ATM - A2 Milk Corporation Limited

[see weed]

Positive comments from Oyvinn Rimer ( Harbour Asset Management) in todays Opinion....ASB morning brief.....falling dairy prices: Winners & losers.....

[see weed]

Here we go again. Another 900,000 gone, up 2c, when is it ever going to stop.:t_up:

[silverblizzard888]

A2 Ice Cream to be launched next months in Coles (Australia), so plenty of more growth potential to happen in Australia!

[see weed]

A2 Ice Cream to be launched next months in Coles (Australia), so plenty of more growth potential to happen in Australia!
And a2 cheese to follow. There's no stopping this company now, they might even overtake fonterra one day when all the farmers change their cows to a2.

[sb9]

Yep, its all happening..A2 milk to start with and now ice cream and cheese, soon to follow butter and other goodies. Sweet!!!

[Kirk]

Great to see that the pipeline products are starting to be released. Just going to add further revenue and the benefit of diversification

[Xerof]

Yep, its all happening..A2 milk to start with and now ice cream and cheese, soon to follow butter and other goodies. Sweet!!! All good, as long as the cost to add value is less than the value added. (Not always easy to achieve)

[NT001]

All good, as long as the cost to add value is less than the value added. (Not always easy to achieve)

Exactly. I'm more interested in seeing them get A2 milk into a second state in the US. It's a company that prides itself on lean staffing, so let's focus on the basics first.

[Ginger_steps_]

Exactly. I'm more interested in seeing them get A2 milk into a second state in the US. It's a company that prides itself on lean staffing, so let's focus on the basics first.

I also agree, although, there does seem to be some strong customer loyalty - if they pull off the new products in the same style, things will get interesting fast. In saying that, they have pulled the a2 cream from our local coles shelves - it never did seem to move.

[NT001]

A big dairying outfit in Westermn Australia is up for sale, and this will probably have implications for a2MC as it is an A2 milk supplier.

http://www.afr.com/street-talk/archer-capital-puts-brownes-dairy-on-block-hires-luminis-partners-20150727-gil4rw

This offer for sale could presumably be of interest to Freedom-Perich-New Hope through their new company AFMH. Two years ago Brownes became the exclusive A2 milk supplier in Western Australia. Here's a news report from September 2013:

"BROWNES Dairy has signed a deal with the A2 Corporation that will see the WA processor supply A2 milk to the WA market. The agreement ... will begin from November this year.

The exclusive agreement will see Brownes become the only locally-based partner of the A2 Corporation in WA and, as part of the deal, it will process about five million litres of A2 milk a year."

Can't see how a2MC would be able to mount a purchase of Brownes as suggested in the preceding article, or why it would actually want to.

[see weed]

I see 70,000 shares have sold before opening at 86c. Strange, when there is a lot more sellers at 85c. Why would you buy at 86c before open, when you can buy them for 85c?:confused:.

[Lola]

Positive comments from Oyvinn Rimer ( Harbour Asset Management) in todays Opinion....ASB morning brief.....falling dairy prices: Winners & losers.....

yes it is (positive), so I assume Harbour is a holder of A2M in which case Oyvinn better be careful to make the necessary disclosures otherwise the fma will come calling. Interesting to see him adopting journalism; must have gotten the Gaynor/ Fisher bug. viz Free marketing.

[couta1]

I see 70,000 shares have sold before opening at 86c. Strange, when there is a lot more sellers at 85c. Why would you buy at 86c before open, when you can buy them for 85c?:confused:.
Some people don't worry about a cent here or there see weed of no consequence long term and probably have a golf game lined up for the day:cool:

[Tsuba]

Some people don't worry about a cent here or there see weed of no consequence long term and probably have a golf game lined up for the day:cool:

Or a pet Guinea Fowl to take their mind of shallow matters. ;)

[NT001]

https://www.nzx.com/companies/ATM/announcements/267492

CEO and MD Geoff Babidge filed a "relevant interest" declaration this morning which shows he has just paid up $594,000 to confirm ownership of 6 million shares he was granted in August 2010 under the company's incentive scheme. Initially he paid one-tenth of a cent per share ($6,000) as part payment, and yesterday was the deadline for paying them up "fully" to 10 cents per share. On the face of it, there does not seem to be any particular significance (other than meeting that deadline) in his latest move.

He also has a relevant interest in a further 5m shares, making 11 million altogether, by way of partly paid shares.

Here's an interesting take on the transaction from today's NBR site:

http://www.nbr.co.nz/article/a2s-babidge-sitting-730-return-after-settling-partly-paid-shares-worth-498m-b-176231

[QFD Sage]

Fair play to Mr Babidge. He has contributed to significant shareholder wealth creation. How are punters reading the tea leaves at the moment? I would have thought that the gradual increase in SP indicates the market is expecting the suitors to come back with a better offer. In saying that, as the price rises it seems less likely that a new offer will succeed. Either way, Freedom benefits. Good strategy some may say...

[nextbigthing]

Seeweed mate, this has got you written all over it!7494

[see weed]

Seeweed mate, this has got you written all over it!7494
Very good. All we have to do now is get Mr Babidge to post out free shirts to shareholders who buy over 5000 shares in a2. Excellent idea for cheap advertising.

[Harrie]

My price range over the next few months is $0.79 to $0.88.
The annual report will not tell us that much more than the update we received in mid July, as the update would have been based on provisional numbers to the same reporting date 30th June.

I think those who were speculating over the Perich/Deans T/O will have disappeared by now IMO.

1. While there is speculation over“other potential” contenders despite what Babidge says and
2. Analyst price targets averagingaround 0.94 and
3. Fund managers like Perpetual are gettinga holding and
4. Improving margins and market share infresh milk, formula, and whole milk powder etc internationally and
5. A2M is getting exposure in Aussie amongother fund managers and
6. Long term supply contracts are beingnegotiated at lower prices
Then that range is where we will beover the next six months. ( I hope) or until something else that the market isnot expecting surfaces.

.

[skid]

So it seems that ''the lift'' has come as a result of the potential takeover and now that it has more or less faded ,the fundamentals have taken over.
It would be interesting to know if the lift would have happened anyway.
market sentiment is always an intriguing animal,(and confusing sometimes)

i wonder if it would be possible to stage a possible takeover interest to boost SP of a solid co?

If takeover is off, will SP drift?

the positive side to all of this is that perhaps ATM will stay in Kiwi hands?(which in the long run would be more beneficial than a few fluctuations in SP,if it came to that.)

[Joshuatree]

Way to early to say its off skid; ATM is still in play imo; Perpetual for one is still there in for a play/gain and I'm sure lots of discussions going on with various parties. Have to decide if there is much more in it atp in these early stages of ATM's life and how much one would pay for the potential earnings or if one has the conviction in the success ahead and ignore all the manoeuvring and speculation and noise going on. Im not feeling a strong conviction personally at this stage in the cycle and am looking at where i can park ATM funds elsewhere for a while. Still holding two thirds atp.

Hey you're in Thailand Skid?.whereabouts ; how about travelogue (on another thread)and a few tips; I'm int in going next winter.

[NT001]

Way too early to say it's off skid; ATM is still in play imo; Perpetual for one is still there in for a play/gain and I'm sure lots of discussions going on with various parties......

Agree entirely. Talks will still be going on. And everyone including Freedom-Perich will be waiting with interest to see how the SP and analysts react to the official FY result. Freedom-Perich have let it be reported that they're in no hurry to up their bid, but that certainly doesn't mean they're giving up. Maybe they're waiting to see who else emerges, as Babidge has said there've been other approaches. And maybe the Aussie-Chinese group are still working on the structure of their own consortium, who's in and who's not and what their respective stakes would be. Still no indication where Dean Foods, potentially a huge player, fit into the scene.

Meanwhile the takeover speculation has led to a new temporary benchmark SP being set, somewhere in the 80's (NZ), which means Freedom-Perich would have to pay more than they had hoped, even for just 51% control. My guess is that they are happy to see the SP stay steady or even ease a little so they and maybe Dean or New Hope can quietly accumulate some more shares. If Freedom-Perich have only 20% or thereabouts, there's still plenty of room for another player to gazump them. Or for existing shareholders to just say go away.

And then, is Perpetual investing on its own account or on behalf of someone else? It could be for a party involved in the Freedom-Perich bid - or for a potential rival. And the longer Freedom-Perich take to make their next move, the more time it gives Babidge to look at other options. He's got skin in the game (11m shares) and if Freedom-Perich are dissatisfied with his performance and strategy as reported, he may wonder about his own future if their takeover succeeds.

There's some evidence Babidge sees the company's future as being as much or more in the US than in China. Freedom-Perich have suggested the US is too big to take on with the funds currently available, and pressured him to delay a proposed capital raising to stymy that plan. His response? That's okay, we can borrow. I see that as a defiant statement that the US expansion will go ahead. He hasn't said US expansion plans are on hold. He also says he taps the views of major shareholders. Freedom-Perich are just one, and they have just a 20% stake and one board member, not enough to dictate strategy.

Wish MAC and Snaps were still around with their views.

[airedale]

will still be going on. And everyone including Freedom-Perich will be waiting with interest to see how the SP and analysts react to the official FY result. Freedom-Perich have let it be reported that they're in no hurry to up their bid, but that certainly

At this stage Freedom/Perich would of course say that they are not too interested in paying more.

[Harrie]

The official FY result will make stuff all difference. We already know mostly what the official result will be and that's already factored into the price. The only thing that will influence SP is an update on the numbers between mid July and November at the shareholders meeting, and perhaps something in the commentary and chairman's report at the time the FY results are announced (but probably not that much) I suspect that by the time the shareholders meeting takes place in November we will have a bit more information about how the top line Revenue is progressing.
Apart from that there are still "other interests" brewing on the side, which along with fundamentals per my post above will IMO keep the shorter term SP in the 0.79 to 0.88 range

[Joshuatree]

Wish MAC and Snaps were still around with their views.[/QUOTE]

What has happened to Snaps ;did he say anything?

Hey how can i find out when ATM has FY results.?Announcements only go back so far. Half yearly re 25th Feb so late August maybe for FY? cheers JT

[Fisherking]

will still be going on. And everyone including Freedom-Perich will be waiting with interest to see how the SP and analysts react to the official FY result. Freedom-Perich have let it be reported that they're in no hurry to up their bid, but that certainly

At this stage Freedom/Perich would of course say that they are not too interested in paying more.

Agree, looks like a bit of cat and mouse being played to me

[see weed]

Forgotten why I am keeping these numbers, but more than 144,036,453 have traded in the last 43 trading days on the nzx. If you include asx it would probably be over 200,000,000.

[skid]

Way to early to say its off skid; ATM is still in play imo; Perpetual for one is still there in for a play/gain and I'm sure lots of discussions going on with various parties. Have to decide if there is much more in it atp in these early stages of ATM's life and how much one would pay for the potential earnings or if one has the conviction in the success ahead and ignore all the manoeuvring and speculation and noise going on. Im not feeling a strong conviction personally at this stage in the cycle and am looking at where i can park ATM funds elsewhere for a while. Still holding two thirds atp.

Hey you're in Thailand Skid?.whereabouts ; how about travelogue (on another thread)and a few tips; I'm int in going next winter.

Thailand--Its a bit like shares--It depends what your after--Im the culturally hungry type and like to get off the beaten path--currently in Northern Thailand on a motorbike--I wont take up to much of this thread but can steer you in the right direction if you have similar interests and want to PM(also went to Myanmar which was awesome)

I get what your saying in terms of the jury still being out on takeover(wondering how much of an affect this has on things in the future )

[NT001]

Interesting story from BusinessDesk about the FMA bringing a law suit seeking financial penalties against Milford’s former high-flier Mark Warminger for alleged market manipulation.

http://www.scoop.co.nz/stories/BU1507/S01030/fma-files-against-milfords-warminger-on-market-manipulation.htm

The FMA’s director of enforcement, Belinda Moffat, is quoted as saying he allegedly manipulated markets by "placing small trades directly on market in one direction, followed by large off-market trades in the opposite direction; trading that manipulates the closing price; and trading conducted in order to set the price, rather than for a genuine commercial purpose."

This sounds a bit like what was happening to ATM a while back. She said the case relates to “trades he carried out between December 2013 and August 2014”. From memory, this period corresponds at least partly with the time we were questioning whether someone was manipulating the ATM share price down. Can someone who has detailed SP data say whether it looks as if ATM was a share he may have manipulated?

[Joshuatree]

So nobody has any knowledge of Snaps dissapperance (all his posts have gone). ?:confused:

[sb9]

Not much posting on this pup in the past few days, things've gone but quieter. Waiting for next bit of news I guess.

[Harrie]

Three out of four analysts nowhave price targets well over $1.00
Doesn't seem that Milford or any of the large instos are selling anytime soon, in fact the trading pattern looks like there is quite a lot of support at the 80c mark.
The 5 o'clock boys are on the other side at the moment sucking up the weak sellers. They love day traders and small profit takers.


Freedom Foods Group Ltd.



126,397,884


19.1%


Milford Asset Management Ltd.



50,803,093


7.70%


Perpetual Investment Management Ltd.



33,531,404


5.08%


Harbour Asset Management Ltd.



33,324,572


5.05%


Accident Compensation Corp.



31,782,727


4.82%


Guardians of New Zealand Superannuation



30,833,173


4.67%


AMP Capital Investors (New Zealand) Ltd.



19,588,712


2.97%


Norges Bank Investment Management



14,360,676


2.18%


Fidelity Management & Research Co.



5,199,509


0.79%


David William Mair, MBA



5,000,000


0.76%

[vin]

^ Interesting figures there

[sb9]

Decent turnover today, someone accumulating it seems...

[NT001]

That's indeed an interesting list of leading shareholders Harrie, but it puzzles me a bit - can you say where it's from?

Here is the list of a2MC's top ten holders registered with the NZX as of 22 July, from my broker.

NZ Central Securities Depository 220,912,863 34.4%
Mountain Road Investments (Cook) 57,558,701 9.1%
Ulrike McLachlan 7,035,163 1.1%
David Mair 5,000,000 0.8%
Gregory & Roslyn Hinton 5,000,000 0.8%
Superlife 4,373,455 0.7%
TP Trustee Bendemeer Investments 4,000,000 0.6%
ForBarr Custodians 3,580,950 0.5%
FNZ Custodians 3,197,554 0.5%
ForBarr Custodians 2,984,187 0.5%

It obviously doesn't include Freedom Foods which transferred to the ASX list at the time of the dual listing. Nor does it include mention of Milford, ACC and NZSF whose shares I assume to be still held in anonymous custody by NZ Securities Depository, which is top of the list.

But it does include some holdings that aren't on your list, such as the 9 million shares held by Mountain Road, the investment vehicle of recently resigned a2MC chairman Cliff Cook, and the 7 million held by Ulrike McLachlan, the widow of A2 co-founder Coran McLachlan, as well as part of the stakes held by the Hinton family.

So the two lists are rather hard to reconcile. Neither list mentions Geoff Babidge's 11 million shares, and BOTH mention David Mair's 5 million, which I recently suggested might be in the process of transfer from the NZX to ASX.

But what about AMP Capital Investors and Equity Casa Grande LLC who a couple of years ago were listed by 4-Traders as holding 5.61% and 4.55% respectively? Do we know how much of AMP was sold down recently? As for ECG, I have no info on whether it still holds a2MC shares at all. It is a Delaware company run by a US property billionaire who is a friend of Cliff Cook and I think is very likely involved with him in offshore retirement home development projects. He may have sold out when A2 shares rose to nearly a dollar in 2013.

It's worth our trying to keep track of these holdings, as any changes may give us clues as to what may be happening with regard to a takeover. So all contributions would be of interest, IMO.

[NT001]

Sorry Harrie, I overlooked the fact your list did mention and clarify the situation of AMP Capital Investors.

[Harrie]

The info I posted is from Thompson Reuter’sdata from the 4-traders website. There is a lot of variance with these holdings between information sources such as Markets-FT , hot copper etc.
Its possible that not even ATM know what the actual % holdings are among their top 50 shareholders. Below is a link to what was produced by ATM prior to the Australian listing:
http://hotcopper.com.au/documentdownload?id=uOMxKKzFkiWRTLKhOROKAxjvQkIK5w m0pmH0rZlJ2%2Fk%3D (http://hotcopper.com.au/documentdownload?id=uOMxKKzFkiWRTLKhOROKAxjvQkIK5w m0pmH0rZlJ2%2Fk%3D)

Even Milford is not shown on that and they held over 10% at the time so who knows?
Would be a good idea to contact ATM directly and see if you can get an updated list NT

The mountain road must still be in there somewhere otherwise we would have seen a SSH

[see weed]

What sort of effect would a2 full cream milk have on ones cholesterol readings? I will let you know my readings next week, after drinking a2 for the last year.

[RGR367]

What sort of effect would a2 full cream milk have on ones cholesterol readings? I will let you know my readings next week, after drinking a2 for the last year.

My bet is that your cholesterol profile would have improved.

[NT001]

What sort of effect would a2 full cream milk have on ones cholesterol readings? I will let you know my readings next week, after drinking a2 for the last year.

The nutritional effects of bovine A1 and A2 milk are basically identical, and there's no known reason why the opioid peptide BCM7 that is generated in the digestive process by A1 milk would affect the consumer's cholesterol levels. Moreover, there's been research into this by a team at Otago University using human subjects. Prof Keith Woodford's book Devil in the Milk dismisses the idea that A1 would impact differently on cholesterol serum, and cites the Otago University study as finding (in Woodford's words) "no difference between the two types of milk in regard to total cholesterol, LDL cholesterol ('bad' cholesterol), HDL cholesterol ('good' cholesterol) or triacylglycerol."

But anyway, why worry? The whole theory that cholesterol causes heart disease is pretty much discredited now. It was a myth invented by the manufacturers of statins and somehow the medical profession bought it despite the fact that there were plenty of clinical studies plus the huge Framingham survey that clearly showed cholesterol was not the problem. Medical authorities are now revising their views.

[NT001]

The frontpage headline and lead story occupying most of page 1 above the fold in yesterday's NBR plus a two-page spread inside the paper raises the suggestion that Fonterra, which has reportedly spurned opportunities in the past to take over the a2 Milk Company, might now face the prospect of A2 being taken over by a foreign dairy giant and turned into a major local competititive threat to the national co-op.

But before everyone rushes out to buy a copy, let me say the story is hardly gripping. Although the NBR reporter has apparently interviewed CEO Geoff Babidge, her story comes nowhere near giving the suggestion any substance. It adds nothing to what has been published elsewhere about a2MC and the recent takeover talk, and doesn't even begin to discuss the issues and problems, let alone the perceived benefits, of a global giant trying to turn a2MC into a competitor to Fonterra. It just notes Babidge's admission that some of the company's patents start running out in a couple of years, leaving a "window of opportunity now to develp the brand", but doesn't say for what purpose.

Of course, a front-page headline in NBR and a big spread inside the paper speculating that A2 is some kind of threat to Fonterra can't do the company's reputation and its SP any harm. It's good to be noticed, at least.

Meanwhile A2 is generating useful publicity for itself in Britain. The London Daily Mirror, which is read by more than a dozen or two folk, has run a story in its financial section on the best promotional deals being offered by British supermarkets, and picks A2 Milk as the best.

"Our favourite deal this week is a free bottle of A2 milk with your grocery shop - it's a 2 litre (2 pints) bottle and the offer is open to anyone shopping online at [Sainsburys]". It then goes on to explain what A2 is all about.

[Harrie]

Are you able to post a copy of both the relevant articles NT?

[NT001]

Are you able to post a copy of both the relevant articles NT?

Sorry, Harrie, the NBR story is paywalled and I had to drive into town to buy a print copy, thinking it might have some stuff we didn't know. I just wanted to save others the trouble and expense of doing the same on a weekend.

The London Daily Mirror item is at
http://www.mirror.co.uk/money/sainsburys-deals-and-voucher-codes-6212479

[nextbigthing]

http://www.bbc.com/news/uk-england-stoke-staffordshire-33840815

[Harrie]

http://www.bbc.com/news/uk-england-stoke-staffordshire-33840815

This would have to be a good thing for ATM wouldn't it?
If farmers want more at the farmgate then why not convert to a2 and pick up a premium.
Lower farmgate prices mean lower milk prices in general over time so doesn't that then make a2 milk more affordable to the consumer whilst maintaining healthy profit margins for ATM?

[NT001]

This would have to be a good thing for ATM wouldn't it?
If farmers want more at the farmgate then why not convert to a2 and pick up a premium.
Lower farmgate prices mean lower milk prices in general over time so doesn't that then make a2 milk more affordable to the consumer whilst maintaining healthy profit margins for ATM?

A number of factors would come into play here Harrie, as I'm sure you know. First, it takes some years to convert your herd to a2 and it costs money to do so. Farmers would have to figure whether the conversion cost is worth it for the farmgate price premium in several years' time. Besides the actual costs involved, such as the cost of DNA-testing each cow and culling the non-a2 cows, there's the problem that on-farm production goes down during the process. It's really only a practical proposition for farmers whose herds are already largely a2 and who can absorb some extra costs.

I haven't seen details of a2MC's farmer recruitment and farmgate pricing policy in Britain, but I do know that the company's entire supply comes at present from about 20 herds in a small region in Cheshire, Shropshire and North Wales.

Obviously it makes economic sense to buy from farmers within a limited region close to the specialised processing packing plant required to ensure the a2 milk is kept completely separate from standard milk containing a1.

The protesting farmers mentioned in the BBC report came from not too far away in Staffordshire, Derbyshire and Warwickshire, but I don't know if the company needs more suppliers at present, and whether there's a queue of farmers already waiting to sign up.

The average dairy herd in the UK has about 135 cows producing milk, so we're talking about 2,700 cows supplying a2MC's needs at present. That's not a lot, although it's about nine times the number supplying a2 milk in NZ and presumably more suppliers will be needed if demand takes off.

The premium farmers are paid for a2 milk is not great, and wouldn't be enough to make a lot convert to a2 in the present global price downturn in the UK or here in NZ.

The above points are worth remembering also when we are speculating about the possibility of a big dairy company or consortium taking over a2MC. It's not as though anyone could move in and suddenly turn a2 into a global money-making giant. It would take years to convert herds en masse and build up supplies, and at the same time to educate the consumer public as to why they should pay a premium for the product. That's one major reason why it's smart strategically for a2MC to position itself as a "niche" player seeking a high retail margin on relatively small volumes.

[nextbigthing]

This would have to be a good thing for ATM wouldn't it?


I hope so. I was hoping the long term effect would be
1) Farmers get paid more
2) Price of milk goes up across the board to cover it, however A2 already pay a premium therefore they don't have to pay farmers proportionally as much of an increase if any
3) A2 therefore becomes relatively cheaper, enticing people to pay that little bit extra to purchase it
4) Increased sales, high shareprice, party time.

[nextbigthing]

Someone mentioned IP the other day. Is anybody convened about ATM's IP expiring?

[NT001]

Someone mentioned IP the other day. Is anybody concerned about ATM's IP expiring?

The NBR story last Friday quoted CEO Geoff Babidge as describing a2MC's patent portfolio as "extremely complex" with some patents running out in a couple of years, although the report didn't say which ones.

But the story also said "key patents which prevent other companies from promoting the benefits of A1-free milk" run out in October 2023, in other words they still have eight years to run, and they are the ones that seem to be causing observers the most concern. Babidge also said the company has a number of new patent applications under way which have a potential life of 20 years.

Elsewhere Babidge has recently stressed that a2MC's security against IP challenge relies not only on its "robust" suite of patents, none of which is vital in itself, but also on its practical know-how and established market position based on consumer perception.

In one statement he said the strength of the company’s comprehensive and inter-locking IP portfolio means "no one else can have complete freedom to operate in the manufacturing, selling and advertising of an A1 beta-casein free proposition in its entirety like we can.”

That wording does suggest a potential competitor might be able to wriggle through cracks here and there in a2MC's IP, but it would continue to run into legal constraints on IP issues overall.

[nextbigthing]

Thanks NT001. Eight years should be plenty.

[klid]

I saw a question on Who Wants to be a millonaire about A2 milk. It was an easy question for like $100 or $200 or something.
I thought of this company at the time, obviously, and I knew the answer, GO A2MC.

[Harrie]

Very comforting NT, thanks for the IP breakdown. I think that appears to be the way a2mc has structured the patents over the next 20 years. True you maybe able to wriggle thru some of them just to be caught by another.
Talking to a insto the other day who had previously invested in A2mc but had also raised the IP question. I wonder how far it was investigated. I am happy to take Babbidges interpretation of the IP question though, he should know as well as anyone. The insto did mention how well they respected Babbidges passion and drive. All good as far as I am concerned.

[Joshuatree]

Perpetual has increased its stake from 5.08% to 6.14% on the 7th Aug .ASX announcement

[NT001]

Perpetual has increased its stake from 5.08% to 6.14% on the 7th Aug .ASX announcement

Do we know whether it is investing on its own behalf or might it be on behalf of someone else who wants to avoid publicity at this stage?

[kiwi_on_OE]

That wording does suggest a potential competitor might be able to wriggle through cracks here and there in a2MC's IP, but it would continue to run into legal constraints on IP issues overall.

They'll be hoping for TPP to be agreed and that everyone agrees to an increase in the length of patents.

[NT001]

The “expression of interest” in taking over a2MC by Freedom Foods, the Perich family and America’s biggest milk company, Dean Foods, is back in the news, although only tangentially.

News from the US overnight is that Dean Foods’ chairman, Tom Davis, has suddenly resigned with immediate effect as regulators launch an investigation into allegations of insider trading. Questions have arisen as to whether this might affect Dean Foods’ plans to take part in the proposed a2MC takeover, but a company spokesman has indicated it won’t.

http://www.smh.com.au/business/a2-milks-us-suitor-target-of-sec-insider-trading-probe-20150811-giwt85.html
(http://www.smh.com.au/business/a2-milks-us-suitor-target-of-sec-insider-trading-probe-20150811-giwt85.html)
Interestingly, a story on the Dean Foods problem in today’s newspaper The Australian says the Perich family, who were earlier reported to be pushing the takeover idea because of doubts about a2MC’s strategy of launching big-time into the US market, are now happier following the recent update issued by a2MC’s CEO, Geoff Babidge.

http://www.theaustralian.com.au/business/companies/dean-foods-still-on-acquisition-trail/story-fn91v9q3-1227478533957

The last two paragraphs are particularly interesting because when Babidge issued his update, the immediate reaction by the takeover proposers was said to be that they were not impressed. There seems to have been a change of heart since then, which also ties in with comments by Babidge in statements to the NZX over the past couple of days.

It will be recalled that the parties to the takeover proposal, especially Perich, insisted that a2MC postpone any plans for an increase in capital. But now, the company is activating a decision made by its board last April to award a total of 15 million options and 1.6 million performance rights to acquire ordinary shares to certain members of the company's senior management team under its incentive scheme.

Babidge this week told the NZX the company had been delayed in finalising the grant “due to recent events”. This appears to mean the conditions attached to the takeover proposal have been relaxed. Does this possibly mean the proposal itself is running out of gas? We aren't hearing much about it now. It wasn't a formal takeover offer. Was it perhaps just a device to push the SP up, as some have suggested?

[sb9]

Thanks NT001 for sharing that, very interesting read that is.

[Harrie]

The offer has been rejected NT so they are not under any constraints which existed while the proposal was "live". That does not mean that another offer under different constraints can't be made by the same or different parties.
Babbage has said that there are other interested parties in the wings however until something is formalized A2mc can do what they want and are obviously doing just that. I don't see what they have announced as much of an issue really. About 2% of the shares and at a price of 63c at expiry. Staff still have to front with large amounts of cash and it sets a bottom to the price. No company wants to issue share options to staff as part of a bonus scheme at an excercise price which is greater than the expected share price at expiry.

[NT001]

The offer has been rejected NT so they are not under any constraints which existed while the proposal was "live". That does not mean that another offer under different constraints can't be made by the same or different parties...
.

You're absolutely correct Harrie, a2MC is no longer bound by any constraint on increasing the company's capital as demanded by those behind the "expression of interest". In fact it never was really, because it was only a proposition, not a formal offer.

But Babidge has said the parties are still open to continued discussions, although the proposers have said they're in no hurry to come up with an improved proposal, and things have gone very quiet. As a former top executive of Freedom Foods himself and a longtime close associate of the Perich family, I believe Babidge would want to stay on good terms with those behind the initial takeover proposal even though the board has rejected it. That's why I believe he wouldn't have gone ahead with the option allocation at this point in time if he didn't have approval from them to do so. There was no need to push it through right now.

To that extent I see it as indicating a change in position by Perich/FF, and this ties in with what The Australian has reported.

I see the report in The Australian has now been paywalled, so here are the two paragraphs I referred to in post 4470.

"It is believed the Perich family, Freedom’s major shareholder, has recently become more comfortable with a2’s strategy following a trading update when the group revealed earnings before interest, tax, depreciation and amortisation was forecast to triple to $NZ12 million ($10.6m) in 2016, slightly above consensus forecasts.


"The Perich family had previously been concerned about a2’s ability to finance and execute its US plans without the support of a deep-pocketed partner."

This is significant, and in my view may indicate the proposed takeover is now a dead duck - if it ever was really alive and flying. The publicised proposal may have achieved its purpose by setting a new benchmark value for a2MC shares somewhere in the NZ80c area as compared with less than 50c previously. Just guessing.

[Harrie]

I don't think that the expression of interest did any harm in fact it prompted the market into making further investigations of its fundamentals and proposition. Without it I doubt whether you would see interest being expressed as much as it is by money managers and in particular Perpetual.
I still suspect that a bit of premium is built into the current price on the prospect of "other interested parties" but essentially most of the price is supported by fundamentals and the expectation of an increasing top line growth in target markets.

[NT001]

For those with time on their hands and an interest in broader aspects of the global dairy scene, not just a2MC’s role in it, three worthwhile articles just published are worth a read. None of them mention A2 specifically, but all have some relevance to A2’s global strategy.

An article in the Herald by Fran O’Sullivan, one of the few NZ journalists who has a good understanding of trade issues, paints a gloomy but realistic picture of NZ’s fading hopes that anything useful to the NZ dairy industry will emerge from the Trans-Pacific Partnership Agreement. As one who has followed to some extent the TPP debate as reported by newspapers in the US, Japan and Canada, I can only say it has been fascinating to observe how these three big trading nations have begun painting NZ as the fly in the ointment, the country that is preventing a TPP agreement. This stance completely overlooks the fact that dairy is the only topic on which the TPP is failing to liberalise trade, simply because the powers that be in Washington, Tokyo and Ottawa lack the political guts to demand agricultural reforms from their powerful but antiquated farming lobbies.

http://www.nzherald.co.nz/best-of-business-analysis/news/article.cfm?c_id=1501241&objectid=11497432

O'Sullivan's view ties in with two articles by Prof Keith Woodford on his blog site.

In one piece, arguing that “It’s time for a breather on TPP” Woodford updates his longstanding view that NZ has always greatly over-rated the benefits that the Trans-Pacific agreement would bring to our dairy industry.

https://keithwoodford.wordpress.com/2015/08/16/tpp-its-time-for-a-breather/#more-1323

And in a second column, focussing on Fonterra and China, Woodford argues that Fonterra is constantly way behind the ball in its strategising for China, and still is, while American and European exporters are rapidly overtaking us.

https://keithwoodford.wordpress.com/2015/08/16/fonterra-and-china/#more-1331

Happy reading.

[skid]

For those with time on their hands and an interest in broader aspects of the global dairy scene, not just a2MC’s role in it, three worthwhile articles just published are worth a read. None of them mention A2 specifically, but all have some relevance to A2’s global strategy.

An article in the Herald by Fran O’Sullivan, one of the few NZ journalists who has a good understanding of trade issues, paints a gloomy but realistic picture of NZ’s fading hopes that anything useful to the NZ dairy industry will emerge from the Trans-Pacific Partnership Agreement. As one who has followed to some extent the TPP debate as reported by newspapers in the US, Japan and Canada, I can only say it has been fascinating to observe how these three big trading nations have begun painting NZ as the fly in the ointment, the country that is preventing a TPP agreement. This stance completely overlooks the fact that dairy is the only topic on which the TPP is failing to liberalise trade, simply because the powers that be in Washington, Tokyo and Ottawa lack the political guts to demand agricultural reforms from their powerful but antiquated farming lobbies.

http://www.nzherald.co.nz/best-of-business-analysis/news/article.cfm?c_id=1501241&objectid=11497432

O'Sullivan's view ties in with two articles by Prof Keith Woodford on his blog site.

In one piece, arguing that “It’s time for a breather on TPP” Woodford updates his longstanding view that NZ has always greatly over-rated the benefits that the Trans-Pacific agreement would bring to our dairy industry.

https://keithwoodford.wordpress.com/2015/08/16/tpp-its-time-for-a-breather/#more-1323

And in a second column, focussing on Fonterra and China, Woodford argues that Fonterra is constantly way behind the ball in its strategising for China, and still is, while American and European exporters are rapidly overtaking us.

https://keithwoodford.wordpress.com/2015/08/16/fonterra-and-china/#more-1331

Happy reading.

Well that pretty well finalizes it -we get pretty much nil from the TPP--(not to mention all the disastrous consequences)

In terms of ''fly in the ointment'' thats what the big trading nations do (or the conglomerates behind them) they intimidate

The biggest danger IMO is that those at the helm here, fall prey to the promise of personal gain as happens all the time in the USA.(there is no such thing as conflict of interest over there)

Of course the fact that everything now cost the average Chinese consumer more due to the devaluation certainly does not help.

We are caught between 2 economic powerhouses and ,as with all economic situations..politics is never far behind

[okay]

Wow 13.715m trade at 16:22 wonder who is involved with that.

[NeverQuestion]

Wow 13.715m trade at 16:22 wonder who is involved with that.

I wonder if that will trigger a "Please Explain" from NZX

[NT001]

I wonder if that will trigger a "Please Explain" from NZX

Why would it? It's only about 2% of the company's capital and there hasn't been any significant share price movement.

Interesting all the same. It may have been an off market transaction that was quietly in the works for a few days. There are only half a dozen or so shareholders who had that number of shares registered on the NZX, so it certainly would be interesting to know who bought and who sold. Trading has been fairly quiet so far today onthe ASX.

[blobbles]

What's everyones thoughts on FY15 results? Not far away now, possibly end of next week?

I reckon lots of growth (aiming for $170m! Be happy with $160 though), traction in UK (will be looking for the different markets breakdown closely) and some decent early US sales.

The real surprise will be the NZ market will be the star, now worth $300m in sales. (Ha haaaaa, tell him he's dreaming!). :-D :-D

Looking at $250m next year, maybe more. While milk prices have gone down, this hasn't affected ATM too much as theirs is a premium product. The dramatic shift in the currency however will be making the US/UK markets veerrrry attractive (not so much the Aus where most revenue comes from). Lets hope for positive news from the new markets!

[Harrie]

[QUOTE=blobbles;586831]What's everyones thoughts on FY15 results? Not far away now, possibly end of next week?

I reckon lots of growth (aiming for $170m! Be happy with $160 though), traction in UK (will be looking for the different markets breakdown closely) and some decent early US sales."

Wouldn't think that there will be anything new in the FY results that have not already been disclosed in the July update given that the July update would encompass known data to end June.
The forecast revenue growth for FY16 was adjusted from $230m to $267m so the $170m for FY15 is certainly achievable. I will be looking mainly at the Chairmans report and early signs of revenue growth in the USA. If this exceeds expectations a lot of the uncertainty of success there will be removed and that will have to be reflected in the SP.

[twotic]

Hi guys,

I'm not much of a commodities guy (at all) so I was wondering if someone could explain to me how dairy prices work?

I notice last night prices have rebounded by roughly 15%. (http://www.stuff.co.nz/business/farming/dairy/71247428/dairy-prices-rebound-in-overnight-auction)This seems quite volatile to me, but again I don't follow commodities so perhaps it is not that far different to other commodities? The main difference though seems to be the way dairy is traded. I.e most commodities can be traded publicly on an exchange right? while dairy is a monthly global auction.

Anyway, my questions to those more in the know are:
How does the global dairy auction work?
Why are prices so volatile?
and I guess in relation to ATM is there much of a correlation between global dairy prices and the ATM SP?

Cheers in advance.

[nextbigthing]

They reduced the amount of product offered for supply (while demand remained the same) hence the price went up.

Read a bit about it here;

https://www.globaldairytrade.info

[NT001]

... is there much of a correlation between global dairy prices and the ATM SP?

Short answer: No, none at all.

There is SOME correlation between global dairy prices and what farmers get for non-A2 milk, and there is SOME correlation between that and what ATM pays its farmer suppliers for A2 milk, but:

(a) Although ATM pays its suppliers a small premium, we don't really know the details and they probably vary from country to country and from time to time.

(b) The level of ATM's payment to its suppliers is only a minute part of a complex set of factors that determine ATM's profitability. Since you are new to this, suffice to say the SP is not determined by its current profitability anyway, but really depends on what investors think the company may be worth at some vague time in the future. In other words it's pretty much guesswork, and if you care to read back on this thread you'll find there is a wide disparity of views on this, especially between practitioners of TA and FA, and between short-term and long-term holders. In other words it's a highly speculative share.

Personally I see no point whatever in trying to draw connections between global dairy prices and the value of ATM shares.

[sb9]

https://nzx.com/companies/ATM/announcements/268705

Milford it was, however their holdings reduced by 8Mln of which 4Mln was transacted y'day.

Wonder who sold the other 5Mln (of 13Mln y'day).

Most importantly who the buyer is...

[airedale]

See Weed tops up again.:)


s

[see weed]

See Weed tops up again.:)


s
Not me. I've been collecting pgw for the last week.

[stoploss]

https://www.nzx.com/companies/ATM/announcements/268725

[Leftfield]

A lot for holders to like in this report and 2016 looking v promising. I particularly liked this bit; "the Company is forecasting strong growth in both revenue and operating earnings in FY16. Group revenue is forecast to increase to $267 million in FY16 (a 72% increase over the pcp) and Group operating EBITDA to $12 million (a ~150% increase over the pcp before non-recurring items)."

[Nasi Goreng]

Could be a wild ride to 65 today. No buyers atm

[vin]

Confused, why would there be such a decline in SP over this announcement?

[stoploss]

Confused, why would there be such a decline in SP over this announcement?

No follow through on possible takeover ... punters getting out .

[Nasi Goreng]

They made a loss, how are they going to fund growth? Just a matter of time till capital raise which will need discount.

[sb9]

Some nervous sellers I reckon....good buying opportunity if you're a long term holder.

[silverblizzard888]

Confused, why would there be such a decline in SP over this announcement?

Market knew about the numbers so it was no surprise, what made it bad is the loss since it was expected them to breakeven and the imminent capital raising thats required given they are losing money. Theres not much in the way of takeover news, so we will likely head down back to pre takeover point unless something else comes up.

[Kirk]

"Significant growth in operating EBITDA forecast for FY16; first two months trading resultsignificantly ahead of both pcp and forecast" based on that for ANZ might exceed $267mil next year

[Xerof]

https://nzx.com/companies/ATM/announcements/268705

Milford it was, however their holdings reduced by 8Mln of which 4Mln was transacted y'day.

Wonder who sold the other 5Mln (of 13Mln y'day).

Most importantly who the buyer is...

Gee, nice timing........check the shredders.....

[Joshuatree]

Its work in progress with growing pains;too early to be investment grade.Sold a 2nd third of my shares @ 79c.Long term heres hoping the potential is met.

[sb9]

Gee, nice timing........check the shredders.....

I don't think so, Milford need to put their house in order.

No need to check the shredders it'll come out soon by way of an SSH, if its warranted.

[Xerof]

You missed the point. Look at when they sold in terms of proximity to when the update was released. Different strokes for different folks.

[sb9]

Agree xerof, however point is Milford have plenty to offload and they've under the pump of late.

What's good price for Milford may be bargain for someone else (like freedom or perich) as they see huge potential in this pup.

In terms timing the sale in time with update released, ATM have already provided trading update to this effect back in Jul.

[Nasi Goreng]

What's good price for Milford may be bargain for someone else (like freedom or perich) as they see huge potential in this pup.



Freedom were pretty good at talking the price down so they may see big potential when the price is in the 50-60c range. That being said, the price could go anywhere in the next few days... I think there will be more pressure to the downside but if some fundies see value at these prices, they may be able to get in.

[NeverQuestion]

Could someone explain

To me these points are all pointing to a company that is growing rapidly and positioned to be profitable

• Total revenue of $155.1 million, up 40% on pcp
• Group EBITDA2 before non-recurring items of $4.8 million up 35% on pcp
• ANZ total sales up 42% on pcp in AUD - exceptional growth in infant formula
• ANZ operating EBITDA3increase of 60% with strong growth expected to continue
• Infant formula direct sales to China building following distribution changes
• Revised UK product format and positioning implemented with broader distribution
• USA business established, positive trade response, distribution building
• NPAT loss primarily due to ASX listing costs and employee share scheme expenses (non-cash)
• High effective tax rate given non-deductible expenses4 and UK and USA losses

Yet the share price is immediately down and people are now saying that the price is about the 50-60c range

Perhaps I missed something

[NT001]

NQ, last year when the company showed it was definitely on the up and up, media stories ran headlines on the fact it recorded a loss. They'll probably do the same this time. People just see the negative.

[Kirk]

Decrease likely due to the fact that freedom and deans havent been talking to the board. The market seems to have still thought that they would be talking about there options

[couta1]

Just bought a good sized block at 70c pulling my average price down from 92c to 74c could go a bit lower but being greedy where others are fearful i reckon applies here.

[Nasi Goreng]

NQ, last year when the company showed it was definitely on the up and up, media stories ran headlines on the fact it recorded a loss. They'll probably do the same this time. People just see the negative.

From a cash point of view, they had $16m 12 months ago, now they have $6.1m. This doesn't seem to be on their highlight reel.

We know that they were about to launch a capital raise before the EOI and it looks like they really need it. They have big expansion plans that are beyond the original plans, how are they going to fund it?

[iceman]

From a cash point of view, they had $16m 12 months ago, now they have $6.1m. This doesn't seem to be on their highlight reel.

We know that they were about to launch a capital raise before the EOI and it looks like they really need it. They have big expansion plans that are beyond the original plans, how are they going to fund it?

Despite very good sales growth in Australia and particularly outstanding with A2 Platinum formula, the good ANZ profit does no longer fund their large expansion plans.
I would have liked to see more detail about USA but suspect the limited info we were given means they haven't actually made any worthwhile progress there so far. It is early days.

I think there is little doubt that we will see a capital raising in the near future. I would like that and take part in it if given the opportunity, providing the terms were reasonable

[Crackity]

[QUOTE=iceman;587157

I think there is little doubt that we will see a capital raising in the near future. I would like that and take part in it if given the opportunity, providing the terms were reasonable[/QUOTE]

Me too - I'm going to buy a tiny parcel to get a foot in the door on the off chance over subscriptions are allowed.....

[Nasi Goreng]

I'm quite surprised by some parts of the presentation. FY16 EBITDA forecast for loss in the UK of 2m GBP which will be a 50% improvement on FY15. So they lost 4m GBP in FY15? Thats 9.5M NZD at todays rates yet in presentation, loss in US and UK was $7.7m NZD.

The growth is great... I think they will need to raise at least $50m to cover growth plans and we will need to see a 5 year plan. As a potential investor, I would want to know what the goals are for each market in year 1, 2 and 3 etc.

[blobbles]

Strange market reaction.

Revenue growth at 40%. Quick, run for the hills!

[Snoopy]

From a cash point of view, they had $16m 12 months ago, now they have $6.1m. This doesn't seem to be on their highlight reel.

We know that they were about to launch a capital raise before the EOI and it looks like they really need it. They have big expansion plans that are beyond the original plans, how are they going to fund it?


Strange market reaction.

Revenue growth at 40%. Quick, run for the hills!

Some people forget that a company has to be profitable to survive withou further injections of capital. So I hope you don't mind Bobbles if I spell things out a little clearer than Nasi did.

1/ Cash burn rate of $9.9m per year equates to $825k per month.
2/ Cash balance at 30th June $6.1m.
3/ Number of months before cash balance is exhausted: $6.1m/$0.825m = 7.4.
4/ Last day of trading for ATM listed entity: 12th February 2016

SNOOPY

[nextbigthing]

Strange market reaction.

Market reaction seems quite appropriate to todays news Blobbles;


Just bought a good sized block at 70c

Our beloved Couta is all in, so market is all out :D ;)

[Nasi Goreng]

Just bought a good sized block at 70c pulling my average price down from 92c to 74c could go a bit lower but being greedy where others are fearful i reckon applies here.

The market has to get afraid first. Crikey, today is a bit of re-adjusting.

Shareholders were fearful when price was in the 40's. This could be a 3 day fall that goes like this...

Day 1, traders buy thinking they got a bargain
Day 2, traders sell realising they just bought a lemon
Day 3, fear takes over, more selling

[GTM 3442]

The market has to get afraid first. Crikey, today is a bit of re-adjusting.

Shareholders were fearful when price was in the 40's. This could be a 3 day fall that goes like this...

Day 1, traders buy thinking they got a bargain
Day 2, traders sell realising they just bought a lemon
Day 3, fear takes over, more selling

And on the fourth day?

[couta1]

Market reaction seems quite appropriate to todays news Blobbles;



Our beloved Couta is all in, so market is all out :D ;)
Go big or go home that's my motto:cool:

[NeverQuestion]

The market has to get afraid first. Crikey, today is a bit of re-adjusting.

Shareholders were fearful when price was in the 40's. This could be a 3 day fall that goes like this...

Day 1, traders buy thinking they got a bargain
Day 2, traders sell realising they just bought a lemon
Day 3, fear takes over, more selling

And on that note I just sold all my shares

Might be back once I see the trend reversing

[NT001]

There speaks a short-term trader. You're absolutely right to sell. This is a share for those who understand what A2 is all about.

[sb9]

On the money there NT001, I'm in for long haul...have seen the sp swing between 46c (small paper loss) all the way to 80c (big paper profit) in the last few months or so. No inclination whatsoever to sell, if anything might top up more on further weakness or participate in capital raising, if there is going to be one.

[nextbigthing]

Go big or go home that's my motto:cool:

Haha fair enough. Best of luck mate.

[see weed]

Wow that was a busy day, sold 91,000 and bought 10,000 and a $14,000 profit:D.

[Harrie]

I'm struggling to find anything negative in the numbers. Its a better result than what I was expecting.
Sure they have made a loss are going to need to do a CR but a2mc is not and never has been a company that over exaggerates its forecasts, in fact traditionally they have been fairly conservative. Accept that the cash flow from ANZ operations is not going to cut it, however they may use some of their credit lines currently in place to fund the difference. That may only require $10 to $15m and at say 7%pa close to half the total cost of what was required to list on the ASX.
The positive thing is why wouldn't they build on the initial success they are getting in the USA. Forecasts of revenue from $1.9 FY15 to $38m needs funding. I'm suspecting that $38m is a bit conservative as well.
Then its baby formula. Already they have $13m of revenue in 2 months, so annualized that's $78m a 87.18% increase over FY15. Suspect that's conservative as well.
Then there is growing revenue coming in through product diversification and more health studies on human subjects that are also looking positive.
Happy to see a2mc go for it and happy to add to my holdings.

[nextbigthing]

Wow that was a busy day, sold 91,000 and bought 10,000 and a $14,000 profit:D.

See weeds round. Pints of a2 milk of course.

[Kirk]

I'm struggling to find anything negative in the numbers. Its a better result than what I was expecting.
Sure they have made a loss are going to need to do a CR but a2mc is not and never has been a company that over exaggerates its forecasts, in fact traditionally they have been fairly conservative. Accept that the cash flow from ANZ operations is not going to cut it, however they may use some of their credit lines currently in place to fund the difference. That may only require $10 to $15m and at say 7%pa close to half the total cost of what was required to list on the ASX.
The positive thing is why wouldn't they build on the initial success they are getting in the USA. Forecasts of revenue from $1.9 FY15 to $38m needs funding. I'm suspecting that $38m is a bit conservative as well.
Then its baby formula. Already they have $13m of revenue in 2 months, so annualized that's $78m a 87.18% increase over FY15. Suspect that's conservative as well.
Then there is growing revenue coming in through product diversification and more health studies on human subjects that are also looking positive.
Happy to see a2mc go for it and happy to add to my holdings.


Only thing is they need the supply to meet the demand

[QFD Sage]

Interestingly, as the share price comes back, the prospect of increased attention from suitors increases. What we are seeing at the moment is simply speculators exiting. Largely good news today so just be patient, buckle in and enjoy the ride!

[Leftfield]

I'm struggling to find anything negative in the numbers.

Perhaps other posters are correct and the market is fearing a capital raise…. however, my interpretation is that the positives in this report outweigh this possibility. Exciting times ahead? Time will tell.

[NT001]

Only thing is they need the supply to meet the demand

Kirk, you are right to identify this as a potential limiting factor, but there are ways around it, especially in the US. And that will be the most important and profitable market for a variety of reasons including its wealth and consumer awareness of health issues.

Quite a few US dairy farmers have already converted to A2, or largely done so. Awareness of the A1-A2 issue is widespread in the US. A2 Corporation had a go at the US market about 7-8 years ago and a lot of Midwest farmers converted or got well down the path of herd conversion before the company pulled out due to a change in global strategy. A lot of those farmers, spread across many states, are dedicated to the cause amd ready to sign up again now.

The US dairy industry is very large, and well placed to develop big A2 herds, capable of supporting not only the US domestic market but also exports to markets such as China and Europe. It can segregate A2 cows within its herds, many of which are much larger than the average NZ or Australian herd. A strategy of within-herd segregation plus selective breeding could quickly build up large and viable A2-only herds, helped by the fact that in contrast to NZ, US dairy farms breed calves year-round.

It would not surprise me if Dean Foods, which has contracts with thousands of US dairy farmers and segmentally targets health-conscious consumers, becomes involved with a2MC, possibly even via a placement of new shares as part of the inevitable coming capital raise (which I'll subscribe to)

China, the UK and Europe will not be quite as easy for a variety of reasons. China will have to be supplied from Australia and NZ for some time. It is good to know from Babidge's FY report today that a2MC has had consumer tests conducted in China, the results of which just await publication in peer-reviewed journals.

And in NZ, although Fonterra has discouraged farmers from going down the A2 route, a lot of them have been quietly moving their herds in that direction. Babidge's report today that more NZ farmers have been signed up to supply milk for infant formula is interesting - and the word will be getting around. Many farmers here are preferentially sourcing their breeding semen from bulls identified as A2-A2 (and most breeding bulls now listed on the catalogue are pure A2). So a lot of NZ farmers are partway there.

[winner69]

Presentation says ANZ EBITDA was $30m

Page 9 of Appendix says ANZ EBITDA was $5.7m


Had me stuffed last time and somebody did try to explain why but I think they were actually confused as well.

Anybody willing to have a go?

I one of those nasty trader of ATM shares but willing to understand the fundamentals

[Harrie]

Wow that was a busy day, sold 91,000 and bought 10,000 and a $14,000 profit:D.



you have only made a profit seeweed if you sold 91000 and bought the same 91000 at a lower price. If you do nothing in the next week fortnight month or year and the SP goes above your sale price the only person making any profit is your broker. Short term gains, long term losses.

[Kirk]

PPT been buying more now over 7% http://www.asx.com.au/asx/research/company.do#!/A2M They love to make announcments late in the day

[see weed]

you have only made a profit seeweed if you sold 91000 and bought the same 91000 at a lower price. If you do nothing in the next week fortnight month or year and the SP goes above your sale price the only person making any profit is your broker. Short term gains, long term losses.

I had to. Was losing over $3000 every time it dropped a cent. Looking for a dividend stock at the moment.Still got 140,000 in the 50c to 58c range and the rest over 73c and am happy with the holding. The brokerage was only $376 all up.

[sb9]

PPT been buying more now over 7% http://www.asx.com.au/asx/research/company.do#!/A2M They love to make announcments late in the day

thanks for that kirk, very interesting now....game on!

[blobbles]

Some people forget that a company has to be profitable to survive withou further injections of capital. So I hope you don't mind Bobbles if I spell things out a little clearer than Nasi did.

1/ Cash burn rate of $9.9m per year equates to $825k per month.
2/ Cash balance at 30th June $6.1m.
3/ Number of months before cash balance is exhausted: $6.1m/$0.825m = 7.4.
4/ Last day of trading for ATM listed entity: 12th February 2016

SNOOPY


OMG! They are going to have to do a capital raising. THE SKY IS FALLING! They will definitely go out of business on 12th of Feb next year, what was I thinking???!!

[Harrie]

Profit is Profit Harrie and see weed seems to be enjoying himself, just buying and holding can be somewhat dull and boring for many.


It's only a profit if you exit the market totally where average buy price is lower than average sell price plus dividends over your total portfolio which may be made up out of many shares.

In seeweeds case he may take the profit out of a2mc and put it into a different share which over time may perform better or worse than A2mc. You still need to make a judgement in the long term where your investments are best placed for the best long term profit. Nothing boring in that.

The only other way of knowing that you are constantly making a profit is to withdraw profits from the market and not reinvest back in the market. ie: maintain your original capital.

[blobbles]

There is one line and one line only that caused the SP drop today IMHO:

"We have had no further communication with either Freedom Foods Group Limited or Dean Foods Company since we advised that the proposal in the Expression of Interest was not compelling."

Clearly a lot of people were hoping these companies were going to improve their offer. When they found out that wasn't going to happen... run for the hills!

[Harrie]

I had to. Was losing over $3000 every time it dropped a cent. Looking for a dividend stock at the moment.Still got 140,000 in the 50c to 58c range and the rest over 73c and am happy with the holding. The brokerage was only $376 all up.

And what you go into is guaranteed not to drop by $3 grand a cent equivalent?
stick with your convictions SW, time better spent with distributing a2 flyers!

[NT001]

PPT been buying more now over 7% http://www.asx.com.au/asx/research/company.do#!/A2M They love to make announcments late in the day

I'm not really interested in a temporary rise or fall of a few cents in the SP, but the question in my suspicious mind is, on whose behalf is PPT buying? Could it be accumulating the shares for Freedom-Perich? This 7% on top of their 19% would make 26% which is about enough to scare other bidders away.

A report in today's newspaper The Australian (paywalled so I got just the first sentence) quoted Babidge as saying he hoped the FY result would satisfy Perich. Remember, it was Perich's discontent that led to the EOI. Can anyone give us more of what that story said? The Australian is the best informed media source on this subject.

[Soldog]

Geoff Babidge, managing director of a2 Milk, said yesterday he was hopeful the group’s reiteration of a more than doubling of earnings in the year ahead would give its shareholders, including the Perich family-backed Freedom Foods, a more positive view on the outlook for the company.
A2 confirmed yesterday that group revenue was forecast to increase 72 per cent to $267 million in FY16 and group operating EBITDA would rise 150 per cent to $12m before non-recurring items.
The forecast is underpinned by strong growth in its core Australian business and better-than-*expected revenues from its a2 Platinum infant formula across both ANZ and China.
A2 reported a net loss after tax of $2.091m for 2015 after absorbing costs associated with its ASX listing earlier this year and employee share-scheme expenses.
Last month a2 formally rejected an unsolicited takeover approach by Freedom and the US-listed Dean Foods Company and said it was exploring other potential approaches from other parties.
A2 confirmed yesterday that there had been no further communications with Freedom and a2 over the past month.
The Australian previously reported that Perich family patriarch Tony Perich in May expressed his frustration with a2’s strategy directly to Mr Babidge and indicated that Freedom Foods would try to buy a2. Freedom and the Perich family have a stake in a2 of just under 20 per cent.
It is believed the Perich family had been concerned about a2’s ability to execute its international expansion plans in a timely manner, especially in the US, without the support of a deep-pocketed partner. But there is speculation the family is now more comfortable with a2’s strategy.
Mr Babidge declined to comment on any direct discussions with the family, but told The Australian yesterday morning: “I have a long-term relationship with the Perichs that I regard positively.
“I’d like to think in consequence of the market update last month and today’s announcement and the significant growth opportunities for FY16 that are ahead of market expectations that all shareholders would have a more positive view about the prospects for the company. I would be hopeful about that.”
A capital raising also remains on the agenda over the coming year but no decision has been made to proceed with it.
The a2 share price has also risen from the level when Freedom and Dean Foods made their initial approach. A2 shares have risen from around NZ50c in late May to over NZ80c late last month. They closed 8 per cent lower at NZ71c yesterday.
“Clearly the share price has firmed over recent times which would be indicative of a better understanding of the company,’’ Mr Babidge said.

[airedale]

Good morning NT, how do you know that many NZ farmers "are quietly moving their herds to A2"? Documentary evidence?

[stoploss]

Good morning NT, how do you know that many NZ farmers "are quietly moving their herds to A2"? Documentary evidence?

Sounds like a logical move , they are not exactly being best served by Fonterra ATM ( at the moment ) ......

[see weed]

And what you go into is guaranteed not to drop by $3 grand a cent equivalent?
stick with your convictions SW, time better spent with distributing a2 flyers!


Run out of flyers couple months ago. Still like a2 and still hold lots and will top up more later on.

[see weed]

Buyers looking weak, good sign for more buying and maybe another t....

[Harrie]

jeepers someone is bailing....someone thinking that the CR price will be lower than $0.69c?
Seems like every bit of good news is met with another round of selling pressure. “I’d like to think in consequence of the market update last month and today’s announcement and the significant growth opportunities for FY16 that are ahead of market expectations that all shareholders would have a more positive view about the prospects for the company. I would be hopeful about that.”
I've never heard Babbage be so positive, maybe sellers are interpreting his comments as a desperate cry for help!

[Harrie]

NT, you wanted to know who perpetual were buying for. Hopefully the following helps.

Perpetual have been buying up on behalf of two major intl players.
There are two global investment managers Perpetual are buying for. Of the 49502632 shares purchased by Perpetual, the largest exposure is for RBC I&TS in Perpetual's "Wholesale ethical fund" (47.46%) and 13.98% in the "perpetual equity investment fund".
RBC Investor & Treasury Services (RBC I&TS) is a leading specialist provider of asset servicing, custody, payments and treasury services for financial and other institutional investors worldwide. They serve clients from 18 locations across North America, Europe, Asia and Australia, delivering custodial, advisory, financing and other services to manage risk in multiple jurisdictions. RBC I&TS is ranked among the world’s top 10 global asset servicing businesses, with CAD 3.54 trillion (USD 3.25 trillion) in client assets under administration (as at July 31, 2014).

There are smaller holdings for UBS. Perpetual hold 28.52% of their total holdings in the "share plus fund" and 10.02% in their "pure equity alpha fund" for them.
UBS Global Asset Management in Australia provides a comprehensive range of investment styles and strategies to institutional investors, intermediaries and retail investors.
UBS has $41 billion of invested assets in Australia (as at 31 December, 2014) and approximately 90 employees located locally, UBS is one of the largest global asset management businesses in the Australian market. Globally, with approximately $817 billion of invested assets under management (as at 31 December, 2014) and approximately 3,800 employees located in 24 countries, UBS Global Asset Management sees itself as a truly global investment manager.

[NT001]

Thanks for that, Harrie - that's very helpful. As you can probably see, I'm not very familiar with how these funds work, but would you say the shots are definitely being called by RBC and UBS fund managers, or by Perpetual managers operating on their behalf, and definitely not by investors using them as a cover for anonymous buying?

[bull....]

dean foods remoured not interested in takeover now
penrichs still unhappy about performance a2 after latest results cant see how they can globally expand

just what I have been saying for ages lol

[sb9]

dean foods remoured not interested in takeover now
penrichs still unhappy about performance a2 after latest results cant see how they can globally expand

just what I have been saying for ages lol

If Penrich aren't that happy why would they keep increasing their stake?

[bull....]

If Penrich aren't that happy why would they keep increasing their stake?

blocking stake there unhappy about financials - anyway theres article on scoop about it

[NT001]

Good morning NT, how do you know that many NZ farmers "are quietly moving their herds to A2"? Documentary evidence?

Good question Airedale. I’m not sure what you mean by “documentary evidence”, but it’s an indisputable fact, although we don't know the exact statistics, and we don't know how much of the shift is due to farmers' deliberate decision to select A2.

We do know that most of the semen being used by farmers for calf breeding is from A2 bulls, because they dominate the semen catalogue. This is occurring partly because of farmers’ awareness of the health case advanced for A2 milk, even though it’s not yet accepted by the industry as proven. There is anecdotal evidence of this. However, another factor is that the A2 bulls catalogued have superior production traits and are in-demand for that reason.

According to Professor Keith Woodford, about 40 percent of New Zealand cows now produce pure A2 beta-casein, and most of the rest produce a 50-50 mix of A1 and A2, while a few produce pure A1.

<https://keithwoodford.wordpress.com/2014/09/01/teasing-out-the-beta-casein-evidence/>

In another article he has stated that “some farmers have been quietly converting away from A1 beta-casein for ten years and more.” As an adviser to the dairy sector who is in contact directly and indirectly with many individual farmers he would know.

<https://keithwoodford.wordpress.com/2014/09/08/the-industry-politics-of-a1-and-a2-milk/>

There are various strategies that can be used to convert a herd, and some are faster than others. The faster ones generally involve higher costs and greater disruption of milk production.

For those interested, the mathematics of herd conversion are essentially straightforward. Every cow carries two protein genes (alleles), each of which is either A1 or A2, and these determine the A1-A2 status of the milk it produces. A cow is known (after testing) to be either A1A1 or A1A2 or A2A2. Production of A2 milk (with no A1) requires all cows milked to be A2A2.

If a farmer only uses semen from pure A2A2 bulls, the resulting calves will be as follows:
All calves from A2A2 cows will be A2A2.
All calves from A1A1 cows will be A1A2.
Statistically 50% of calves from A1A2 cows will be A1A2 and 50% will be A2A2.

So even without any testing of cows or calves, the herd inevitably gets moved gradually in the direction of pure A2, and this must be happening. But because there’s quite a time-lag between a cow being born and producing its first calf and that calf itself giving birth and starting to produce milk, the process is slow. It takes several generations, and a farmer can’t really be sure the herd is pure A2 until every cow and calf is tested. Part of the problem of course is that half of each calf generation is male. It is generally estimated that full conversion will take about 10 years unless the process is speeded up by culling non-A2A2 cows and heifer calves, and/or by using sex-selected semen which cuts out the wasteful production of male progeny in each calf cohort.

[skid]

Ive not been following closely but aside from the exposer,how are things different now, than before news of the possible takeover-(now that it looks doubtful)-the SP is still well above where it was before.

[Harrie]

Thanks for that, Harrie - that's very helpful. As you can probably see, I'm not very familiar with how these funds work, but would you say the shots are definitely being called by RBC and UBS fund managers, or by Perpetual managers operating on their behalf, and definitely not by investors using them as a cover for anonymous buying?

Perpetual have the mandate and are judged by those granting the mandate on their performance. RBC are a global fund manager who have appointed Perpetual to look for companies within Australia that are showing potential. The exposure therefore fits within some of the specific profiles that meet RBC's investment criteria such as ethical, small companies or alpha type investment pools. These funds are then added to similar profiled master funds on behalf of RBC's own clients. For example if the RBC had an ethical fund called the "RBC global ethical fund" it could have a whole heap of individual shares and pooled funds from around the world. One of the assets within the "RBC global ethical fund" would be the Perpetual ethical fund.
If they were buying for someone else that would need to be disclosed as they have done for RBC and USB.

[QFD Sage]

Has this thread lost some pages recently?

[bucko]

Yeh i think something happened over the weekend? Seems the NTL thread was removed for no apparant reason and few people are now banned after making a few negative comments against the moderators haha

[Harrie]

I think that this site has died since the moderators have thrown out some very worthwhile and controversial contributors.

[biker]

I think that this site has died since the moderators have thrown out some very worthwhile and controversial contributors.

Agree Harrie. Unfortunately not the site it used to be. The interesting, opinionated, mostly informed, volatile contributors who were an important part of sharetrader have gone.
Now a shadow of its former self.

[NT001]

I also agree Harrie. I'm not sure entirely what happened - whether the Mods threw out some of our best contributors or whether they just quit because of the silly destructive negativism and harassment of some posters on the PEB thread which quite a few of us were also following.

Frankly I think it would have been better if the Mods had simply closed down the PEB thread for a few months - it's largely full of irrelevant chit-chat. This one is worth keeping going if we can get some of the worthwhile contributors back, especially as the takeover thing is quite possibly still alive and there will almost certainly be a capital raise before long.

[Harrie]

Classic case of ST sh...... in its own nest. Too much PC stuff and contributors lose interest and ST loses advertising revenue....a bit dumb. Personally I don't think anyone cares about criticism as long as it is not personalized and makes a reasonable point to substantiate a view. Keeps the interest up and stops people making stupid comments.

[see weed]

I also agree Harrie. I'm not sure entirely what happened - whether the Mods threw out some of our best contributors or whether they just quit because of the silly destructive negativism and harassment of some posters on the PEB thread which quite a few of us were also following.

Frankly I think it would have been better if the Mods had simply closed down the PEB thread for a few months - it's largely full of irrelevant chit-chat. This one is worth keeping going if we can get some of the worthwhile contributors back, especially as the takeover thing is quite possibly still alive and there will almost certainly be a capital raise before long.
What price for capital raise? Lets have a guess...60c

[winner69]

See Danny got chopped from the England RWC squad

No A2 drinking world champions this time around

[QFD Sage]

Maybe Waisake Naholo has been drinking A2 ... ?

[twotic]

What have I missed with ATM? Down 7% on open. Make that 8.6% now

[lolgza]

Most likely from this article yesterday evening:
http://www.smh.com.au/business/freedom-foods-and-us-partner-dean-foods-scrap-a2-milk-takeover-bid-20150831-gjbu5k.html

[twotic]

Most likely from this article yesterday evening:
http://www.smh.com.au/business/freedom-foods-and-us-partner-dean-foods-scrap-a2-milk-takeover-bid-20150831-gjbu5k.html

Ah thanks - wow big news! Does this not warrant an NZX announcement? I sold last week so I haven't been following this one since, but did log in to see how things were tracking. Looks like I got a little lucky in my timing.

[bull....]

should announce capital raise then shortly?

[sb9]

I see it as positive that Dean Foods is out. Was never in favour of takeover, ATM has got much bigger potential in coming years and would rather that the we reap the benefits.

[Nasi Goreng]

should announce capital raise then shortly?


My limited experience with capital raise is that the share price will drop again once capital raise is announced. Based on that, I wouldn't be a buyer right now.

[sb9]

There we are....Trading Halt!!!

[twotic]

There we are....Trading Halt!!!

So the article came out last night, and they allow 32 min of trading before a trading halt? That stinks if you ask me!

You may like the long term prospects of holding this stock without the takeover bid, but short term this can not be good for the SP, surely! Traders out who were betting on a takeover (SP down) and ensuing capital raise (SP down). Not good if you ask me....

[Crackity]

Most likely from this article yesterday evening:
http://www.smh.com.au/business/freedom-foods-and-us-partner-dean-foods-scrap-a2-milk-takeover-bid-20150831-gjbu5k.html


As a first post that was a very useful one! Ta Lol

[sb9]

So the article came out last night, and they allow 32 min of trading before a trading halt? That stinks if you ask me!

You may like the long term prospects of holding this stock without the takeover bid, but short term this can not be good for the SP, surely! Traders out who were betting on a takeover (SP down) and ensuing capital raise (SP down). Not good if you ask me....

That's fine twotic, I'm not trader!!! Happy to play to long term...

[mattwanz]

Oh well just a matter of time until some Chinese businessman picks the whole lot up at a discount

[sb9]

Oh well just a matter of time until some Chinese businessman picks the whole lot up at a discount

Yep, time will whether that 3M shares trader this morning before trading halt was a bargain or high price...

[Bjauck]

So the article came out last night, and they allow 32 min of trading before a trading halt? That stinks if you ask me!..
I agree. There should have been no trading at all this morning until after an announcement to the exchange.

[Crackity]

My limited experience with capital raise is that the share price will drop again once capital raise is announced. Based on that, I wouldn't be a buyer right now.

Sell me some bargain basement shares ATM - I like the company's growth story so far. Take some of my money - build the business more - share price growth will follow :)

[sb9]

Trading halt to be lifted soon, not much in announcement other than the news about Dean Foods position. Nothing on capital raising....let's move on...

[twotic]

I agree. There should have been no trading at all this morning until after an announcement to the exchange.

I'm a little confused by your comment. I would have thought last nights article warranted either a statement before market open or a trading halt if they couldn't get their act together in time.

It seems ridiculous to me that they allowed a 32min window to sell before they acted.

My memory is a little hazy on ATM but hasn't this happened before in a similar form?

[stoploss]

I'm a little confused by your comment. I would have thought last nights article warranted either a statement before market open or a trading halt if they couldn't get their act together in time.

It seems ridiculous to me that they allowed a 32min window to sell before they acted.

My memory is a little hazy on ATM but hasn't this happened before in a similar form?

If it was sensitive enough for them to call a trading halt @ 10.32 ... they should have been on suspend before the open . In good faith they should cancel all trades before the trading halt . Then it is a fair market for everyone .
Disc : Still hold .

[Bjauck]

...In good faith they should cancel all trades before the trading halt . Then it is a fair market for everyone .
Disc : Still hold .


..

It seems ridiculous to me that they allowed a 32min window to sell before they acted...

I agree with both of you.

[blundoon]

My theory is that the NZ market misunderstood this comment from Freedom CEO Rory Mcleod in yesterday's SMH article, (as posted this morning by 'lolgza'):- "The company and Dean Foods have ceased detailed discussions in relation to a2," Freedom said". The "company" is Freedom Foods - not a2MC. The ceasing of detailed[!] discussions may have something to do with Dean Foods being investigated for insider trading, whatever, I think a2MC moved to stop the freefall (8.6%) with a short TH and then clarify the situation with the 'Update on EOI' released at 12:03 NZ time, stating: "Although there has been no formal withdrawal of the Expression of Interest, the Board continues to consider that no takeover offer is imminent". Note that a2MC have stated that 'no takeover is imminent' right from the first announcement of an EOI.
It was a bit confusing over here in Oz, because the ASX suspended trading without a TH announcement. The first trade (0.605c) was at 10:21am after the 'EOI update' at 10:10am.
The lesson here is to read articles in the press carefully. Those who sold at 64c this morning may be regretting their decision. I trust only what the company announces.

[Harrie]

The lesson here is to read articles in the press carefully. Those who sold at 64c this morning may be regretting their decision. I trust only what the company announces.

I have to agree with you blundoon. I could not have sourced any more negativity than was inherent in the SMH article. They even delved into FF's last annual statement and pulled out the "a2 holding potentially on the block for sale" or words to that effect line, and the "perich unimpressed with latest results" line. Throw that in with FF/Deans deal "abandoned" and you would go rushing to drop your shares immediately as if the company had no future.
The statement about reviewing a2 shares for sale is nothing new. As a prudent person you could logically say that about any holding anyone had. Anything is sellable at the right price.
Happy to be guided by the company's forecasts rather than the media's assessment.

[blundoon]

I have been commenting without introducing myself. Originally from Wellington NZ, I have lived in Oz for quite a while, but travel back to visit family regularly. I have been a holder of ATM since May 2012, (and now also A2M), buying several parcels over the years. Like many of you, I've become a huge believer in the science of a2/a1 beta-casein in cow's milk, and therefore a consumer as well - haven't tried the ice-cream yet! I feel sorry for you in NZ with the limited availability of the products at the moment.

I would like to thank all the contributors to this forum since I joined a year ago - your research and comments have been very informative and helpful. I've been investing for over 10 years, but always learning. In particular I want to mention NT001 for his research, insights and knowledge of the dairy sector. NT's reply to 'xafalcon' on 22 Jan 15 (currently #2602/2603 on page 174 - this changes as comments are deleted), was absolutely brilliant, and dairy tech expert 'xafalcon' was never heard from again!

Comparing this forum with HotCopper, I miss not being able to give a thumbs up or down to a comment, and it is handy on HC to see if a poster is a holder of a stock and their investing sentiment. Of course some down-rampers and negative nellies are quite obvious by their comments, and it all adds to the mix.

As you can see, I don't mind a chat, but I will try and keep my posts to useful stuff. I'm now a subscriber to 'The Australian' online, (excellent Business section), so can copy-and-paste any relevant pay-walled articles to this forum. Good luck to all!

[ziggy415]

I have to agree with you blundoon. I could not have sourced any more negativity than was inherent in the SMH article. They even delved into FF's last annual statement and pulled out the "a2 holding potentially on the block for sale" or words to that effect line, and the "perich unimpressed with latest results" line. Throw that in with FF/Deans deal "abandoned" and you would go rushing to drop your shares immediately as if the company had no future.
The statement about reviewing a2 shares for sale is nothing new. As a prudent person you could logically say that about any holding anyone had. Anything is sellable at the right price.
Happy to be guided by the company's forecasts rather than the media's assessment.

did notice the aussi market traded a large volume and are down so far today and they opened after the halt was lifted.....maybe im reading too much into it

[blundoon]

I have to agree with you blundoon. I could not have sourced any more negativity than was inherent in the SMH article. They even delved into FF's last annual statement and pulled out the "a2 holding potentially on the block for sale" or words to that effect line, and the "perich unimpressed with latest results" line. Throw that in with FF/Deans deal "abandoned" and you would go rushing to drop your shares immediately as if the company had no future.
The statement about reviewing a2 shares for sale is nothing new. As a prudent person you could logically say that about any holding anyone had. Anything is sellable at the right price.
Happy to be guided by the company's forecasts rather than the media's assessment.

Yes Harrie, the headline plus other comments were misleading in my opinion, however, I had to chuckle at this comment: "Freedom was believed to be underwhelmed by a2's full-year financial results, despite it reporting a 40 per cent surge in revenue and being broadly in line with analysts' estimates." FNP's FY15 revenue rose only 4.1% and their underlying net profit fell 60.3%!
I should disclose that I am also a holder of FNP - originally because of their major stake in a2MC, and was very happy when they signed the A$500M deal with New Hope Dairy. They have always stated in their presentations etc; that their stake in a2 was 'strategic'.

Thanks for your comments over the last year. Cheers.

[NT001]

Ah well, with all that media speculation, where did the SP end up?

The fact that Freedom-Perich are no longer talking to Dean Foods about jointly taking over a2MC is a positive, not a negative. It puts Dean in a better position to cooperate with a2MC in rapidly expanding its new US operation, while Freedom and Perich focus on China. Dean is the right kind of partner for a2MC, with a big dairy marketing infrastructure in the US and a preference for catering to top-end consumers interested in "healthy" dairy. Dean Foods has a policy of very tight quality controls over its farmer suppliers, backed up by sample testing of their milk, and I see it as becoming involved somehow.

The media are carelessly wrong, IMO, in suggesting Dean Foods has been "derailed" from a deal with a2MC by the investigation into alleged insider trading activities by its former chairman, Tom Davis. It's Davis who is under investigation, not Dean Foods - and he's gone. And Dean Foods has already said publicly that the investigation does not affect any acquisition or other corporate plans it may have.

I'm betting on (and looking forward to) a capital raise announcement soon to fund the US operation. I believe, as Geoff Babidge seems to, that the US is the market offering the best returns while a2MC's full package of patents remains in force.

I also expect a very interesting announcement soon coming out of a clinical trial of Chinese consumers. It will (I am sure) back up the Curtin University research showing consumer experience from drinking A2 milk is markedly superior to drinking standard milk.

Bring it on.

[mfd]

Maybe they didn't immediately halt because they're not actually saying much new? We were told on the 20th of August there had been no further discussions since the update on the 20th July, nothing has changed as far as A2 are concerned apart from another couple of weeks with no discussion as far as I can tell. Maybe they felt compelled to release a statement because of the morning's trading, rather than because of anything material changing?

[NT001]

Interesting piece here on the Chinese infant formula market out of Australia. Not sure whether the A2M figures given in the final paragraph are new, but certainly positive.

http://www.smh.com.au/business/retail/battle-for-the-bottle--the-fight-to-feed-chinas-babies-20150903-gje6kp.html

[blobbles]

Interesting piece here on the Chinese infant formula market out of Australia. Not sure whether the A2M figures given in the final paragraph are new, but certainly positive.

http://www.smh.com.au/business/retail/battle-for-the-bottle--the-fight-to-feed-chinas-babies-20150903-gje6kp.html

Thats a fantastic piece, it means ATM is currently annualising $78m AUD in Infant formula ALONE. Huge! 230m next year... looks like they will be putting that a bit higher methinks...

[Harrie]

Thats a fantastic piece, it means ATM is currently annualising $78m AUD in Infant formula ALONE. Huge! 230m next year... looks like they will be putting that a bit higher methinks...


Great news on the formula front. All we need now is positive growth signs in the USA and UK

[NT001]

Up three cents on the NZX so far today and about the same on the ASX with some reasonable volumes traded. In Oz the SP actually rose from 62c early this morning to 67c a couple of hours ago. Something going on?

[NT001]

This may not be everyone’s idea of light or even useful reading, but for anyone interested in the Indian perspective on the A1-A2 controversy, this is a good article by three Mumbai academics. It illustrates the growing view that raising and milking non-A2 cows (which are foreign to India) should be banned. India is the biggest milk producer in the world, and milk (bovine and buffalo) is a more important part of the diet there than in China, for example. And originally all breeds of milking cow in India were A2. There are articles like this pretty well every week in major Indian media now.

<http://www.fnbnews.com/article/detnews.asp?articleid=37729&sectionid=1>

[sb9]

Up three cents on the NZX so far today and about the same on the ASX with some reasonable volumes traded. In Oz the SP actually rose from 62c early this morning to 67c a couple of hours ago. Something going on?


http://www.smh.com.au/business/retai...03-gje6kp.html (http://www.smh.com.au/business/retail/battle-for-the-bottle--the-fight-to-feed-chinas-babies-20150903-gje6kp.html)

Something to do the above may be....

[garfy]

It has all gone quiet..... Yet $8million+ through yesterday, and $500,000 pending today (International) Something has to be happening somewhere....

[sb9]

Watch out for any SSH to be released on NZX in next couple of days. Surely something's cooking behind scenes!!!

[zs_cecil]

Might be a prelude for cap raising

[NT001]

Not strictly relevant to A2, but this article by Keith Woodford is certainly serious food for thought for those interested in the future of NZ's dairy industry, and especially the relationship with China which is heavily based on whole milk powder (WMP).

https://keithwoodford.wordpress.com/2015/09/09/too-many-eggs-in-the-whole-milk-powder-wmp-basket/#more-1355

[Harrie]

Just happened to pick this up while reading NT's article above from prof Woodford which I think those new to the post should read.
There is some pretty compelling evidence against a1 beta casein here.

https://keithwoodford.wordpress.com/2014/09/01/teasing-out-the-beta-casein-evidence/

[sb9]

Well, looks like Perpetual accumulated another 6ml shares between 1-8 sep. Notice issued to ASX late in the evening. Explains the hug volume of trades in the past few days.

[Harrie]

Perpetual buying for the same fund profiles as before on behalf of international clients. These are specialised SRI and ethical funds, small growth companies in Australia, and companies that are developing strong brands and that have international growth prospects, positioned in a growing market sector (health).
They have just picked up another 1% of the company and I don't think they will stop there. I suspect they will go the same way as Milford did and will keep building the book and improving the price as they go. ( They will want to protect their mandate with their intl clients...failure will not be an option which will mean that they will take as many shares off weak sellers as it takes to keep the price around these levels and above)
As a significant institutional player, others will start to do their own research (they don't like to be left behind in the performance rankings) and if they come up with the same conclusion, watch the action....

[kiwi_on_OE]

The SMH article reminded, I wonder if/when A2 will try organic A2? I guess they should focus on the basics for now.

[NT001]

The SMH article reminded, I wonder if/when A2 will try organic A2? I guess they should focus on the basics for now.

You're correct, best to focus on the basics. Actually, an organic company in Canterbury did have a licence to market A2 milk in NZ but it's no longer doing so, probably because it wasn't viable commercially. At the time, several years ago, I wrote to ATM making the point that it was very confusing to consumers because it seemed to suggest that the "healthy" point about A2 was that it was organic. It was a distraction from trying to explain the true difference between A2 and A1, which has nothing whatever to do with organics. I think a2MC probably realises this now.

The organic A2 was available only through organic and health product outlets, probably not a big enough market to be profitable. By the time a company has met all the requirements to be registered as organic, PLUS the requirements to guarantee its milk is pure A2, PLUS paid a licence fee to a2MC, the retail price would probably not be very attractive to consumers - or retailers.

[Harrie]

I'm not sure that BAL has progressed quite that much KW. They have gone from around A$1.80 to A$7.60 in the last year, so around 320% increase on my calcs. Nevertheless a whole heap better than a2mc, but they are a more diversified health product producer so not all that growth in SP is predicated on baby formula. Having said that, the growth in a2 baby formula has outpaced BAL in the last few months according to SMH as shown in the graph :

http://www.smh.com.au/business/retail/battle-for-the-bottle--the-fight-to-feed-chinas-babies-20150903-gje6kp.html

I'm wondering if supply is becoming an issue for a2mc?

If supply is an issue, it would make more sense as KW has suggested to produce baby formula and sacrifice the fresh milk supply. There seems to be an endless demand for "healthy" baby formula.

[NT001]

...I'm wondering if supply is becoming an issue for a2mc?
If supply is an issue, it would make more sense as KW has suggested to produce baby formula and sacrifice the fresh milk supply. There seems to be an endless demand for "healthy" baby formula.

I think supply is going to be an issue for quite a while in several markets. But I'm inclined to think on balance that there are significant advantages in continuing to supply plenty of both fresh milk and formula in Australia. One of a2MC's strong selling points globally is that it has captured 9-10% of the Aussie fresh milk market, and that could rise further.

The Chinese in particular like to know that the product they're buying sells well in its "home" market. This would include selling to adults, not just babies.

It also makes Australia a good place to monitor the health and digestion effects of A2 - there's a good pool of literate adult consumers to conduct research on, whereas it's harder to do research on babies, especially Chinese ones.

And when farmers in the US and UK see what can be achieved in the Australian market they're more likely to switch to A2, which will help solve the supply issue. Switching involves some extra costs and work for farmers in the initial stages.

[Leftfield]

Why target a niche market estimated at 25% of the population, who are not big dairy consumers anyway, with a low margin product - when you can target 100% of a market who are high dairy consumers, with a product with a high margin.

Good advice. Reckon you should be charging ATM consulting fee's!

[Harrie]

They were $1.33 a year ago. 575% increase to $7.64.

Ok KW on that basis its a 474.44% increase to be precise, but lets not get bogged down in the detail, its an extremely impressive rise, in fact anything over 20% in a year is what you could term as a stellar performance!
I hear and accept what NT is saying, but I am persuaded by the immense opportunity to concentrate on the baby formula especially when I look at the trajectory of a2's growth in the last few months, if it is a matter of supply.
You could however argue that a2mc is fairly new in the market over there in the supply of baby formula so growth is from a low base, but it looks to me that the growth is primarily predicated on the idea of "health" as is Ballamys "organic" milk especially when comparing the relative success of both of these brands to other brands not associated with the "healthy" label.
Many Chinese wouldn't understand necessarily what was "healthy" about a2 milk, so the brand appears to have successfully created that perception already.

[kiwi_on_OE]

I stand corrected, i should have said it has gone up 5.75 times in one year not %. Almost 6 bags.

No, it has gone up 4.75 times. You could say the price is now 5.75 times what it was a year ago, if you insist on using 5.75. (i haven't checked the maths, I'm just assuming the numbers are correct)

But back to the real issues.

So they're doing well in Aus with baby formula. Do we know how much of that is being sold for babies in Aus, and how much is being 'exported' for babies overseas? If the former, great. If the latter then I wonder how much is being bought for export as an A2 product and how much is being bought just because it is on the shelves? If the latter then it might not take much for it to lose it's popularity.

[Harrie]

I wonder how much is being bought for export as an A2 product and how much is being bought just because it is on the shelves? If the latter then it might not take much for it to lose it's popularity

I must admit that's a point I have recently pondered as well. I suspect both actually, otherwise the growth against other brands would not look as impressive. The message is getting through albeit slowly. Need the results of the research project being conducted in China to give it a kick along.

[Harrie]

[QUOTE]So in the UK and USA where they are struggling to get traction with fresh milk sales (with its niche specialty milk designation) it might be of more benefit to launch the A2 formula there instead [QUOTE]

What evidence do you have that this is the case in the USA KW?

[Harrie]

[QUOTE So in the UK and USA where they are struggling to get traction with fresh milk sales (with its niche specialty milk designation) it might be of more benefit to launch the A2 formula there instead [QUOTE]

What evidence do you have that this is the case in the USA KW?
Seems contrary to the scores of outlets already opened across the U.S.A which are supplying a2 fresh milk. This is seen on the USA A2mc website.
This is now more than just a Southern California toe dipping deal.

[Ginger_steps_]

I'm wondering if supply is becoming an issue for a2mc?

If supply is an issue, it would make more sense as KW has suggested to produce baby formula and sacrifice the fresh milk supply. There seems to be an endless demand for "healthy" baby formula.

Havent been able to get a2 at our supermarket for about a week now (in the wop wops of NSW).... supply issues?? hopefully not.

[QFD Sage]

What will be the next catalyst for ATM share price growth? Maybe a trading update? Share price showing good resilience at the moment in my view.

[airedale]

Hi QFD, the thought of a capital raising will be weighing on investors' minds.

[NT001]

... the thought of a capital raising will be weighing on investors' minds.

Maybe so, airedale, but I agree with QFD Sage that a trading update is likely soon, which will be very positive, given the recent expansion of sales outlets in the US plus the very interesting details about A2 contained in this week's FY report of SML, which have not so far attracted much attention.

Plus, we now have this report from the UK that suggests things are going ahead pretty quickly there.

<http://www.thegrocer.co.uk/buying-and-supplying/new-product-development/milk-brand-a2-launches-two-long-life-uht-cartons/525028.article>

I have seen nothing to suggest a failure to gain traction in the US and UK as suggested by KW.

[airedale]

Maybe so NT, it may work like this....a positive trading update to stimulate interest and boost the SP and then the capital raising.

[Nasi Goreng]

They will have to give a trading update before the capital raise. Anything but a positive trading update and the result could be quite the opposite. Things have got to go very well for a number of years to get to an NPAT of $40m which would be a decent return for the current share price.

[Jasemc]

Maybe so, airedale, but I agree with QFD Sage that a trading update is likely soon, which will be very positive, given the recent expansion of sales outlets in the US plus the very interesting details about A2 contained in this week's FY report of SML, which have not so far attracted much attention.

Plus, we now have this report from the UK that suggests things are going ahead pretty quickly there.

<http://www.thegrocer.co.uk/buying-and-supplying/new-product-development/milk-brand-a2-launches-two-long-life-uht-cartons/525028.article>

I have seen nothing to suggest a failure to gain traction in the US and UK as suggested by KW.


From sml report.
In the last year we have seen this customer gain significant momentum with their infant formula business and we also began producing a new whole milk powder product for the Australasian market. Their growth indicates they will soon be a leading infant nutrition and powdered milk brand in the marketplace and we’re pleased to have increased our milk supply in FY15 in response to their success.

[NT001]

Show me the money! That's right - there isnt any, or rather, sweet FA. $1.9m revenue for BOTH countries. Meanwhile A2 did $41m in sales of formula in FY15, and got $13m in just 2 months of FY16. I know where I would be focusing my efforts if I were running A2.

Yes KW, but I wouldn't want the company to completely change its strategy and become a one-trick pony on the basis of relatively small revenues from fresh milk sales at the start of operations in the UK and US. It was easy to make quick money in a currently hyped infant formula market but markets are fickle, and one thing I liked about the UHT announcement in the UK was that it shows the company is doing interesting things that we don't even know about, testing the market for a range of A2 products.

I was also interested to note Wotherspoon is now CEO for both UK and China, which possibly suggests some of the British-made UHT may be destined for China, although initially they were saying it would be the company's initial product on the EU market.

[sb9]

Looks like someone is quietly accumulating in the past few days..Perpetual again?

[westcoaster]

https://www.fool.com.au/2015/10/06/research-pinpoints-5-mega-opportunities-for-super-investors/

[QFD Sage]

Hope they're right! TPP deal positive on the infant formula front also.

[stoploss]

https://www.nzx.com/companies/ATM/announcements/271446

[Snoopy]

https://www.nzx.com/companies/ATM/announcements/271446


67c is a very small discount to the market price. Why would Goldman Sachs New Zealand want to underwrite at that price? Perhaps no interest from the Australian market institutions, despite the recent listing there?

For the larger retail investors, the $15,000 small shareholder application ceiling is a nice bit of shafting for their loyalty.

SNOOPY

[Not too Flash]

The limit of $15k is the maximum due to listing rules. Only $3m means scaling will be major as only 200 shareholders will be enough to get it to $3m

[airedale]

The biggest piece of market news for weeks and the silence is deafening. The CR has been well signposted so perhaps there is not much to add.

[kiwi_on_OE]

67c is a very small discount to the market price. Why would Goldman Sachs New Zealand want to underwrite at that price? Perhaps no interest from the Australian market institutions, despite the recent listing there?

For the larger retail investors, the $15,000 small shareholder application ceiling is a nice bit of shafting for their loyalty.

SNOOPY

-GS no doubt get a fee, and have probably sounded out the market to see what demand there is. A high price indicates good demand hopefully.
-Depending on your definition of a small shareholder, they would probably get less than $15k in a pro-rata issue. So I don't see the $15k as a shafting. Shareholders can always try their luck with GS if they want more.
-$3m for the existing shareholders does seem a bit mean. So with the scaling it could be a shafting to the small shareholders.

[sb9]

67c is a very small discount to the market price. Why would Goldman Sachs New Zealand want to underwrite at that price? Perhaps no interest from the Australian market institutions, despite the recent listing there?

For the larger retail investors, the $15,000 small shareholder application ceiling is a nice bit of shafting for their loyalty.

SNOOPY

Remember 67c is floor price, depending on demand it could be higher. Contrary to what you said, I pick that demand from Aussie instos would be very strong and high. It'll all be snapped pretty quickly. Pity existing holders only get a paltry $3 ml take.

Unlike in many share purchase plans, I suspect this will go higher after placement.

[iceman]

-GS no doubt get a fee, and have probably sounded out the market to see what demand there is. A high price indicates good demand hopefully.
-Depending on your definition of a small shareholder, they would probably get less than $15k in a pro-rata issue. So I don't see the $15k as a shafting. Shareholders can always try their luck with GS if they want more.
-$3m for the existing shareholders does seem a bit mean. So with the scaling it could be a shafting to the small shareholders.

It sure is very disappointing how they are treating us small SH. With only $3m to share between us and the expected large scaling, its hardly worth taking part in this. Pi..ed off.

[winner69]

It sure is very disappointing how they are treating us small SH. With only $3m to share between us and the expected large scaling, its hardly worth taking part in this. Pi..ed off.

Now you know your place in the pecking order eh ...... an irrelevant nuisance

[sb9]

There we've it, all placed @0.68c must be very strong demand.

[NeverQuestion]

There we've it, all placed @0.68c must be very strong demand.

Ahh... So that's how you make 40 Million Dollars in under 24 hours :P

[sb9]

Big volume and sp is strong too. 80c soon I reckon, wait till ASX open and it'll go even higher.

[Bjauck]

I think SPPs are not as fair to all shareholders as a pro-rata renounceable rights issue. However they are quicker and cheaper and this SPP seems to have been well received. The way professional investors have taken to it has produced a fillip, that perhaps may not have happened with a regular rights issue. In that way all shareholders benefit I suppose.

[silu]

And it opened at 72.5c (+11.5%) on the ASX. BOOM!

[stoploss]

On the move again , 83 cents ... Maybe still in play ?

[sb9]

Yeah, looks like the sp has just exploded. Strong demand from Aussies I reckon...up and up!!!

Expect huge scaling for the public pool of (paltry $3Mln) when it opens later.

[QFD Sage]

Hi all. Interesting and positive trading - very solid volumes. My guess also is that some of the Aussie instos are building positions. Does anyone have any idea on how the SPP scaling will work? Some of these SPP schemes are very poorly designed. To get your maximum entitlement I suspect you will have to pay 15k, and await the inevitable scaling. Get your paltry number of shares + a refund cheque (no interest no doubt!). Is it worth the hassle? In the meantime, enjoy the ride. Next target 90 cents...end of the week?

[Ginger_steps_]

a2 vanilla and chocolate ice cream has hit the shelves locally! Priced at AUD $10 per 1.8 litres. It has a full page advertisement in the Coles weekly junk mail and 20% introductory discount this week - will let ya'll know how it tastes!

[Harrie]

Suspect that there may not be as much take up of this as expected as a2 seems to be associated with the "healthy" tab, whereas most of their buyers of fresh milk might think that ice cream is associated with unhealthy ie too much sugar. Limited market therefore.
IMO would prefer it if they concentrated on the baby formula and fresh milk which is where most of their demand is coming from.

[Leftfield]

Suspect that there may not be as much take up of this as expected as a2 seems to be associated with the "healthy" tab, whereas most of their buyers of fresh milk might think that ice cream is associated with unhealthy ie too much sugar. Limited market therefore.
IMO would prefer it if they concentrated on the baby formula and fresh milk which is where most of their demand is coming from.

Agree…. they are risking bastardizing their good name.

[Ginger_steps_]

I agree also - but hey its happening, and management seem have a pretty good track record with their judgement til now. Is ice cream big in China?? The Chinese / Taiwanese i know smash it!

[Bjauck]

Suspect that there may not be as much take up of this as expected as a2 seems to be associated with the "healthy" tab, whereas most of their buyers of fresh milk might think that ice cream is associated with unhealthy ie too much sugar. Limited market therefore.IMO would prefer it if they concentrated on the baby formula and fresh milk which is where most of their demand is coming from. Nothing unhealthy about sugar or fat per se, provided eaten in moderation as part of a balanced diet. A2 ice cream may well mean that some people can have a tasty treat that will be easily digestible compared to regular ice cream. I think it is great that A2 is expanding its product range.

[see weed]

So what happens now with spp. Do we go a-knocking on their door. Or do they post out an application form to all shareholders?

[stoploss]

So what happens now with spp. Do we go a-knocking on their door. Or do they post out an application form to all shareholders?

A wee way off yet ....

The record date to determine New Zealand and Australian holders' eligibility
to participate in the share purchase plan is 7:00 p.m. (NZ time) on 7 October
2015 ("Record Date"). The offer document for the SPP will be distributed and
the offer is expected to open, on or about, 3 November 2015. The SPP will be
open for not less than 12 business days and is expected to close at 7:00 p.m.
(NZ time) on 19 November 2015.

[see weed]

A wee way off yet ....

The record date to determine New Zealand and Australian holders' eligibility
to participate in the share purchase plan is 7:00 p.m. (NZ time) on 7 October
2015 ("Record Date"). The offer document for the SPP will be distributed and
the offer is expected to open, on or about, 3 November 2015. The SPP will be
open for not less than 12 business days and is expected to close at 7:00 p.m.
(NZ time) on 19 November 2015.
Thank you, now back to pgw.

[NT001]

I agree that ice cream (like yogurt) is a diversion from the main thrust of the a2 message. I'd sooner see the company stick to its main strengths, namely liquid milk and infanct formula, but from a marketing viewpoint it's pleasing to see it is testing other product areas as well.

In California last week I dropped in to one of the stores named on the US a2 site as stocking its milk, and sure enough it was there, all four categories. I wasn't able to find out how well it's selling, but it was clear from the displays that "healthy" milk products such as organic and almond and soy milk are in strong demand.

[Harrie]

Nothing unhealthy about sugar or fat per se, provided eaten in moderation as part of a balanced diet. A2 ice cream may well mean that some people can have a tasty treat that will be easily digestible compared to regular ice cream. I think it is great that A2 is expanding its product range.



Yes That's true, all I'm saying is that there may be a limited market given that a2 milk drinkers are likely to be less persuaded to buy ice cream as a group than non a2 drinkers. That's not to say that a2 milk drinkers wont buy a2 ice cream. Could be wrong, could taste delicious and it goes the same way as that milk chocolate that there was a high demand for. In other words it could sell on its taste rather than health benefits.
Would be more inclined to go for a2 unsweetened yoghurt or a2 cheese. Think these would fit better within their market IMO.

[see weed]

Down another 3c . If it carries on then we will not have to buy the SSP:). Might wait till the dust settles and top up at 50c to 55c next year :D.

[sb9]

Down another 3c . If it carries on then we will not have to buy the SSP:). Might wait till the dust settles and top up at 50c to 55c next year :D.

I doubt if it goes that low to be honest. The SPP will have a huge scaling when it opens.

Just traders profit taking is what might have caused today's drop, I think.

[Nasi Goreng]

It looks like its been stagged by the institutions. I'm not a buyer in the high 60's or 70's. It will be interesting to see if it holds 62c in the next 6 months. Around 62c, I'm a confident buyer... at these levels its a buy and close your eyes and pray investment.

[sb9]

It looks like its been stagged by the institutions. I'm not a buyer in the high 60's or 70's. It will be interesting to see if it holds 62c in the next 6 months. Around 62c, I'm a confident buyer... at these levels its a buy and close your eyes and pray investment.

I'm bit sceptical if it would go that lower, purely based on strong demand coming in from Aussies. The trading update they've provided recently does not give any reason why it should go down to that level in 6 months time, if anything it should be double that in my opinion.

[Nasi Goreng]

What year do you predict profits will be $80m+ to warrant $1.40? That's a heck of a lot of cans of formula with a lot of things that could go wrong between now and then. I think at the moment there is technical momentum but can that last 6 months, I'm not sure.

[Harrie]

Things heating up in the UK ...finally?
http://www.just-food.com/news/a2-milk-eyes-uk-infant-formula-launch_id131216.aspx

[Bjauck]

Things heating up in the UK ...finally?
http://www.just-food.com/news/a2-milk-eyes-uk-infant-formula-launch_id131216.aspx

Does ATM have any plans to enter the German market. I know NZers are more familiar (and comfortable?) with the British market. However I think the Germans are more health conscience and arguably more prepared to pay a premium for healthy alternatives. My opinion is probably based on anecdotes! Was it during the British Mad Cows epidemic that continental European meat consumption decreased much more than British? Perhaps the Brits had been keen to get bargain prices.

[Leftfield]

Things heating up in the UK ...finally?
http://www.just-food.com/news/a2-milk-eyes-uk-infant-formula-launch_id131216.aspx

Thanks for posting Harrie, some v useful info' in the article. Interesting that UK is now profitable 'at a gross margin' level and likely to be in the black in 2016.

[winner69]

Thanks for posting Harrie, some v useful info' in the article. Interesting that UK is now profitable 'at a gross margin' level and likely to be in the black in 2016.

Wotherspoon said on Friday (25 September) A2 Milk's UK business remains loss-making but was now profitable "at a gross margin level", with sales growing faster.

Does that mean they have been selling at below cost up to know - horrible thought

Mac always kept reminding us that A2m had the highest gross margins of all the players - obviously not in the UK

[Leftfield]

Wotherspoon said on Friday (25 September) A2 Milk's UK business remains loss-making but was now profitable "at a gross margin level", with sales growing faster.

Does that mean they have been selling at below cost up to know - horrible thought


Winner - do you expect ATM (or any company) to be profitable from day one with a new product in a new market such as the UK ?

[winner69]

Winner - do you expect ATM (or any company) to be profitable from day one with a new product in a new market such as the UK ?

but I would hope that they would sell the stuff at above the cost of buying and processing the raw milk into the finished product (usual definition of 'gross margin') early on

I can live with a loss when sales and marketing costs etc are included

[NT001]

Wotherspoon said on Friday (25 September) A2 Milk's UK business remains loss-making but was now profitable "at a gross margin level", with sales growing faster.

Does that mean they have been selling at below cost up to know - horrible thought


I'm not an accountant but my understanding is that gross margin simply tells you whether the amount generated by selling a product is greater than the amount it has cost you to create that product, without counting costs such as office expenses, rent, management salaries etc. So I would assume this means the amount received from retailers by a2MC (UK) is greater than what it pays out for procuring the milk from farmers and processing, packaging and transporting it to the retailers. I'm not sure whether or not advertising and promotion costs are counted as production costs or not. But obviously the main cost is in buying, processing, packaging and delivering the product to market, so if that is profitable already I think that's a pretty good sign.

[Leftfield]

But obviously the main cost is in buying, processing, packaging and delivering the product to market, so if that is profitable already I think that's a pretty good sign.

Wotherspoon is also talking about being 'in the black in the UK' in 2016 , and I take that as v encouraging. The current uncertainty re 'investment' (i.e. loss) in 'new' markets such as UK and USA has been well priced in the SP by the market.

I take it as very encouraging now that UK is headed to profit, as is Australia (and I suspect China.) Time will tell.

[winner69]

I'm not an accountant but my understanding is that gross margin simply tells you whether the amount generated by selling a product is greater than the amount it has cost you to create that product, without counting costs such as office expenses, rent, management salaries etc. So I would assume this means the amount received from retailers by a2MC (UK) is greater than what it pays out for procuring the milk from farmers and processing, packaging and transporting it to the retailers. I'm not sure whether or not advertising and promotion costs are counted as production costs or not. But obviously the main cost is in buying, processing, packaging and delivering the product to market, so if that is profitable already I think that's a pretty good sign.

Almost right

So I would assume this means the amount received from retailers by a2MC (UK) is greater than what it pays out for procuring the milk from farmers and processing, packaging and transporting it to the retailers.

a2m seem to include freight/transport in other expenses - not included in Gross Margin

My point was I would have thought that even in the early stages of production one would want to at least sell the stuff for more than it costs - like buy something for a buck one and sell it for at least a buck so the gross margins can go to sales / advertising / admin and all the other costs

Who am I to question - suppose they know what they doing

As a matter of interest a2m Gross Margin in total is about 33% of sales - a 50% markup on cost

[sb9]

What's up with the big pre-open trades this morning, 42mln shares traded.

[ddrone]

What's up with the big pre-open trades this morning, 42mln shares traded.

It's the placement isn't it?

[sb9]

It's the placement isn't it?

Don't think so, the recent placement was for 58,823,529 for which the notice was issued to NZX on 15 Oct.

[Kirk]

Im think Milford just sold out there stake in a2. Last SSH they had 42,792,872. The interesting thing is who bought. About a 6% stake of the company. If you alsso consider the placement someone could have just acquired about 14%

[sb9]

From the Australian....could only copy this little extract as its paid content.

Freedom sells down a2 Milk stakeThe Perich family and its listed food group Freedom Foods have sold down a combined stake in listed milk company a2 Milk to 10.4 per cent, from 19 per cent, as Freedom conducts a capital raising this morning. Freedom sold 42.5 million a2 Milk