ATM - A2 Milk Corporation Limited

[tango]

I chuckled at flyinglizard's description of executive as "Both of them failed to understand". That prompted me on a post I was working on but it evaporated. So here is a summary without the humour.

There seems no explanation as to what the plan was or is. So how are investors meant to respond. But that is not the worst of it. If investors do not know, what do the different stakeholders in the distribution channels know, understand etc. This is a scary comment. Because if the answer is they do not have an understanding then a2 is at sea.

So I had a look at their staff via linkedin(not perfect but a guide). Jane Broughton, senior regulatory manager lasted 4 months leaving late last year to go to Nestle. She was earlier at Fonterra (and Nestle). I found 1 person in a role but junior. While regulatory is not everything it is something especially in a company focused heavily in a market affected by regulatory, and sometimes in nasty ways AND with very few product categories.

Head of Strategy, seems light but what would I know as I think young people go to the RSA and a Smartphone means you don't have to use the operator.

Let's turn to the US which I have heard is struggling for the 2nd time. 50 people claim to work on Linkedin in the US for a2. In the USA financial results EBITDA loss of $106m over the past 5 halves of on revenue of $135m. I would back out US to find the margins in business ex USA btw. No super growth in revs. But listen to this insight, COVID has made the consumer more value conscious(last result paraphrased).

What did a2 understand about the people that walk into Costco, Walmart and Target(amongst others) who are the bulk of the stores a2 claims. Maybe when they signed the distribution deals it was the Annual Rolls Royce USA Drivers Club outing to Walmart. Did a2 notknow all the customers were cost conscious at these outlets even pre-COVID. For the US to break even on the 22% margin they will have to increase sales by at least 600% per annum.

To wrap up does anyone truly understand what is happening, probably no and this in itself is an issue.

When I listened to the investor call I was underwhelmed. It was a little bit confusing as David kept passing back to David LOL which didn’t help but generally I didn’t feel they had adequate answers for the questions. They simply don’t know what’s going on and their one plan is throw lots of money at it and conduct a strategic review. They are also recruiting a replacement for the Asia channel after the resignation. That’s pretty much it.

[tango]

PS I wouldn’t believe the employee numbers on LinkedIn. I have a company and there are several people who claim to work for my company on LinkedIn who I’ve never heard of. Probably fake profiles…

Other than that good research, thank you!

[Sideshow Bob]

https://www.odt.co.nz/business/corpo...pective-crisis

I would have thought would have been focusing a lot of time on A2 currently.....

[Dassets]

https://www.globaltimes.cn/page/202105/1223271.shtml

Above is a link to an english language article in China on infant formula, very interesting. Hope any a2 exec reads it. Quotes one personal shopper saying she stopped in March 2020. Why? 3 reasons, first couldn't travel, second mail/courier was delayed by a month, 3rd buyers worried COVID could be transmitted via the packaging/courier process.

Talks about chinese competition, sale of an international competitor's operations(why are they exiting I wonder).

The other thing I have noticed and maybe this is normal for China, why does a2 have blue eyed blonde girls' pictures/video and european families(mainly) on its chinese website. Do chinese not like chinese images? Honest question.

Why does the US just sell milk(and maybe some coffee creamer. The coffee creamer sounds like a waste of time to me.

[tango]

This article talks about one of the competitors in China expanding its product range - something ATM is yet to do. Feihe added a2 milk and is now adding a full nutritional milk powder from goat milk (which is usually an a2 protein)

“China’s infant formula giant Feihe to expand into FSMPs after goat-milk powder patent granted
18-Jan-2021 By Tingmin Koe

Major China infant formula brand Feihe’s patent application for a special medical use goat milk powder has been granted, with market observers now expecting the company to expand its range and retail channels.”

You can read more at:
https://www.nutraingredients-asia.co...patent-granted

[Balance]

https://www.globaltimes.cn/page/202105/1223271.shtml

Above is a link to an english language article in China on infant formula, very interesting. Hope any a2 exec reads it. Quotes one personal shopper saying she stopped in March 2020. Why? 3 reasons, first couldn't travel, second mail/courier was delayed by a month, 3rd buyers worried COVID could be transmitted via the packaging/courier process.

Talks about chinese competition, sale of an international competitor's operations(why are they exiting I wonder).

The other thing I have noticed and maybe this is normal for China, why does a2 have blue eyed blonde girls' pictures/video and european families(mainly) on its chinese website. Do chinese not like chinese images? Honest question.

Why does the US just sell milk(and maybe some coffee creamer. The coffee creamer sounds like a waste of time to me.

Very interesting article, thx for posting.

Other pertinent bits :

‘According to Euromonitor, the market scale of China's infant formula is nearly 200 billion yuan ($31.12 billion), accounting for about 50 percent of global market. In the Chinese market, local brands' share has increased to about 60 percent in recent years from 30 percent in 2013.’

‘ …… overseas infant formula brands have long enjoyed the advantage of online sales channels, and the e-commerce sector may witness the fiercest competition this year as leading local brands start to step up efforts in this regard.’

So much for those who argued that China domestic brands cannot compete with foreign IF brands. A bit like saying that China car companies cannot compete with foreign car companies.

ATM really has its work cut out to maintain its market position and so the question is - does it have the right management to lead it into the future?

[aperitif]

Geeez balance, how much of your time do you spend on this website... Go and allocate that time to your loved ones, your return is far greater than any stock.

[Balance]

Geeez balance, how much of your time do you spend on this website... Go and allocate that time to your loved ones, your return is far greater than any stock.

Thanks but I devote plenty of all of my time to my loved ones - it’s all about balance.

Do you?

Looks to me you waste your precious time on this website simply reading & posting your incorrect positive bias confirmation on ATM? Where has it got you?

[Leftfield]

I was an early supporter of A2 because I could see the potential. ........Is anyone here a holder?

Tango, I suspect there are still many holders...... and that to some, it is not all doom and gloom.

I'm still a long term holder and have held since 2012.

ATM grew to 70% of my portfolio for several years when revenue and profits were growing rapidly. However, as ATM's annual revenue increases slowed, I started slowly selling and diversifying predominantly between the $15 to $22 SP range (going both up and down.)

By the time the TA death cross became apparent ATM was down to 20% of my portfolio and currently sits at just under 10% of my now much more well diversified portfolio. All my remaining ATM now very much 'free held' and my realised capital gain profits rate ATM as my most successful share investment.

I will review my remaining holding after the next Aug update and am heartened by the fact that most institutions bought in at prices well north of mine, and still hold. I held XRO during it's dumping from $40 to $13 and see many similarities in the short term.

When the news becomes more positive, and TA signals a strong uptrend I may well buy more ATM.

I appreciate some have not been so fortunate so as always, DYOR and take responsibility for your own decisions. GLH.

[Ggcc]

PS I wouldn’t believe the employee numbers on LinkedIn. I have a company and there are several people who claim to work for my company on LinkedIn who I’ve never heard of. Probably fake profiles…

Other than that good research, thank you!

I have been asked to link with other companies on LinkedIn and do not know these people either. I feel too much rubbish is out there and too many fake profiles. Don’t believe every positive or negative feedback about companies through their LinkedIn profile.