Synlait reported sales of 43,000 metric tonnes (MT) for infant milk powders, nutritional base powders and infant formula in FY15, up 54% on FY14. The added dryer capacity from 90,000MT to 140,000MT at least doubles this, on-line since Sept. Note that formula is only a proportion of the 43,000MT. Australia's total infant formula demand is about 30,000 to 40,000 MT p.a. (Nov 2015). http://www.smh.com.au/business/a2s-...ur-months-20151117-gl0o60.html?skin=text-only. Demand is increasing somewhere between 15% to 45% p.a.
LightForce ran some numbers in late November:
"According to A2M, 47pct of their revenue is now infant milk powder. Revenue for first 4 mths is $38m. Assuming the average sale price they get is NZ$20 per can of 900g powder, that means that they already sold 1710 tonnes in first 4 months." At 47% of revenue and Nov forecast $285M group FY16 revenue, formula revenue would be about $134M.
Adding $30M revenue in Nov/Dec brings total formula sales to about 3060 MT for the 1H2016. Maintaining sales at the Sept-Dec rate in 2H16 would result in 6793 MT for FY16, $151M formula revenue for the full year, group revenue $302M.
The revised group revenue estimate in Dec of $300M to $315M corresponds to between 6705 to 7380 MT for FY16, formula revenue $149M to $164M. The lower end of forecast range implies no growth from Sep-Dec sales rates, the upper end implies 15.7% increased sales compared with Sep-Dec, or 6.67% increase compared with Nov-Dec.
Bottom line is that there should be ample spare capacity for now with Synlait and the revenues required to meet updated guidance are not demanding.
A2M has increased supermarket market share from 12% to 15% since mid-year. Taking 7000MT as rough sales for A2M, and assuming this translates to other points of sale, overall Australia sales would be about 46666MT p.a. This is up between 16% and 55% relative to the SMH Nov data, about in line with expected annual growth.
A2M Price at posting:
$1.88 Sentiment: Buy Disclosure: Held
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