Headline numbers
FY20 Guidance:
Revenue of NZD $1.7b to $1.75b
EBITDA margin of 31-32%: implied EBITDA range of NZD $527m to $560m
Consensus:
Revenue of NZD $1.76b
EBITDA of NZD $563.6m
NPAT of NZD $394.9m
Actual result:
in line with what the market was expecting at a headline level
Products and geographical segments
growth in all product segments and all geographies
main driver of growth: infant formula product segment, increasing 33.8%
Geographical perspective:
USA
gaining momentum
EBITDA loss due to increase in marketing and distribution spend
launched in Canada by a licensing agreement in July 2020 FY
Asia region
makes up more than 40% of the group's revenue
focused a lot of efforts and marketing spend on this region (particularly around their one brand two label strategy),
which led to growing market share in key china-based retail channels (such as mother and baby stores, cross-border e-commerce channels).
Risk of focusing on dominant geographic player:
potential new regulation
possibility of a comeback in some of their domestic brands
geopolitical risk (e.g. barley and beef fiasco between Australia and China)
Cash balance and capital allocation
ending cash balance: $854.2 million
the stronger cash balance was predominantly driven by the growth in revenue and net profit
also smaller contributors such as improvements in working capital
due to strong cash flows over the past few years, they've been able to build up a significant cash balance which they can easily deploy for the growth initiatives
Capital allocation framework
plan to self-fund all their initiatives by the cash flow that they generate from operations
priorities that they intend to focus on are:
growing their core business in existing markets (e.g. recently offered to acquire a majority stake in a NZ business called Mataura Valley Milk - to help scale their infant nutrition business)
expand into new products and geographies and have potential M&A
maintain a level of balance sheet strength
only then will A2 consider returning excess cash flow to shareholders = dividend payout is probably not going to happen for awhile
FY21 Outlook
201020
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