Forget about following the floundering fortunes of Fonterra – a2 Milk is the NZX’s fast-rising star

New Zealand  eyes  have been so  focussed  this  week  on  an event  20,000kms distant   that they  might  not have  noticed here  at  home another  extraordinary  event, taking  place  on the  NZX.

The market capitalisation of a company  which listed   as recently  as  2012  on the local sharemarket soared  past the  $12bn  mark and is hard on the heels of  Meridian Energy,  which has the  highest   valuation  of  NZ-based companies on the NZX  at $12.3bn.

The  challenger is a2 Milk,  which sells a  specialised  type of  milk  with what  it claims are health benefits.

A2 has had  a  chequered  history  but  its  market  valuation  keeps  climbing,  racing  ahead   of  blue chips  like  Auckland International  Airport  and  Fisher  & Paykel  Healthcare  and  leaving  in its dust some one-time  market  darlings  like Fletcher  Buildings  (market cap  $4.3bn)  and   Spark  ($7.2bn). Continue reading “Forget about following the floundering fortunes of Fonterra – a2 Milk is the NZX’s fast-rising star”

Grass on the A2 side of the dairy fence is looking greener – and the profits plusher

The  contrasting   fortunes of  Fonterra  and  A2 Milk came into the  spotlight   this  week,  after the  latter  reported a  startling 55%  rise in  half-year net profit  to  $152m.  Fonterra  shareholders will be  ruefelly recalling  their  company’s  performance last year  when  it  reported its  first-ever  net  loss  of  $196m.

A2 Milk  shareholders  are  marching to a  very  different  tune.  Despite  one market  analyst  reckoning its shareprice had  become over-priced, buyers  pushed  it up  by  more than  a dollar to  $13.95  as they absorbed  news  of   strong sales growth in all key product segments – infant formula, liquid milk and milk powders.

Sales of infant formula totalled $495.5m for the half – a 45.3%  increase on the previous half, driven by share gains in China and Australia.

The company is accelerating its investment in building brand equity through enhanced marketing campaigns in its key markets of China, US and Australia, alongside continued investments in R&D and further development of its intellectual property. Continue reading “Grass on the A2 side of the dairy fence is looking greener – and the profits plusher”

Someone in the dairy business has been creaming it – check out A2 Milk’s results

The  contrasting   fortunes of   key components  of the  NZ  dairy industry  were  thrown into  stark  relief  this  week.  While the  NZX market  darling  A2  Milk  was  reporting record revenue of $368.4m in the first four months of the financial year, up 40.5% on the same period last year, dairy product prices were falling at  the  Global Dairy Trade  auction, prompting  analysts  to reinforce  predictions  Fonterra  would again have to  cut its  forecast  for this  season’s  milk payout.

Fonterra, which  started the season  with a  $7kg/MS  forecast payout, has since  lowered that  to the  $6.25-$6.50 range. Analysts  are  now pointing to  the prospect of this further falling to a  $5.80-$6  range  in the   wake of   the  latest  slide in price at the GDT, where the  falls in butter and  anhydrous milkfat  were the biggest in two years and the  overall price index  dropped  3.5% from the previous  auction.

For  A2 Milk, the  positive result comes after last year’s record revenue of $922m and the profit after tax more than doubling to $195m. Continue reading “Someone in the dairy business has been creaming it – check out A2 Milk’s results”

Why Fonterra’s farmers should be wondering what the Irish can teach us

It’s a critical  week for   the country’s largest company,  Fonterra, which has to find a new direction  after shipping out its  chief executive, Theo Spierings, writing off  more than  $1.5bn from its balance sheet, and posting its first loss  in its  17-year  history.

Meanwhile,  back  on the farm,  Fonterra’s suppliers  are  absorbing  payout  downgrades  as  well as a slump  in  dairy farm  prices. At the  same  time  they are  seeing  the valuations  of other companies in the dairy industry—notably  A2 Milk and Synlait— soaring  on  the  NZ  sharemarket.

So  they’ll be looking  to Fonterra’s  leaders  for  some  fresh ideas  on  how to  turnaround the fortunes of the  big  co-op. Continue reading “Why Fonterra’s farmers should be wondering what the Irish can teach us”

A2 Milk reports an a1 result while scientists work on the health benefits

Revenue up   68%, profit up 116% , cash  on hand up  280% …

Those annual results are the sort most  companies’ bosses  dream of.  They are certainly are the  kind  of  results  Fonterra’s  farmer-suppliers    are  not  likely  to  hear  from  the  co-op’s  board in  this lifetime.

But  for A2 Milk’s  shareholders  they are  real.   Reporting to shareholders  (who  indeed have had a  dream run  this year), the   company this week  said revenue  reached  $922.7m,  annual profit $195.7m,  and  the sales margin  was  31%,  up  from  26%

Other key statistics  included strong cash conversion with operating cash flow of $231.1m – up 131%, and basic earnings per share of 27c – up from 12.7c. Continue reading “A2 Milk reports an a1 result while scientists work on the health benefits”

Beingmate has muted Fonterra’s Chinese hum

Fonterra is “humming” in China, according  to  a headline  in the  NZ  Herald,  although the  text  of the article beneath it mentioned  the  “woes”  associated with  the co-op’s investment  in Beingmate.

The  co-op  is having to absorb   an impairment of   $405m    on the value of its 18.8%  holding in Beingmate.  On top of the $183m payment it has had to make  French  giant  Danone, the  writedown  takes the gloss off that  otherwise  “humming”  performance.

Some of its farmer-shareholders may be looking over the  fence to  the rather different  outcome  for A2 Milk, which lifted its annual  sales  68% in the June year,  with  revenue   rising  from $549m in the June  2017 year  to  $922m.  During  the latest  year A2  Milk achieved gross margins  up  to  49%.   Continue reading “Beingmate has muted Fonterra’s Chinese hum”

If we must come down from Peak Cow, let’s be careful about the regulatory path we take

“We’ve  kinda got to  what they might call ‘peak cow’” . That’s how  Primary Industries Minister  Damien  O’Connor  put it,  when  Corin  Dann interviewed  him  on  Q&A.  He  went  on:

“We’re  giving   clear signals that if growth is going to continue  it will be  growth and value from  what they do, not  just  getting  more   from the land, with the environmental   impacts of that”.

To some people, the phrase   ‘peak  cow’    sounds  like it comes from the  lexicology of the   Green   Party,    which  for   long  enough   cried  wolf   about   ‘peak oil’,  only  for  oil  producers  to  keep  the stuff  coming  out  of the ground in  ever-increasing  volumes. Continue reading “If we must come down from Peak Cow, let’s be careful about the regulatory path we take”