Ann: GENERAL: ATM: China Market Entry - ATM

• Release Date: 24/10/12 11:14
• Summary: GENERAL: ATM: China Market Entry - ATM
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ATM
24/10/2012 09:14
GENERAL

REL: 0914 HRS A2 Corporation Limited

GENERAL: ATM: China Market Entry - ATM

A2 Corporation Limited ("A2C" or "the Company") has today advanced the launch
of a2(TM) brand milk powders and infant formula in China in 2013 with the
appointment of an in-market Chinese distribution partner.

Developing an infant formula business in highly prospective markets is part
of A2C's strategic agenda. The global infant formula market is valued at
greater than USD 17bn at the retail level, with China accounting for around
USD 6bn and growing rapidly at approximately 12% per annum1.

In that context, in April 2012 the Company announced a strategic agreement
with Synlait Milk Limited ("Synlait") to source a2(TM) milk from accredited
New Zealand dairy farms and manufacture a2(TM) brand milk powders and infant
formula at Synlait's facility in Dunsandel, New Zealand.

Having established supply, A2C has now appointed China State Farm Holding
Shanghai Company ("CSF")2 as the exclusive distributor of a2(TM) brand infant
formula in the Peoples Republic of China.

CSF is a wholly owned subsidiary of China National Agriculture Development
Group Corporation3, the only Chinese State Owned Enterprise that operates in
the production of agriculture, animal husbandry and fisheries. CSF has
extensive operations in the major agricultural regions of China, including
the trade and distribution of agricultural inputs and high end consumer
products. CSF has the strength of local relationships and financial capacity
to establish a dedicated infrastructure, distribution network and marketing
activity to support the A2C infant formula business plan. Both CSF and its
parent have demonstrated strong commitment to the a2(TM) product proposition.

The distribution agreement is for three consecutive three-year terms with
renewal conditional on the achievement of agreed performance hurdles
including distribution coverage. A joint Marketing Committee comprising
representatives from A2C and CSF will control marketing activities for a2(TM)
brand infant formula, funded by contributions from each party and linked to
sales volumes. The Chairman of the Committee will be Geoffrey Babidge (A2C
Managing Director).

CSF plan to establish a support infrastructure, appoint sub-distributors and
initially establish distribution in five core Tier 1 cities that have a
combined urban population in excess of 50 million4 and progressively expand
across China, Hong Kong and Macau. A2C has established its own management
team to support the A2 Infant Nutrition business, including a divisional CEO,
marketing, supply chain and quality functions and a manager based in Shanghai
to closely co-ordinate activities between the parties.

A2C will derive its revenue from the sale of a2(TM) brand infant formula to
CSF. This infant formula will be sourced in New Zealand and packaged in a
form that is shelf ready to ensure that quality is maintained through the
supply chain. The business plan currently assumes annual sales revenues
growing progressively to approximately USD 50 million in year four.

It is expected that production of a2(TM) brand infant formula will commence
from December 2012, with the first sales to China to take place by June 2013.
A2C expects to commit funding of USD 5 million during 2013/14 for
administration, initial marketing contribution and working capital to support
the establishment of the business. The Company is positioned to fund these
requirements by virtue of its internally generated cash flows and strong
balance sheet.

A2C's Managing Director, Geoffrey Babidge, said: "Today represents a further
significant development in the Company's evolution. Having now secured both
supply and distribution for a2(TM) brand infant formula with highly credible
and experienced market participants, A2C is now well positioned to enter the
Chinese market which will support the Company's strong future earnings growth
profile."

For further information contact:

Geoffrey Babidge
Managing Director
A2 Corporation Limited
+61 2 9697 7008

A2 Corporation Limited
A2C is a differentiated, premium-priced, dairy company which is building a
global business based on unique intellectual property relating to a2 Milk(TM)
and related products.

A2C has operations in Australia, New Zealand, the UK and China and is
pursuing growth opportunities in Asia, North America & Europe.

A2C is listed on the NZAX market and trades under the code ATM.
End CA:00228784 For:ATM    Type:GENERAL    Time:2012-10-24 09:14:25