Hi @WomtradeThe a2MC has consistently stated that there will be...

Hi @Womtrade

The a2MC has consistently stated that there will be no dividend or share buy back in the short term future as right now there are far too many growth opportunities that exist, so we can safely rule that out for now.

They have also stated that although they are fully aware of the growing middle class in Asia (other than China) and the potential there for further growth is enormous, however the focus for a2MC in the immediate term is the the two biggest consumer economies in the world, China and the US.

So we know Synlait have the exclusive agreement with a2MC to supply A2 IF to NZ, AUS and China until 2023 and we also know Synlait's new site at Pokeno will ramp up further production. I think it would be fair to expect that target market share of 10% in China is on track given the overwhelming demand and soon to be increased supply. Further production in the medium term will be negotiated with Synlait. So that leaves me thinking that the truckload of cash in hand you mention will be focused on the US.

Although there were many doubters, the strength of A2 fresh milk is growing in the US and performing strongly. Yes there are flavoured milks and the new coffee creamer range but I think this is just product branding before IF rolls out. They have tested the water so to speak and they are getting a positive response but IF has always been the flagship product. I know many will disagree with me but I would like this option because it mitigates the risk to revenue if there are any future complexities with China, which are well outside a2MC's ability to control, and it also opens up a massive market. Short term pain for some long term gain, well actually probably pretty quick gain but anyway. Yes like China there are plenty of hoops to jump through and there is already a developed market there but I believe that is where a2MC want to target next.

A recent AFR article stated that they were looking into the possibility of purchasing a canning facility and due to the facts stated above this is why I feel this will be the next logical move. To give a rough idea of costs the Pokeno site is costing Synlait approx $280M NZ. Yes we need to take into consideration currency conversion, different costs of construction, land etc but it gives a ball park figure.

Whilst this would go against the current light framework model that a2MC currently operates it would seem that the company is growing and change is inevitable as it matures. Obviously a2MC could still go in another direction if a better opportunity presents itself but from recent interviews and statements this seems to be a strong possibility. If the response to IF is anything like fresh A2 milk in the US then this will be massive increase in revenue.