Explain China new tax policy and formula registration with CFDA, page-64

A2M are particularly exposed to a grey market decline, much more so than other companies, because A2M presently have a much lower ratio of direct sales in China than other companies do.

At HY16 reporting, China segment revenues were $8.4M, which includes sales of WMP, FM, UHT and IF. It is probably that around half of that revenue is infant formula, or around $4M.

Compared to overall IF sales of $73.9M mainland China sales represents only around 6%.

So, around 94% of infant formula is sold in Australia, only 6% is exported directly to China.

In addition, although A2M have diversification with a mixed product portfolio and fresh milk sales, between 45 to 50% or revenues are achieved through the grey market, and a very much higher dominant percentage of earnings.

It’s not all bad news though I reckon,

A2M are opening up an IF market in the UK, and they are working in the background to further efforts in improving direct mainland China sales, it may take some time though.
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