Ann: FY23 Annual Report, page-20

Yeah lots of detail to go through but it seems like a mixed bag to me.

Positives:

EPS 21.2c is well ahead of consensus and a good result as there was some risk given all of Synlait's downgrades.

China performance overall is outstanding relative to opportunity. To be in the top 3 market share gainers is hard proof of the brand's strength and its resilience to a declining broader market. Inventory levels for the China label transition were confirmed to be going according to plan. That was one of the key risks that analysts keep raising.

USA and ANZ fresh milk also performing positively.

David Hearn leaving

Negatives:

The China market and in particular birth rates are still lower than most predicted. Feihe recently had a 20% drop in revenue and lost market share. IMO on this point one needs to evaluate the company's performance relative to its peers. It seems to me that the company's pessimistic outlook on its own revenue growth is mostly based on the overall outlook about the China market.

USA - getting a bit sick and tired of the 'carefully carefully' approach with respect to introduction of A2 Platinum. It's been almost a year since recieving FDA approval and only now are they 'trialing' distribution of the product. Prudence is one thing but this is something else. At least clinical trials are progressing which indicates some degree of seriousness about gaining long term FDA approval.

Capital management (or lack thereof). I would have been happy with another buyback and frankly am surprised they didn't do one. It suggests the management think the SP is no longer undervalued. It's particularly galling to read the same rhetoric about investing in growth through supply chain transformation without any indication of specific plans for this. By the end of the current FY, they will be sitting on nearly $1B. I could be more accepting of the do-nothing approach if there was transparency about what kind of growth opportunities they are waiting for. But there's not. Big fail on that front IMO.

New products - there was progress on this front in FY. Lactose free in ANZ, Hersheys, Grass fed, protein + collagen powder in USA. But I would like to see more on the family / adult / senior nutrition front.

Overall

A2M remain a good company in my view (one of the best in the sector) in a currently tough market. Being amongst the top in terms of market share gains means they will bounce back harder than most when the market conditions stablise and improve. But there is more they could be doing particularly outside China and outside of IF in order to ride out the poor market conditions. Hopefully new management in USA will help progress things quicker there.