ASX investors are set to shortly get the opportunity to invest in an exciting dairy processing and marketing business – A2 Milk Company Ltd (ASX: A2M).
The New Zealand-based A2 has been listed for more than a decade – initially in 2004 on the NZ stock exchange (NZX) Alternative Market, and since 2012 on the main board of the NZX.
Due to the company's desire to expand its capital market options and increase liquidity the group has sought an ASX listing. This means that A2 is not conducting a capital raising and there will be no new shares for investors to buy in an initial public offering (IPO), but rather the securities of A2 which are currently only quoted on the NZX will be quoted on both the NZX and the ASX.
Facts and Stats
- A2-branded milk contains only the A2 protein rather than both A1 and A2 which is found in regular cow's milk. For some consumers there may be a benefit from drinking A2 milk as it appears some people find A2-only milk easier to digest than regular cow's milk.
- A2 doesn't just produce fresh milk, the company also markets long-life milk, infant formula, thickened cream and yoghurt. Of particular interest is A2's plans to establish and build a global infant formula business with an emphasis on China, which will see it competing with the newly listed Bellamy's Australia Ltd (ASX: BAL).
- For financial year 2014, the group achieved sales of NZ$110.6 million and adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of NZ$3.6 million. Earnings for the group were down substantially on the prior year reflecting the increase in costs associated with expansion into China and the UK.
- In 2007, A2 entered a joint venture with allergen-free health food company Freedom Foods Group Ltd (ASX: FNP). Freedom remains a significant shareholder in A2 with approximately 18% of the shares on issue.
An exciting sector
The food processing industry could be appealing to investors for a number of reasons including:
- The growing wealth of the Asian region, particularly China, means the number of consumers demanding higher quality and higher protein food and beverage is rising dramatically.
- Historically businesses that have successfully built a brand around their product have in certain cases enjoyed significant economic profits.
