ATM - A2 Milk Corporation Limited

[winner69]

Nice touch David writing what the media needs to say

Quotes for media

The a2 Milk Company’s Managing Director and CEO, David Bortolussi said:

• “While our third quarter trading was broadly in line with plan, it is clear that the actions taken to address challenges in the Daigou and CBEC channels will not result in sufficient improvement in pricing, sales and inventory levels to meet our previous guidance

• “We have conducted a comprehensive review of inventory in the trade and this work has indicated that channel inventory levels are higher than had been anticipated

• “The challenges in the Daigou and CBEC channels have been exacerbated by excess inventory and difficulties with visibility

• “In the interest of the long-term health of our brand and the medium-term trading outlook of the business, more aggressive actions to address inventory will be taken which will impact FY21 revenue and EBITDA, and potentially 1Q22


• “Despite these short-term setbacks, we are confident in the long-term potential for infant nutrition and other opportunities we have in China, and are determined to build on the strong position we have built in the market over the past five years

• “We recognise that the China market and channel structure is changing rapidly and are commencing a comprehensive review of our growth strategy and executional plans to respond to this new environment

• “The Board is actively considering capital management initiatives, including a potential share buy-back
and we will provide an update at the full year results in August

[LaserEyeKiwi]

Like this bit - no worries

Underlying business

It is important to recognise that the revised outlook does not reflect the underlying performance or strength of the business. The Board and Management have determined that it is appropriate to address the inventory imbalances aggressively in order to allow the business to return to growth as quickly as possible and to deliver acceptable margins. Most of the actions that we are taking are non-cash in nature with the result that Company’s balance sheet will remain strong, and we would expect to see improved performance during FY22.

Specifically, it is estimated that if the one-off charges and sales reductions to reduce inventory in the trade were backed out for this year, the business would record annual revenues in the order of $1.3 billion with an EBITDA margin percent in the low to mid-twenties.

Its true that the underlying business isn't horrible, but the collapse in growth rate means its horribly overvalued at $5.6B market cap.

[Biscuit]

Rather than proceeding with the purchase of a dairy factory, perhaps they should invest in a pig farm to help get rid of all the excess inventory?

[bull....]

Its true that the underlying business isn't horrible, but the collapse in growth rate means its horribly overvalued at $5.6B market cap.

way overvalued now. with respect to the underlying business is all good they say they dont see any recovery as imminent which means they are uncertain of the future sales etc at this stage.

[JohnnyTheHorse]

way overvalued now. with respect to the underlying business is all good they say they dont see any recovery as imminent which means they are uncertain of the future sales etc at this stage.

Extremely painful downgrade for holders. The key takeaway for me is that there is still so much uncertainty going forward. Market will not like this.

[winner69]

Very interesting review IMHO.
.....
5.) New cloud based accounting management system touted.... clearly their systems weren't up to scratch.

.

Jayne said they didn't have an IT person when she started ....and then got fired for bringing some on board

and the caretaker didn't give a stuff about such things

[Habits]

Other companies when in the stook then use the situation to get ALL the bad news out (and more) and lower everyones expectations. From then on, what would otherwise look bad actually looks good.

[winner69]

Other companies when in the stook then use the situation to get ALL the bad news out (and more) and lower everyones expectations. From then on, what would otherwise look bad actually looks good.

But is ALL the bad news out

Worry when he says '....could affect H122' etc etc

[winner69]

At least Chairman Hearn still there to right the ship

I take it he's still ensconced in the UK somewhere and giving hugs and cuddles remotely

[BlackPeter]

HUGE indeed

Sales now 1.2 billion

EBITDA 11% gives $130m

NPAT about $90m

Bit of a disaster I reckon

Commiserations to holders.

$90m NPAT means 12 cents EPS.

Lets be optimistic and assume that the decline does not become a habit and they manage to consolidate from here. I guess they said they are reviewing their growth strategy, didn't they?

Fair price for a non growth agricultural company is something like a PE of 10 - right?

10 * 12 cents equals $1.20 per share. Ouch.

I recon today will be a field day for shorters.