Media Updates, page-10008

As I said before, there is pretty much no information in the report that was not known for nearly four months. The only thing that was really anticipated this time was possible capital management initiatives. But as predicted right now all these doom and gloom merchants with goldfish memories who don't remember what happened 5 minutes ago and don't see beyond their current feed are out in force to bury the company yet again. Here is what I wrote in mid May.

Unfortunately for many investors they don't read beyond the headlines and don't do any analysis and at best rely on what brokers say. I can pretty much guarantee that in August we will see headlines something like "a2 milk profit has plummeted 70%" everywhere and that business is in great danger. And if as you say there will be no growth next year and say assume they will record same 1.2-1.3b in sales but without this year one-offs EBITDA will be somewhat 20%ish I bet next year you will see headlines like "a2 has recorder record sales increase of 100%" and business better than ever. But the reality would be that there was no change in underlying business. Of cause all the above is an assumption, because nobody knows what will happen next. Next year could be better could be worse, could be same, as I said before all will depend on execution by new management. And none of those analysts or anybody else can predict it. Same as none of them saw 1.2b in sales in the last update coming just 2 weeks ago, no-one.

Now in summary what do we have from the report
1. FY revenue guidance of 1.2-1.25bil was known and met
2. 4th quarter sales would be low as result of withholding sales. So, as expected
3. Stock write-offs and rebalancing as expected. English label stock levels now at target and China label is very close to target.
4. Strategy review is underway and will be presented in October.
5. Capital management. Somewhat disappointing. They have been saying for years now that they have better use for it but so far unable to show anything (not counting MVM) to prove it. However, I would give them one last chance to come up with something meaningful in October as part of strategy review which would make sense.
For those who are complaining about lack of guidance and saying management do not know what to do and how to run business, etc. Well, this is what the coming strategy review is all about. It might be hard to understand but to run business of that scale is not the same as to trade few shares once a month. And just because you can't wait for a few more months it does not mean they are sitting on their hands. In my view coming strategy presentation could be a turning point which I think should had happened about three years ago but was screwed up by CEO fiasco.

As for the coming review - it seems now we all know what happened and what the main problems are and company is looking at to resolve those problems. Currently a2 has 4 main arias they are doing business in
1. China label IF
2. English label IF
3. Milk in Australia
4. Milk in US
Two of them China label and milk in Australia are doing very well. Milk in US is doing okayish taking into account current environment but definitely can do better. The only area of the business that in trouble is English label.
From latest presentation and conference call I see that DB is quite aware of this and main attention will be given to distribution options as well as developing wider range of products to not rely solely on new born and infant products. This is what I hope for anyway.
So, as I said I was not really anticipating much from recent report but the strategy presentation and ability to deliver on that strategy will be something I'll make my future decisions on. Anyway rant is over and for the next two months I probably will concentrate on my other investments as I do not anticipate anything material happens till then. Good luck all