Media Updates, page-13085

Nothing new, just some summaries from analysts, who seems equally puzzled with company's capital management approach.

A2 Milk is facing a problem most other companies would love to have: what to do with a mountain of cash.
The company’s annual net profit was a creditable $144.8 million, up 26.2 per cent on the previous year, but the market punished the stock for what was deemed to be a lacklustre earnings outlook.
Cash on hand, however, is not a problem.Even after completing a recent on-market share buyback of $149.1m, at balance date the company still had a lazy $757.2m lying around.
Devon Funds head of retail Greg Smith said there was some disappointment that a2 did not announce a dividend or share buyback.“Companies return cash in the form of buybacks when they have no better use for it, typically. A2 Milk does have some capex requirements coming — up to $100 million for Matarua Valley — and they are investing in their supply chain,” Smith said.“Potentially, once all that is done, there may be something in the way of a distribution to shareholders.”
There is always conjecture in the market about whether buybacks are preferable to straight-out cash distributions to shareholders, Smith added.Buybacks are less “visible” to shareholders.“A dividend of $100m to shareholders is more visible than a company announcing that it is going to buy back $100 million in shares,” Smith said.
China — a2 Milk’s biggest market and New Zealand’s biggest export destination for dairy, meat and logs — is weighing on the company.“The big thing about a2 Milk is that they are gaining market share, but they are getting market share in a declining market,” said Smith.“China’s birth rate is at record lows, so it’s not going in the right direction for a company that sells infant formula.“Add to that the fact that China’s economy has not bounced back as many had thought, and there’s increased competition.”
Not only is China weighing on New Zealand; it is also a factor in global market sentiment at the moment, he said.Clouds are gathering over the dairy sector after a series of big downgrades in the forecast milk price and a worsening economic conditions in the People’s Republic.
A2 said despite an expected double-digit decline in China’s infant formula market in 2024, the company expects to increase its market share and achieve group revenue growth in the low single digits in 2024, and an ebitda-to-sales margin broadly in line with the 13.8 per cent achieved in the 2023 year.
Analysts had expected a material improvement margin forecast for the year ahead.