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22-06-2020, 04:45 PM
#16411
Originally Posted by Mr Slothbear
thanks SB9 and Joshuatree for the quality posts. Certainly much food for thought!
Mataura looks like a very good prospect.
These are investments that will make A2 bigger and better in coming years.
Originally Posted by kiwidollabill
Mataura is probably one of the most efficient plants in the world, built mainly just to make IF (only base powder at the moment) it runs with only a handful of staff...
Yes, they do not have canning facilities at the moment, not sure how easy is it to add one to existing capabilities.
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23-06-2020, 08:12 AM
#16412
Originally Posted by sb9
These are investments that will make A2 bigger and better in coming years.
Yes, they do not have canning facilities at the moment, not sure how easy is it to add one to existing capabilities.
Doesn't it increase their risk though?
Much more capital intensive whereas their capital light model has, so far, treated them well.
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23-06-2020, 08:22 AM
#16413
Missed the 'plant acquisition' fun yesterday, and have mixed feelings about ATM becoming a true manufacturer.
SH have done well out of ATM's current 'capital light model' and will need convincing that any acquisition is a good move.
That said... there has been an interesting article in the South China News re increased demand for IF. There are some fears re booming lactoferrin sales too. See it here.
One highlight...
"In New Zealand, export volumes are expected to grow by 40 per cent this year to 7 million cans from 5 million cans last year, according to China infant formula market consultant Jane Li.
One New Zealand milk powder manufacturer told Li in February that it had received three times as many orders in the first two months of the year than it did for the whole of 2019"
Last edited by Leftfield; 23-06-2020 at 08:25 AM.
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23-06-2020, 08:31 AM
#16414
Member
Originally Posted by sb9
Yes, they do not have canning facilities at the moment, not sure how easy is it to add one to existing capabilities.
Built with that in mind... only aspect of it thats not modern is a great big coal boiler....
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23-06-2020, 08:43 AM
#16415
Originally Posted by dobby41
Doesn't it increase their risk though?
Much more capital intensive whereas their capital light model has, so far, treated them well.
I think they will be trying to address their 'supply chain' risks through this model. ATM's core products that drives their sales are produced by someone else; it therefore makes sense to have some modicum of control/influence as to what gets produced. Can do that through standards and monitoring, but now that ATM is selling a lot, ownership is one of the models that makes sense.
The trade-off is that you now need to earn a return on that capital (that's the 'return risk' you are thinking about). It's a trade-off, but I would have thought that as they get larger their supply chain risk is increasing rapidly, at a rate far greater than any risk they are incurring from not achieving returns on capital.
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23-06-2020, 08:52 AM
#16416
Originally Posted by SylvesterCat
The trade-off is that you now need to earn a return on that capital (that's the 'return risk' you are thinking about). It's a trade-off, but I would have thought that as they get larger their supply chain risk is increasing rapidly, at a rate far greater than any risk they are incurring from not achieving returns on capital.
Also, the management of a dairy plant is quite different to the management that they do now.
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23-06-2020, 09:50 AM
#16417
Member
Originally Posted by SylvesterCat
I think they will be trying to address their 'supply chain' risks through this model. ATM's core products that drives their sales are produced by someone else; it therefore makes sense to have some modicum of control/influence as to what gets produced. Can do that through standards and monitoring, but now that ATM is selling a lot, ownership is one of the models that makes sense.
The trade-off is that you now need to earn a return on that capital (that's the 'return risk' you are thinking about). It's a trade-off, but I would have thought that as they get larger their supply chain risk is increasing rapidly, at a rate far greater than any risk they are incurring from not achieving returns on capital.
That, and more A2 milk will be coming off farm, if they dont buy those milk pools then someone else will. They cant take that approach forever but extends the moat further.
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23-06-2020, 11:05 AM
#16418
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23-06-2020, 11:45 AM
#16419
Originally Posted by kiwidollabill
That, and more A2 milk will be coming off farm, if they dont buy those milk pools then someone else will. They cant take that approach forever but extends the moat further.
Good point kiwidollabill.
dobby, agree it's a new capability, but by buying into an existing producer, and as long as they give the manufacturers a seat at the top table, that reduces the risk markedly. They will also have gained enough knowledge/visibility of production capability thru their Synlait partnership.
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23-06-2020, 11:47 AM
#16420
Originally Posted by tomm
They have been sponsors for a good couple of years. Those TV series don't do anything for nothing....
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