Connections
Work with your personal adviser to grow your wealth

New Zealand Peripheral Stock: a2 Milk Company

STOCKS RECENTLY ADDED TO HAMILTON HINDIN GREENE’S INVESTMENT COMMITTEE AS PERIPHERAL EQUITIES: a2 Milk Company

Peripheral equities are designed to be supplementary to your core stocks. As such, it is recommended to have a maximum allocation of 5% of your investable wealth in any peripheral equity.

SHARE PRICE: $11.90 NZD

MARKET CAP : $8.73 BILLION

OVERVIEW

ATM is a vertically integrated and multinational manufacturer of a2™ branded milk, infant formula and other value-added dairy products that it processes, packs and sells to grocery stores, food service providers and other retailers in Australia, Asia and around the world.

Business Lines ATM derives most of its operating revenue from selling a2™ dairy products in Australia. 66% of the NZD922.7 million it generated in the 2018 financial year came primarily from infant formula and fresh milk sales in Australasia. ATM manufactures dairy products using milk containing the A2 type beta casein protein, which it believes tastes better and has a range of added health benefits. ATM uses proprietary systems to identify suitable dairy cows, source their milk and process it in-country into different products (mostly infant formula and pasteurised fresh milk).

ATM’s a2 branded products are packaged, distributed and sold directly or under license in Australia, New Zealand, Asia, Europe and North America. Its products are processed and sold under license by Fonterra and Synlait Milk in New Zealand, Muller Wiseman Dairies in Europe and China State Farm Holding Shanghai Company in China. It manages its own product distribution in North America.

ATM also owns 17% of a New Zealand listed milk powder manufacturer called Synlait Milk.

STRATEGY, RISKS AND OPPORTUNITIES

Product manufacturing is often characterised as competitive and susceptible to currency and commodity price movements, multinational competitors and the adoption of alternative technologies. Companies try to reduce these risks and maintain margins by investing in their own plant and equipment, by hedging part of their delivered raw material and energy costs, and by continuously improving their production and supply chain efficiency.

Specifically, ATM has indicated its near-term focus is to: expand the availability of its products into different countries, including the United Kingdom and the North American market; increase its product range, with a key emphasis on growing its infant formula sales; and continue to build its brand and consumer awareness.

ATM competes directly with other domestic and international dairy manufacturers with larger economies of scale and market influences such as: National Foods and Parmalat in Australia; Fonterra in New Zealand; and Müller Wiseman Dairies in the United Kingdom. ATM has established a strong brand and vertically integrated business model with reliable channels-to market across a diverse set of countries.

 

 

Filed under Newsletter

Leave a comment

Fields marked * are required

Find An Advisor CONTACT NOW
Become A Client START NOW