Latest / Early Edition with Ryan Bridge / Matt Montgomerie: Forsyth Barr Senior Analyst on A2's profit increase, purchase of the Pokeno plant

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Matt Montgomerie: Forsyth Barr Senior Analyst on A2's profit increase, purchase of the Pokeno plant · Early Edition with Ryan Bridge

• 0:00
  Speaker 1: Good day for A two milks shareholders. Company posts two
• 0:02
  Speaker 1: hundred million dollar profit for twenty five announced they're getting
• 0:05
  Speaker 1: ready to turbocharge production. This is the purchase of a
• 0:09
  Speaker 1: plant in Polcino. This is for three hundred million bucks.
• 0:12
  Speaker 1: Pocono plant has two registrations to sell infant formula in China.
• 0:16
  Speaker 1: This isn't clearly an area that A two sees as
• 0:18
  Speaker 1: a growth market. Matt's Montgomery is Forsith Bar analyst with
• 0:22
  Speaker 1: me this morning. Matt, good morning, Good morning Roan. Thanks
• 0:25
  Speaker 1: having great to have you here, this market reaction, some
• 0:29
  Speaker 1: strong results for them, and also a lot of trust
• 0:32
  Speaker 1: in their management here obviously.
• 0:34
  Speaker 2: Yeah, that's right. I think in the context of numerous
• 0:37
  Speaker 2: New Yealand corporates over the last couple of years, A
• 0:40
  Speaker 2: two it has stood out, I mean, consistently exceeding expectations
• 0:45
  Speaker 2: despite your operating in what is a relatively tough formula
• 0:49
  Speaker 2: market in China. And you know, the decision is today
• 0:54
  Speaker 2: to acquire the plants in Pocono sort of one quite
• 0:58
  Speaker 2: big step in continuing that growth pathway.
• 1:01
  Speaker 1: You said, it's a tough market for infant formula in China.
• 1:03
  Speaker 1: They've got an aging population. Is this a growth market.
• 1:09
  Speaker 2: Well, the market itself is flat to slightly down at
• 1:12
  Speaker 2: the present time, but birth rates did increase last year,
• 1:17
  Speaker 2: so you're seeing a little bit of an air pocket
• 1:19
  Speaker 2: of growth in the very short term. But Eights have
• 1:22
  Speaker 2: been taking markets share consistently across both their Chinese and
• 1:27
  Speaker 2: English label formula products. So the market itself is relatively challenging,
• 1:33
  Speaker 2: but their execution has been very impressive for a few years. Now.
• 1:37
  Speaker 1: Can you sell milk to the old aging population?
• 1:43
  Speaker 2: Well, they have been diversifying the business. So if you
• 1:46
  Speaker 2: think back five years ago, it was principally an formula
• 1:50
  Speaker 2: play in China, but they have been diversifying the business
• 1:54
  Speaker 2: into other nutritionals. So this is selling senior milk powers
• 1:58
  Speaker 2: and that's been and growing at sort of thirty percent plus.
• 2:02
  Speaker 2: So you're trying to stretch the brand, I guess if
• 2:04
  Speaker 2: you will into other skews smaller today, but you know
• 2:10
  Speaker 2: another small growth angle for their business.
• 2:13
  Speaker 1: Chunk of change they paid for Pocono.
• 2:16
  Speaker 2: Yeah, two eighty two as it value was around two
• 2:19
  Speaker 2: point fifty. But you know the company reported net cash
• 2:23
  Speaker 2: of just over a billion dollars yesterday, so they haven't
• 2:28
  Speaker 2: been short of change. And that's allowed them to return
• 2:30
  Speaker 2: a three hundred million dollars special dividend to shareholders yesterday,
• 2:33
  Speaker 2: and we see the scope for more distributions to shareholders
• 2:38
  Speaker 2: over the next few years. So yeah, the free cancelor
• 2:42
  Speaker 2: generation and the business over a long time has allowed
• 2:44
  Speaker 2: them to be in this position.
• 2:45
  Speaker 1: Good to seeing ambitious company well run.
• 2:48
  Speaker 2: Yes, indeed management's doing a good job.
• 2:50
  Speaker 1: Matt, appreciate your time. Matt Montgomery for sith Bar Senior
• 2:53
  Speaker 1: arounds with me on A two this mornth For more
• 2:56
  Speaker 1: from early edition with Ryan Bridge.
• 2:58
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• 3:00
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