I’m sure Geoff, Peter and Susan must have a reasonably good feel for the A2M strengths and weaknesses ay.
One of the difficulties for A2M, I would agree, is in assessing just how much long term production capacity to put in place for 2017 and beyond.
Booms don’t last forever, and although the market volumes for NZ and Aussie IF should keep expanding in China for several years, the present mainland China price points may prove to be unsustainable and will quite probably reduce for the reasons expressed by Keith Woodford, Fonterra, and others.
If, as some expect, Australian price points do increase, and as some also anticipate, Chinese price points do drop, then the margins for the poor old Daigou may go to nothing in 2016, I’m in that camp, or perhaps by early 2017 in my case.
The difficulty for A2M is that over half the IF sold in Australia is presently bought by the Daigou's, when they give up on IF and move to cheese or something else, then A2M will incrementally need to maintain or make up those lost revenues elsewhere. ie: higher volumes to china at those lower price points, with greater production capacity required to do so.
One of the risks is that revenue growth attenuates or even flattens for a period in 2017 for said reasons, bit too early to speculate too much on that just yet.
Although, A2M have six staff in Shanghai for marketing and regulatory consultation, it would again be difficult to imagine that their forward plan does not allow for such market developments, esp when already sign posted.
A2M Price at posting:
$1.59 Sentiment: None Disclosure: Not Held
(20min delay)