ATM - A2 Milk Corporation Limited

[allfromacell]

A2 is definitely not being helped by the exchange rate.

[Scrunch]

A2 is definitely not being helped by the exchange rate.

Could you please explain this more clearly. With China being the most important export market, the NZD to the Chinese yuan would appear to be the critical exchange rate to look at (Not NZD to USD). Over the last year this exchange paring looks to be basically flat at about 1:4.5. There has been a slight tick-up in the last month, but over the last six months the google chart of the exchange rate is in a narrow range of 4.40 to 4.60.

[see weed]

Hi Snoopy. I hear what you are saying and that is correct. If I sell all my holding of a2 shares on Fridays close of $14.59 then would have to pay tax on $354,000 profit. But if I sell bits and pieces over the next 5 or 10 years I can spread the tax out. But in saying that, at different times of the year I will also be buying in at the lower price. Am buying into TPW at the moment and will be trying to make about 6k to 8k loss on that stock after ex div day. TPW is not very liquid and hard to buy into at the moment. Everyone wants the div. Am trying to buy an extra 5000 or 10000 before ex div day. Have you got any you want to sell?

[Balance]

Could you please explain this more clearly. With China being the most important export market, the NZD to the Chinese yuan would appear to be the critical exchange rate to look at (Not NZD to USD). Over the last year this exchange paring looks to be basically flat at about 1:4.5. There has been a slight tick-up in the last month, but over the last six months the google chart of the exchange rate is in a narrow range of 4.40 to 4.60.

Simplistically a higher exchange rate is not good for exporters. Their returns in NZ$ are diminished while their production & domestic costs remain the same.

Applied to all exporters except those with very high import contents in their products or are price makers & can increase their US$ prices.

China currently still use US$ for most of its import prices, I believe.

[Waltzing]

Good point balance and the NZD might move even higher if they can bring in the crops in the fields. In older times the population would be mobilised to bring in the HARVEST.

Today the labour coffee shop politicians and social liberals (ooops not pointing fingers as us art shop lovers and orchestra goers , check out Nordic Pulse).

Today they just dont have dirt under our finger nails and we have no idea where our slow hands are needed in skilled jobs at harvest time.

US main street is badly damaged and a massive crunch could be coming soon.

[Snoopy]

Hi Snoopy. I hear what you are saying and that is correct. If I sell all my holding of a2 shares on Fridays close of $14.59 then would have to pay tax on $354,000 profit. But if I sell bits and pieces over the next 5 or 10 years I can spread the tax out. But in saying that, at different times of the year I will also be buying in at the lower price. Am buying into TPW at the moment and will be trying to make about 6k to 8k loss on that stock after ex div day. TPW is not very liquid and hard to buy into at the moment. Everyone wants the div. Am trying to buy an extra 5000 or 10000 before ex div day. Have you got any you want to sell?

OK I am starting to get this. If you make a 6K to 8k loss on a short term TPW trade you can sell an equivalent amount of A2 shares such that your profit on the A2 share sale exactly cancels out your TPW trade loss dollars and you have a tax free capital injection for Christmas. Plus you can bank the TPW dividend which will already have tax deducted from it. But where does buying more A2 shares at a lower price come into the picture?

Sorry don't have any TPW shares I can offer you. Never held and with all the rag tag of assets they own I have found it difficult to analyse.

SNOOPY

[Scrunch]

Simplistically a higher exchange rate is not good for exporters. Their returns in NZ$ are diminished while their production & domestic costs remain the same.

Applied to all exporters except those with very high import contents in their products or are price makers & can increase their US$ prices.

China currently still use US$ for most of its import prices, I believe.

However, the reason for the comment is that doesn't factor in Chinese importers exposure to the USD / Chinese Yuan. China after all doesn't use the USD as a domestic currency.

While the NZD is to USD is going up, the USD to Chinese Yuan is going down (7.14 at the end of May, 6.58 now). This is offsetting the increase in the NZD to USD for Chinese importers meaning once both both currency pair's are considered, there is minimal price change in the exchange rate between the starting currency (NZD) and finishing currency (Yuan).

A rising exchange rate is obviously bad for exporters, but how does that materially impact ATM if the combination of the exchange rate pair's means the NZD is not going up to China consumers. (the US operations will be slightly less profitable, dido OZ). What am I not understanding?

[dreamcatcher]

A2 is definitely not being helped by the exchange rate.

I take it you mean AU$ / $NZ exchange rate affecting SP

[Balance]

However, the reason for the comment is that doesn't factor in Chinese importers exposure to the USD / Chinese Yuan. China after all doesn't use the USD as a domestic currency.

While the NZD is to USD is going up, the USD to Chinese Yuan is going down (7.14 at the end of May, 6.58 now). This is offsetting the increase in the NZD to USD for Chinese importers meaning once both both currency pair's are considered, there is minimal price change in the exchange rate between the starting currency (NZD) and finishing currency (Yuan).

A rising exchange rate is obviously bad for exporters, but how does that materially impact ATM if the combination of the exchange rate pair's means the NZD is not going up to China consumers. (the US operations will be slightly less profitable, dido OZ). What am I not understanding?

I can only relay my understanding from talking to a produce exporter to China - meat, seafood, fruits and honey - their export prices to China are in US$ and they will feel the full impact once their forward cover runs out.

[xp04]

However, the reason for the comment is that doesn't factor in Chinese importers exposure to the USD / Chinese Yuan. China after all doesn't use the USD as a domestic currency.

While the NZD is to USD is going up, the USD to Chinese Yuan is going down (7.14 at the end of May, 6.58 now). This is offsetting the increase in the NZD to USD for Chinese importers meaning once both both currency pair's are considered, there is minimal price change in the exchange rate between the starting currency (NZD) and finishing currency (Yuan).

A rising exchange rate is obviously bad for exporters, but how does that materially impact ATM if the combination of the exchange rate pair's means the NZD is not going up to China consumers. (the US operations will be slightly less profitable, dido OZ). What am I not understanding?

Answer to this is very simple, A2 conduct its business in China in US$. As for US operations actually it will help a bit, as US business is not profitable at the moment and supported by sales in China