I have said before, just keep topping up as it goes down. Have done 21 top ups in 5 months and 6 sell offs. Haven't checked sp today but would buy more if sp drops. I don't think Milford will sell me their 90 odd million for a take over, they would not accept my offer.:D

[winner69]

Fair enough,

What did you decide the shareprice slide was down to? Purely just the market revaluing to fair value in your opinion?

Cheers

Think the answer is yes .....just staying around fair value. No maul action here.

Pointed this thread out to Balance's mates at the LSE .....maybe a bit of raw material into a study on cognitive dissonance

[Harrie]

Think the answer is yes .....just staying around fair value. No maul action here.

Pointed this thread out to Balance's mates at the LSE .....maybe a bit of raw material into a study on cognitive dissonance

Yes that's correct Winner, I also purchased a swodge of Spark and Genesis at "fair value" this time last year. I like fair value because it has an element of protecting my downside in the long run. Any upside is just a bonus. ATM seems to be getting fairer and fairer value as the SP dips. The good news is that as it does my average buy in price just keeps getting cheaper. I like that.

[see weed]

9.12 am.... Notice of special meeting.

[BFG]

9.12 am.... Notice of special meeting.

Nomination of see weed as official NZ spokesman for A2 :D :D :D

[Jasemc]

seconded..

[BFG]

It's actually to announce the MAC/NBT/Seeweed/KW takeover.

Haha chuck me into it (if there's room left), A2 tastes great AND is a market performer!

[sb9]

Looks like some momentum building up into the sp...

[Sgt Pepper]

I was reading in the UK Guardian that price of milk in the UK has collapsed to 43p per litre due to the huge glut on the domestic and international markets. It is now cheaper than bottled water at 44p per litre. ATM has entered the UK market so I am not sure how severe the impact will be and how much leverage on A2 differentiation will be when the generic product price is collapsing.

Another point : why the heck are we paying so much in NZ for milk, it is completely out of synch with the rest of the world. How come?????

[MAC]

I was reading in the UK Guardian that price of milk in the UK has collapsed to 43p per litre due to the huge glut on the domestic and international markets. It is now cheaper than bottled water at 44p per litre. ATM has entered the UK market so I am not sure how severe the impact will be and how much leverage on A2 differentiation will be when the generic product price is collapsing.


I think the answer for you Sgt Pepper lays in two aspects, firstly the UK retail price trend below, you can see that ATM ranged the market when re-launching the product after the Wiseman buy out, and have recently increased back to the upper threshold, quite prospective, let’s see now if this sticks for the medium term.

Secondly, they do seem to be following a similar roll out approach in the UK now as they did in Australia, the Australian retail prices have not altered in five years from $2.50 per litre despite the ‘milk wars’ and $1 home brand milk. Over that time ATM went from 1% to 10% market share.

ATM’s products are offered into a different value added specialty market from general bulk A1/A2 milk supply.

6652

[Harrie]

Its all about profitability isn't it? Wouldn't ATM just be paying less for it at the farm gate so that after procesing costs their margin is more or less the same as it has always been, in fact, as a result of a lowering retail price, wouldn't the volumes consumed tend to rise = greater total revenue? I can't immagine that ATM would be fixing a price for delivery, albeit paying a premium over and above standard milk, as they currently do, just at a reduced price in line with standard milk.

[Ginger_steps_]

Our local coles brand milk is $1 for 2 lites at the moment! Atm still going strong. Also saw the a2 and Jalna yoghurt for the first time over xmas in ballarat, victoria. a2 milk seemed to be moving off the shelves there as well. Slowly but surely gaining shelf space around Australia it appears.

[westcoaster]

http://www.abplive.in/author/devindersharma/2015/01/14/article476238.ece/A2-Milk-may-be-the-answer-for-appalling-child-malnutrition-and-deteriorating-health-of-Indians

Pepsi?

[NT001]

Pepsi?

Not sure where he gets that from - he's made the same claim previously but I have found no other record of it. However, David Hearn, chairman of a2MC's UK board, is a former top executive of Pepsi Europe and would be well placed to guide the company's entry to the Continent. Pepsi could be a useful partner - it markets a lot of beverages besides Cola.

[kizame]

Not sure where he gets that from - he's made the same claim previously but I have found no other record of it. However, David Hearn, chairman of a2MC's UK board, is a former top executive of Pepsi Europe and would be well placed to guide the company's entry to the Continent. Pepsi could be a useful partner - it markets a lot of beverages besides Cola.

Maybe it is the man he is refuring to and not Pepsico,as I couldn't find any reference to milk on their website,I would think it a bit unusual for Pepsi,but I guess anything is possible.

[MAC]

So, a2MC are now selling through Whole Foods in the UK, not the biggest retailer in the UK by far, but one that’s focused primarily on health and an urban ‘famers market’ theme. Seems to be a good match up at this stage in market entry IMO.

http://a2milk.co.uk/a2-milk-now-part-whole-foods-market-family/

I think this move is possibly though as much about getting a foot in door with Whole Foods for when a2MC launch in the US later in the year, from whence they hale. Then there is the foot in the door they already have with Costco in Australia also.


http://www.cnbc.com/id/101278992#.

[Sideshow Bob]

Was actually listening to Radio Live the other day, and Siomon Gault was on and they were talking about tooth fish and seafood. When asked about his favourite way to cook tooth fish, he mentioned buffalo butter (I think) as it was 'a2 and healthier.....'

Got a celebrity spokesman there me thinks.

[airedale]

He should be encouraged to move from a2 buffalos to A2 cows.

[see weed]

ASX listing. What happens now? 660,000,000 odd shares in a2 milk company. Do the Aussi's come along and offer us 60c to 70c for half of our shares, if we are willing to sell :D ? Will they have to buy on the NZX, then transfer to ASX? Or will a2 Milk Company Print out another couple of hundred million shares for ASX? Dose anybody know? Or will it all be revealed on 27/1/15 at special meeting.:confused: Have a nice day from the a2 smoothie maker.

[kizame]

ASX listing. What happens now? 660,000,000 odd shares in a2 milk company. Do the Aussi's come along and offer us 60c to 70c for half of our shares, if we are willing to sell :D ? Will they have to buy on the NZX, then transfer to ASX? Or will a2 Milk Company Print out another couple of hundred million shares for ASX? Dose anybody know? Or will it all be revealed on 27/1/15 at special meeting.:confused: Have a nice day from the a2 smoothie maker.

They don't need the money so no new shares being issued, Aussies would buy from the existing pool,but not sure how a nz seller and aussie buyer are matched between countries.

[winner69]

Freedom exit plan ......sell to Aussie instos seems to be the plan. ASX makes it easier to then spread them around

Otherwise just like Summerset, Ebos etc an ASX listing a non-event

[Kirk]

What effect will it have on the share price?

[winner69]

What effect will it have on the share price?

Probably little impact at all

[MAC]

a2MC has a huge profile in Australia, hard to appreciate if you've not been or lived there for a bit. I could see the Aussie insto's quite readily buying and transferring, on or off market. It’s not like they have a mining sector to buy into at present.

“Listing on ASX will enable more Australian investors to participate in the company's growth and will increase the attractiveness and liquidity of its shares. The board believes that this will benefitall shareholders.”

https://www.nzx.com/files/attachments/204009.pdf

[NT001]

No new shares will be issued - we have that promise from Geoff Babidge. He also assured us that the dual listing will benefit all existing shareholders. Exactly how he can give that assurance I wouldn't know, except that logically there should be more demand for the existing shares. It's not that an Australian investor can't buy ATM shares at present via the NZX, but once the dual listing begins it will be a lot easier. ATM will also appear in the Aussie papers each day as part of the ASX share list, and brokers and the media there will take more notice of it.

There should be some useful publicity in Oz surrounding the launch of the dual listing - an opportunity for ATM to talk about its plans for China, UK and USA and even NZ. And with a larger pool of potential buyers, including the many thousands of Aussies who are avid A2 Milk customers already willing to pay premium prices for the product, the signs all suggest the SP should increase. It should also be more difficult for holders to manipulate the share price and force it down, if that is indeed what has been happening recently.

[MAC]

Absolutely NT, that's the difference between dual listed companies like FBU and KMD, they have a high profile on the ground in Australia with similar dual listed trading volumes.

I don't know or really care if traders will make a quick overnight buck out of it or not, but it seems to be a good medium term initiative to me.

And, with the dairy sector gaining the sort of attention in the article below, at a time when the once adored Australian mining sector is toast, we may very well see quite a bit of investor focus on soft commodities in 2015.

http://www.bbc.com/news/world-australia-30705467

ASX listing relieves a hurdle to all sorts of possibilities including Australian based M&A. The numbers kicked around in this one article alone paint the picture of possibilities at a time when ATM is so undervalued.

And of course, in reference to the articles focus on China, a2MC have told us that they anticipate fresh milk and UHT sales to double each year for the coming years. This is mostly exported under the Australian umbrella from their fully owned Australian subsidiary.

[see weed]

Milk police here. Last week on 16/1/15 I bought 2 litre a2 at Green Lane Countdown with B/B date 29/1/15 , nice fresh milk and good tasting. Good on you Greenlane:t_up:......... This morning 19/1/15 went to Mt. Wellington Countdown to buy a2 with B/B date on 20/1/15, there was about 6 bottles. Not good enough I thought. So took the bottle to the front of shop info. desk. And in a loud voice said ...Hey there.. you can't sell this old milk, :ohmy: it's 2 weeks old and I would'nt even give you two dollars for it. And the nice lady said...vedy vedy sorry, we can not sell it for two dollar, but we try to sell the old milk first. So I thought they must keep all the fresh milk out the back freezer for a couple of weeks. Not good enough I thought. ... All that milk should be removed from the shelves. Vedy vedy good we will do that immediately. So that is my moan for the week.:)

[Gunny]

Team,

I heard the tail end of a BBC discussion (as I was driving) where they were commenting on the removal of the milk quota's on farmers in Europe in April and how this could result in a flood of product on the market and downward pressure on the price going forward. Farmers were saying they would need to increase production to remain profitable under downward price pressure points, nasty cycle. They also mentioned the possibility of Coca Cola getting involved ???? (missed this detail as was avoiding a lamppost at the time). I saw Pespi mentioned in previous posts now Coca Cola as well!!!! All old news maybe but don't recall Coca Cola been mentioned here before.

Of course we have a premium product in A2 however a possible flood of A1 at a lower price could impact this side of the world and markets overall.

What would happen if the premium price gap increased. If Pepsi or and Coco Cola get involved would they aggressively protect A1 or even embrace A2.


Interested in views

Gunny

Disc Hold ATM

[Gunny]

Doing a bit more homework on it I see Coca Cola are launching their milk brand called Fairlife in 2015 after first noting it 2012.


Gunny

[Gunny]

Doing a bit more homework on it I see Coca Cola are launching their milk brand called Fairlife in 2015 after first noting it 2012.


Gunny

[NT001]

Doing a bit more homework on it I see Coca Cola are launching their milk brand called Fairlife in 2015 after first noting it 2012. Gunny

The Coke product will evidently be highly processed and materially altered, and not much like natural milk, but sold at twice the price of ordinary milk. The announcement says sugar will be filtered out (making it lactose-free) and extra "nutrients" added including proteins and calcium. But the Fairlife website contradicts this slightly, saying a cold filtration system separates the milk (water, fat, sugar, protein, vitamins and minerals) and ditches most of the fat and sugars, then just puts the components together again in altered proportions. It says the end product has “no added protein powders or synthetic junk.” The premium milk comes in four versions (reduced fat, fat-free, chocolate-flavoured and "ultra filtrated full"). It is already available in Denver, Minneapolis and Chicago and is expected to be available nationwide this year.

Whether it is being marketed on the "milk" shelves or in the dairy-related beverages area isn't quite clear. Anyway, it's not much like A2 Milk which is unprocessed and purely natural. And presumably it contains A1.

Anyway, the US is a huge market, and as the BusinessWeek article notes, the dairy market there is very fragmented regionally and brandwise. So Fairlife "milk" should not be a big threat to A2 Milk which is aiming to launch in California shortly, so long as a2MC gets its consumer pitch right.

http://www.businessweek.com/articles/2014-12-01/coca-cola-prepares-to-build-a-milk-brand-called-fairlife

Here's another version of the Coke announcement for those who enjoy girlie pictures. It seems to suggest Coke doesn't quite know whether its product will be pitched at seriously health-conscious consumers or the populist beverage market. Wonder how the feminist lobby will react.

http://www.independent.co.uk/life-style/food-and-drink/news/coke-milk-cocacola-to-launch-premium-milk-brand-called-fairlife-9883030.html

[Harrie]

Good comment NT.
I have read a bit about it. It seems that it is more of a product with a milk base but manufacured or altered by taking certain elements out and enhancing with others.'
Be difficullt to say its a natural product, so definately belongs in the dairy related shelves. Its certainly not natural milk, but they won't go there in their marketing blerb.
interesting comment by someone on the blog site which is headed 'fairlife is unfair" or something like that, where someone has posted that talking about health benefits in this milk brand is irrelevant if it is missing the main point being the presence of a1 beta casein protein.

There is nothing that I can find in the fairlife blerb which mentions anything about beta proteins. I suspect there is an a1 presence in the fairlife product.

Coca Cola have cleverly worked out what people want and have developed the product that the unsuspecting consumers will buy on face value...[more “nutritious” with 50 per cent more natural protein and calcium and less sugar than ordinary milk.]

[nextbigthing]

6685

Only one spare spot on the shelf in the supermarket tonight, where the a2 was earlier...

[winner69]

6685

Only one spare spot on the shelf in the supermarket tonight, where the a2 was earlier...

How's that special creamy chocolate milk going these days

[axe]

6685

Only one spare spot on the shelf in the supermarket tonight, where the a2 was earlier...

That is a scene I see in all my local supermarkets. Very rarely any A2 on the shelf.
Either the supermarkets aren't ordering enough or the stock or the stock not getting refilled into the facing as it is sold throughout the day. I wonder if A2MC has any sales reps who visit the supermarkets to ensure that their products are ordered in sufficient quantity and restocked as needed.


Shareholders probably should just keep pestering your local supermarket as to why the shelves are always void of A2 ( if this is the case for everyone else)


DISC : Don't hold - watching

[MAC]

That is a scene I see in all my local supermarkets. Very rarely any A2 on the shelf.
Either the supermarkets aren't ordering enough or the stock or the stock not getting refilled into the facing as it is sold throughout the day. I wonder if A2MC has any sales reps who visit the supermarkets to ensure that their products are ordered in sufficient quantity and restocked as needed.


Shareholders probably should just keep pestering your local supermarket as to why the shelves are always void of A2 ( if this is the case for everyone else)


DISC : Don't hold - watching

They are not a2MC products they are Fresha Valley products processed under a licensing agreement, a2MC receive a licensing fee only, and really a rather humble one at that, have a look at the segment analysis.

I doubt a2MC have even a single sales rep in New Zealand, nor should they bother whilst a2 milk can be better value added more profitably through export as infant formula.

Long may the supermarket shelves here remain empty !

[NT001]

That is a scene I see in all my local supermarkets. Very rarely any A2 on the shelf.
Either the supermarkets aren't ordering enough or the stock or the stock not getting refilled into the facing as it is sold throughout the day. I wonder if A2MC has any sales reps who visit the supermarkets to ensure that their products are ordered in sufficient quantity and restocked as needed. Shareholders probably should just keep pestering your local supermarket as to why the shelves are always void of A2 ( if this is the case for everyone else)

That's interesting, axe, what area are you in? Countdown is of course the only supermarket chain that carries A2, and we used to find the same in the Wellington region - no A2 available. But we gave the management a gee-up at seven Countdown supermarkets here (Petone, Newtown, Johnsonville x2, Kilbirnie, Karori and Crofton Downs) to make sure they're ordering enough, and now encounter little problem. And we have no issues with use-by date, as it usually has at least a week before expiry. If there's no A2 on the shelf it's usually because of fast turnover, and when we inquire of the store-room staff they immediately bring out another box.

Part of the problem, I think, is that A2 is packed in sealed cartons rather than open crates. It's a bit of an effort to break the cartons open and unload them. If it was in crates like most other milk, the stores could leave them out in the open for customers to just help themselves, and I'm sure they'd sell more. Cartons are much more space-efficient for long-distance cartage and probably for temperature control, but they make extra work for Countdown staff. a2MC has little control over the sole supplier (Fresha Vallery, in Northland) but there have been hints that it might become more active - it has emphasised that the licence to Fresha Valley is non-exclusive. NZ will never be a huge profit centre for a2MC, but it should be doing alot better and the company is aware it should be doing better in the country where its shares are registered.

[mcdongle]

a2 is in my local New World

[biker]

That's interesting, axe, what area are you in? Countdown is of course the only supermarket chain that carries A2,

That is not correct

[NT001]

That is not correct

Sorry, I should have said:

Countdown is of course the only supermarket chain that carries A2. A small number of non-Countdown outlets including health products retailers also do, and I know of one New World store in the Wellngton region that does but it's an exception.

[Harrie]

I reckon that fairlife could create a bit of a problem in the USA for ATM, at the very time that ATM is trying to establish a market difference. Very unfortunate timing. Expect to see more aussy profit money going into trying to promote the real natural product and the differences to fairlife.
Coca Cola has a massive marketing machine and the CEO looks like he is expecting their product to "rain money" and will therefore be spending millions on its promotion.
When you advertise less sugar, more calcium, more protein freshness, and "natural", is the average american punter really going to worry about the type of beta casein existant in the milk?
Most punters will look at the product and buy the spin on the basis that "its got to be good for you" rather than any of the detail behind the spin.
Just throwing that out there for comment.