Full Year 2026 Growthpoint Properties Australia Ltd Earnings Call

Speaker #1: Hi, I'm joining on the call by our CFO, Dave Musket, and our business unit leaders, Li Zhao, Yoan, Senna Ratner, Jaron McVicker, and Kevin Bush.

Speaker #1: The team and I will present the results and outlook, and there'll be time at the end for questions. During the presentation, we'll focus on continuing operations, excluding MVM, which we divested in the first half, and occasionally refer to underlying results, which excludes both MVM and A2 Poker Note.

Speaker #1: We've excluded A2 Poker Note from the underlying results, given that the site is currently underutilized and incurring manufacturing losses and transformation costs, which are short-term in nature.

Speaker #1: Starting on slide 4, we delivered FY26 results in line with, or slightly ahead of, our updated April guidance, with double-digit revenue growth. Input milk formula, or IMF, grew 5% in a flat China market, supported by strong English label growth, with China label sales significantly impacted by temporary supply chain disruption in the 4th quarter.

Speaker #1: Supply chain disruption had a material impact on China IMF product availability, performance, and supply chain costs, which impacted our second-half group sales and earnings.

Speaker #1: As you would expect, we have a comprehensive recovery plan in place, and we've commenced execution, which I'll come back to later in the presentation.

Speaker #1: Other nutritionals grew significantly by 42% through innovation in kids, seniors, UHT, and supplements. In liquid milk, growth was well above market at 22% in Australia and the US.

Speaker #1: Our commitment to innovation has resulted in the launch of a series of new products over recent years, which are making meaningful contributions to our growth.

Speaker #1: These new products accounted for more than 50% of our sales growth in FY26, with further launches planned in the first half of '27. We also advanced our supply chain transformation through the divestment of MVM and the acquisition of A2 Poker Note, with the transformation program on track or ahead of plan.

Speaker #1: Finally, from a regulatory approach, following regulatory approval of our two new China label registrations, we declared a $300 million special dividend, and today announce an increase in our full-year ordinary dividends with improved payout ratio.

Speaker #1: The combination we have declared a total of $453 million of ordinary and special dividends in FY26. Turning to our financial summary on slide 5, revenue was up 12.4% to $1.95 billion, reported EBITDA was down 2.5% to $284 million, which was impacted by supply chain disruption and A2 Poker Note losses.

Speaker #1: On an underlying basis, excluding A2 Poker Note, EBITDA was up 5.4%, and underlying EBITDA margin was 15.6%. On earnings perspective, underlying net profit after tax and underlying EPS were up approximately 7%.

Speaker #1: Slide 6 shows that our growth was broad-based across all of our geographic markets and product categories. China and other Asia grew 11%, AMZ 10%, and the US over 28%.

Speaker #1: Our product category, IMF, was up around 5%, liquid milk up 22%, and other nutritionals up 42%, excluding A2 Poker Note sales. Moving to slide 7, the China IMF market was relatively flat, with premiumization offsetting a low single-digit volume decline.

Speaker #1: The China label IMF market stabilized, and English label growth slowed significantly in the second half due to the impacts of industry recalls. Pleasingly, the A2-type protein and ultra-premium segments continued to grow ahead of the category, which plays to our strengths.

Speaker #1: Slide 8 addresses the supply chain disruption experienced in the 4th quarter. As outlined in our market announcements in April and July, product availability was materially impacted by a number of factors, including strong demand in the preceding quarter, freight challenges, a production backlog at Sinlai, extended product release timeframes, and additional customs and testing requirements.

Speaker #1: These factors have been resolved and availability has significantly improved. However, the in-market product availability issues necessitated a large proportion of our existing users to switch to alternative brands, which, as you can see, significantly impacted our China label market share during the 4th quarter.

Speaker #1: The rate of recovery will depend on our ability to regain past users, new user recruitment momentum, and the performance of our new China label IMF products.

Speaker #1: Slide 9 sets out our recovery plans, built around rebuilding trust, driving past and new user recruitment, supporting our distributor and retailer ecosystem, and launching new products.

Speaker #1: There's been positive early progress against our plan, a new traceability tool has been very well received by consumers, brand sentiment is recovering, and new user recruitment conversion rates are back to or above historical levels.

Speaker #1: Moving to slide 10, the first wave of marketing behind our China IMF recovery is focused on reassuring consumers that A2 products are of the highest quality.

Speaker #1: This includes a market-leading traceability tool with batch-by-batch testing and endorsement campaign from China state media, Xinhua News, as a leading food safety expert, and independent validation by a leading quality assurance influencer, Daddy Load.

Speaker #1: Together, these initiatives are rebuilding confidence in quality and supply and driving positive sentiment. Next slide measures how our social media and PR activity is helping rebuild confidence in the A2 brand.

Speaker #1: Brand sentiment has recovered quickly towards prior levels, with the ratio of positive to negative sentiment improving significantly in July. Search interest in the A2 brand A2 Zhe Qiu and A2 Platinum on the major e-commerce platforms has been recovering each week, reaching around 80% of December to January peak levels by the end of July.

Speaker #1: From mid-August, our new user education and recruitment programs will ramp up, followed by a broader A2 brand superiority campaign in October. Turning to our outlook statement on slide 12, we expect revenue and EBITDA to grow in FY27, supported by innovation and new markets, continued momentum in other nutritionals and liquid milk, and improved profitability at A2 Poker Note.

There's been positive early progress against our plan. A new traceability tool has been very well received by consumers. Brand sentiment is recovering, and new user recruitment conversion rates are back to, or above, historical levels.

Maybe to slide 10.

Speaker #1: IMF sales are expected to be impacted by the flow-on effects of supply chain disruption in the 4th quarter, with a gradual recovery over the course of the year, supported by an increase in marketing investment, particularly in the first half.

The first wave of marketing behind our China IMF recovery spoke to reassuring consumers that A2 products are of the highest quality.

Speaker #1: As a result, group revenue and EBITDA are expected to be materially weighted to the second half. Overall, we currently expect mid-single-digit revenue growth in FY27, with first-half revenue broadly in line with last year.

This includes a market-leading traceability tool with batch-by-batch testing and an endorsement campaign from China State Media. Qinwan News is a leading food safety expert, and there is independent validation by a leading quality assurance influencer, Daddy Load.

Together, these initiatives are rebuilding confidence in quality and supply, and driving positive sentiment.

Speaker #1: EBITDA margin is expected to be approximately 15%, with the first-half materially down on PCP before improving in the second half. Our full outlook statement, including key risks, is set out in our results commentary released today.

The next slide measures how our social media and PR activity is helping rebuild confidence in the A2 Grant.

Brand sentiment has recovered quickly to prior levels, with the ratio of positive to negative sentiment improving significantly in July.

Speaker #1: Slide 13 outlines our strategy, which is unchanged and enduring. We remain focused on capturing the full potential in China IMF, ramping up product innovation, entering new markets, and transforming our supply chain.

Search interest in the A2 brand, A2J 2, and A2 Platinum on the major e-commerce platforms has been recovering each week, reaching around 80% of December to January peak levels by the end of July.

Speaker #1: All underpinned by our brand strength and science and innovation capability. As slide 14 shows, we continue to track well against our medium-term financial and non-financial goals and remain on track to deliver the majority of our targets despite the temporary supply chain disruption during the 4th quarter.

From mid-August, our new user education and recruitment programs will ramp up, followed by a broader A2 Brand Superiority campaign in October.

Speaker #1: Turning to the next slide, we just fell short of achieving our medium-term revenue ambition of $2 billion this year. But we'll do so in FY27.

In our outlook statement on slide 12, we expect revenue and EBITDA to grow in FY27, supported by innovation and new markets, continued momentum in Other Nutritionals and Liquid Milk, and improved profitability at A2 Pocono.

Speaker #1: Our market and category growth drivers remain on track, except for China label IMF, which has been impacted by supply chain disruption and is a key focus and work in progress currently.

IME sales are expected to be impacted by the flow-on effects of supply chain disruption in the fourth quarter, with a gradual recovery over the course of the year, supported by an increase in marketing investment, particularly in the first half.

Speaker #1: Moving to the next page and beyond our FY27 goals, we have significant growth opportunities to capture in our core business, adjacent categories, and new markets over the years ahead.

As a result, group revenue and EBA are expected to be materially weighted to the second half.

Speaker #1: We've been addressing these opportunities over time and thought it would be helpful to lay out the markets and categories we are focused on, the estimated size of these markets of retail, the addressable component, our current share, and how our portfolio through innovation and new markets has evolved from FY21 to where we expect to be by the end of FY27.

Overall, we currently expect mid-single-digit revenue growth in FY27, with first half revenue broadly in line with last year.

EBITDA margin is expected to be approximately 15% in the first half, materially down on PCP, before improving in the second half.

Apple outlook statement, including key risks we set out in our results commentary released today.

Speaker #1: Interestingly, our portfolio of products and markets has expanded from 8 in FY21 to a planned 36 by the end of this year, which is an indication of the focus on innovation and market expansion.

513 outlines our strategy, which is unchanged and enduring. We remain focused on capturing the full potential in China, IMF, ramping up product innovation, entering new markets, and transforming our supply chain.

Speaker #1: In summary, we have a low share of a large TAM, with plenty of growth opportunities to pursue over the long term. Over recent years, we have focused on expanding our product portfolio supported by investment in innovation and product development capability, A2 Poker Note, and building a network of strategic manufacturing partners.

All underpinned by our brand strength and science and innovation capability.

As slide 14 shows, we continue to track well against our medium-term financial and non-financial goals and remain on track to deliver the majority of our targets, despite the temporary supply chain disruptions in the fourth quarter.

Speaker #1: Slide 17 highlights the many new innovations coming to market in FY27 and beyond. In the first half of '27, we'll launch two new China label products that will expand our China label portfolio from 1 to 3, significant updates to A2 Platinum and A2 Genesis, alongside continued expansion in other nutritionals, which Chow and Yohan will cover later.

Turning to the next slide, we just fell short of achieving our medium-term revenue ambition of $2 billion this year, but we'll do so in FY27.

Our marketing category growth drivers remain on track, except for China labeling IMF, which has been impacted by supply chain disruption and is currently a key focus and work in progress.

Speaker #1: Moving to slide 18, which speaks to the science that underpins our A2 brand proposition and innovation. We have continued to invest in research for more than 25 years, building scientific evidence around milk that is A1 protein-free.

Moving to the next page and beyond our FY27 goals, we have significant growth opportunities to capture in our core business, adjacent categories, and new markets over the years ahead.

With an addressing these opportunities over time, I thought it would be helpful to lay out the markets and categories. We are focused on the estimated size of these markets of retail.

Speaker #1: I highlight this year was our US growth monitoring study, a key clinical requirement for the FDA infant formula approval process. The study showed that infants consuming formula made with A2 milk demonstrated appropriate growth and had a comparable safety profile to infants consuming conventional formula, which is the primary purpose of the study.

The addressable component of our current share and how our portfolio, through innovation and new markets, has evolved from FY21 to where we expect to be by the end of FY27.

Speaker #1: However, secondary analysis of the data showed a 6% greater length and weight gain versus conventional infant formula. These findings were presented at the American Society for Nutrition annual meeting in July and attracted significant interest.

Um, by the end of this year, which is an indication of the focus on innovation and market expansion,

In summary, we have a low share of a large TAM, with plenty of growth opportunities to pursue over the long term.

Speaker #1: Slides 19 and 20 cover our supply chain transformation, during the year we completed the acquisition of A2 Poker Note, a world-class nutritional facility in the divestment of MVM.

Over recent years, we have focused on expanding our product portfolio, supported by investment and innovation and product development capability, A2, Pocono, and building a network of strategic manufacturing partners.

Speaker #1: Since acquisition, we've more than doubled our Poker Note team, delivered the first phase of our multi-year capital investment program on time and on budget, and secured registration amendments for the two new China label products.

Slide 17 highlights the many new innovations coming to market in FY27 and beyond.

Speaker #1: The site is on track for an EBITDA break-even result in FY27 as we insource A2 Platinum and capture vertical margin benefits. As per slide 20, all of our key milestones with respect to English label transition, China label registrations, and facility upgrades for FY26 are all complete, with our FY27 metrics on track, with production and financials in line with plans.

In the first half of 2017, we'll launch two new China label products that will expand our China label portfolio from one to three, significant updates to A2 Platinum and A2 Genesis, alongside continued expansion in other nutritionals, which Chow and Yohan will cover later.

Moving to slide 18, which speaks to the science that underpins our A2 brand proposition and innovation.

We have continued to invest in research for more than 25 years, building scientific evidence around milk. That is A1 protein, three.

Speaker #1: Finally, on slide 21, we continue to make good progress on sustainability, including commencing work to convert the A2 Poker Note gas-fied boiler to an electrode boiler, to progress towards our scope 1 and 2 net-zero target by 2030.

A highlight this year was a US growth monitoring study, a key clinical requirement for the FDA infant formula approval process.

Speaker #1: We also established real on-time data collection approaches to increase the accuracy of our scope 3 emissions reporting and awarded 27 new projects through our Farm Sustainability Fund.

The study showed that infants consuming formula made with A2 milk demonstrated appropriate growth and had a comparable safety profile to infants consuming conventional formula, which is the primary purpose of the study.

However, secondary analysis of the data showed a 6% greater length and weight gain versus conventional infant formula.

Speaker #1: I'll now hand over to Dave to take us through the financials in more detail.

These findings were presented at the American Society for Nutrition annual meeting in July and attracted significant interest.

Speaker #2: Thanks, David, and good morning, everyone. Starting on slide 23 with our group P&L. Net sales revenue was up 12.4% to 1.972 billion, with growth across all product categories and segments.

Slides 19 and 20 cover our supply chain transformation during the year. We completed the acquisition of H2 Pocono, a world-class nutritional facility, and the divestiture of MDM.

Speaker #2: Gross margin was 47.7%, down 3.4 percentage points, reflecting A2 Poker Note losses, which were in line with expectations, a lower share of China label sales, one-time costs related to the previously mentioned supply chain disruption, and higher COGS due to higher milk and other ingredients prices particularly in the second half.

These acquisitions have more than doubled. Our Pocono team delivered: the first day of their multi-year capital investment program, on time and on budget, and secured registration amendments for the two new China label products.

The site is on track for an EBITDA break-even result in FY27, as we in-source A2, Platinum, and capture vertical margin benefits.

Speaker #2: Distribution costs were marginally higher as a percentage of net sales revenue at 3.5% due to higher freight rates primarily related to the liquid milk businesses.

Speaker #2: Marketing investment of $325 million was higher in support of the China growth strategy innovation and user recruitment. SG&A was also higher this year, mainly reflecting investment in capability to support China growth and supply chain transformation including planned A2 Poker Note operating and transformation costs.

As for slide 20, all of our key milestones with respect to English label transition, China label registrations, and facility upgrades for FY22 metrics are on track.

The production of financials in line with plans.

Speaker #2: However, if you exclude FX losses caused by the New Zealand dollar devaluation, SG&A as a percentage of sales was lower than last year. Reported EBITDA was $284.4 million, with margin in line with our previous guidance.

Finally, on July 21st, on sustainability, including commencing work to convert the A2 Pocono gas side boiler to an electrode boiler to progress towards our Scope 1 and 2 Net Zero target by 2030.

We also established real on-time data collection approaches to increase the accuracy of our Scope 3 emissions reporting, and awarded 27 new projects through our Farm Sustainability Fund.

Speaker #2: On an underlying basis, excluding A2 Poker Note losses and transformation costs, EBITDA increased to $307.6 million reflecting growth in the underlying business. Our effective tax rate improved to 30% supported by improved profitability in New Zealand and partial utilization of our group tax losses.

I'll now hand over to Dave to go through the financials in more detail. Thanks, David, and good morning everyone. Starting on slide 23 with our group P&L, net sales revenue was up 12.4% to $1.972 billion, with growth across all product categories and segments.

Speaker #2: NPAT from continuing operations was $208 million or $235.8 million on an underlying basis. We also declared a final dividend of 9.5 cents per share, representing a payout ratio of around 74%.

Gross margin was 47.7%, down 3.4 percentage points, reflecting A2 and Pocono losses, which were in line with expectations; a lower share of China-level sales; one-time costs related to the previously mentioned supply chain disruption; and higher COGS due to higher milk and other ingredient prices.

Speaker #2: The dividend will be fully franked and unimputed, and will be paid on the 2nd of October. Slides 24 and 25 set out our segment and product performance.

Particularly in the second half.

Speaker #2: On slide 24, China and other Asia revenue grew by 11.2%, with segment revenue and EBITDA impacted by A2 Poker Note losses and the fourth quarter supply chain disruption.

Distribution costs were marginally higher as a percentage of net sales revenue at 3.5% due to higher freight rates, primarily related to the liquid milk businesses.

Marketing investment of $325 million was higher in support of the China growth strategy, innovation, and new user recruitment.

Speaker #2: ANZ and USA both achieved double-digit revenue growth, with USA EBITDA improving materially. Slide 25 shows revenue growth across all product categories at group level, with liquid milk and other nutritionals growth partially offsetting China label IMF decline.

Speaker #2: Moving on to slide 26, operating cash flow was $133.1 million with cash conversion of $68% in line with our updated guidance. This reflects the planned inventory build associated with the A2 Poker Note ramp-up and normalization of China label IMF inventory, plus some timing impacts related to the fourth quarter supply chain disruption.

SG&A was also higher this year, mainly reflecting investment in capability to support China growth and supply chain transformation, including planned A2, Pocono, operating and transformation costs. However, if you exclude FX losses caused by the New Zealand dollar devaluation, SG&A as a percentage of sales was lower than last year.

Reported EBITDA was $2,084.4 million, with margin in line with our previous guidance on an underlying basis, excluding A2, Pocono losses, and transformation costs. HAI EBITDA increased to $307.6 million, reflecting growth in the underlying business.

Speaker #2: Investing cash flows included net cash net supply chain transaction outflows of around $165 million associated with the A2 Poker Note acquisition and MVM divestment, with other investing activities including a reduction in our term deposits and capex additions relating to our A2 Poker Note capital upgrades.

Our effective tax rate improved to 30%, supported by improved profitability in New Zealand and partial utilization of our group tax losses.

And PAT from continuing operations was $208 million, or $235.8 million on an underlying basis.

Speaker #2: Our closing cash balance at the end of the period was $784.5 million down $276.7 million reflecting the previously mentioned supply chain transactions A2 Poker Note capital investment program and dividends paid throughout the period.

We also declared a final dividend of 9.5 cents per share, representing a payout ratio of around 74%. The dividend will be fully franked and unimpeded, and will be paid on the 2nd of October.

Speaker #2: Turning to slide 27, our balance sheet remains strong, with cash and term deposits of $784.5 million and no external debt. Inventory as previously mentioned increased an intangibles rose with the goodwill from the A2 Poker Note acquisition.

Provides 24 and 25. Sit at a segment and product performance on slide. 24, China and other Asia Revenue grew by 11.2% with segment revenue and ebiza impacted by A2 Pocono losses, and the fourth quarter supply chain disruption,

A&Z and USA both achieved double-digit revenue growth, with USA IBAA improving materially.

Speaker #2: The balance sheet gives us capacity to support our growth strategy while balancing risk and maintaining flexibility for future investment. That concludes the financial overview.

Flight 25 shows revenue growth across all product categories at the group level, with liquid milk and other nutritional growth partially offsetting the China label IMF decline.

Speaker #2: I'll now hand over to Zhao to take you through the performance of our China label business.

Speaker #1: Thank you, Dave. Starting on slide 29, China label IMF revenue declined 14% to $544 million for the year. This was very much a story of two halves.

Moving on to slide 26, operating cash flow was $133.1 million with cash conversion of 68%, in line with our updated guidance. This reflects the planned inventory builds associated with the A2, Pocono ramp up, and normalization of China label IMF inventory, plus some timing impacts related to the fourth quarter supply chain disruption.

Speaker #1: With revenue up 6.5% in the first half and a down 33% in the second half, as a result of the fourth quarter supply chain disruption.

Speaker #1: As previously mentioned, the contributing factors are now resolved. IMF availability has improved significantly, while it is too early to be conclusive. We are encouraged by some of the early data reads.

Investing cash flows include a net cash, net supply chain transaction. Our flows of around $165 million are associated with the A2, Pocono acquisition and MVN divestment, with other investing activities including a reduction in our term deposits and capex additions relating to our A2, Pocono capital upgrades.

Speaker #1: With brand sentiment significantly improved since June and the conversion rate of new user recruitment activities is back to historical level, however, to be clear, the recovery is expected to be gradual in FY27.

A closing cash balance at the end of the period was $784.5 million, down $276.7 million. This reflects the previously mentioned supply chain, transactions A2, the Pocono capital investment program, and dividends paid throughout the period.

Turning to slide 27, our balance sheet remains strong, with cash and term deposits of $784.5 million and no external debt.

Speaker #1: Turning to the next slide, under looking at market share, on the MAT basis, China label share increased to March before declining to 5.2% by year-end.

Inventory has previously mentioned increased, and intangibles rose with the goodwill from the A2 Pocono acquisition.

Speaker #1: However, on a quarterly basis, MBS and DOL both declined significantly impacted by the fourth quarter supply chain disruption. I stock levels has now significantly improved, we are focusing on our China IMF recovery and regaining past users and accelerating new user recruitment.

The balance sheet gives us capacity to support our growth strategy while balancing risk and maintaining flexibility for future investment.

That concludes the financial overview. I'll now hand over to Zhao, who will take you through the performance of our China-level business.

Speaker #1: Moving to slide 31, which previews over two new China label products, data due to launch in the first half of FY27. Both of which will be manufactured at A2 Poker Note.

Thank you. This is starting on flash 29. China label IMS revenue declined 14% to $544 million for the year.

Speaker #1: The first A2 Zhichu Qiren targets the ultra-premium segment. And the share gains in lower-tier cities. The second A2 Zhichu Zhichun is a dual certificate organic product that is expected to build our brand in higher-tier cities.

This was very much a story of two halves, with revenue up 6.5% in the first half and then down 32% in the second half as a result of the fourth quarter supply chain disruption.

As previously mentioned, the contributing factors are not resolved.

Speaker #1: Both products has an innovative packaging including scoop inlaid. And provide consumer with confidence in the safety and quality of their purchase via our recent launched traceability APP.

Ms. Availability has improved significantly, although it is too early to be conclusive. We are encouraged by some of the early data. Risks with brand sentiment have significantly improved since June, and the conversion rate of new user movement activities is back to the historical level.

However, to be clear, the recovery is expected to be gradual in CY27.

Speaker #1: Together these new IMF products expand our China label range and support our growth strategy in the China IMF market. Our retailers distributors and the brand ambassadors are excited to welcome our new A2 IMF babies to the market very soon.

Turning to the next size and looking at market share on the MAT basis: China-level share increased to March before declining to 5.2% by year-end.

Speaker #1: I will now hand over to Yuhan to take you through the English label and the other nutritionals.

However, on a quarterly basis, MBS and the DOLL both declined, significantly impacted by the fourth quarter supply chain disruption.

Speaker #3: Thanks, Zhao, and good morning, everyone. Starting on slide 32, our English label IMF revenue grew 23% to $788 million. Driven by our strong growth in our CBEC and O2O channels, with a growing contribution from A2 Genesis, which now represents 6% of the total English label sales.

Our spoken levels have not significantly improved. We are focusing on our China business, IMF recovery, regaining past users, and accelerating new user equipment.

Moving to slide 31, which previews over two new China-level products that are due to launch in the first half of FY27.

Speaker #3: And rapid expansion in new markets, particularly Vietnam. Third quarter A2 Platinum sales were strong following industry recalls. However, off-take momentum slowed in the fourth quarter, indirectly impacted by the USA label IMF recall announced in May 2026, net of some modest switching benefits from China label.

Both of which will be manufactured at A2 PNO.

The first way is to target the all-for-premium segment and the share gains in low care cities.

The second A is a due certificate. Organic products that are expected to build our brand in higher-care cities.

Speaker #3: In ANZ, our English label IMF sales declined due to lower Daigu channel sales, while A2 Gentle Gold continues to drive growth in Australian retail channels.

Speaker #3: Moving to slide 33 and looking at market share, from a market perspective, English label now represents 20% of the total China IMF market. However, market growth slowed significantly in the second half following industry recalls.

Both products have innovative packaging, including spooky and late designs, and provide consumers with confidence in the safety and quality of their purchase. We have also mentioned launching traceability, a...

Together, these new IMF products expand our channel, level range, and support our growth strategy in the China market.

Speaker #3: A2MC was the leading share gainer on CBEC, driven by A2 Platinum and A2 Genesis performance. A2 Genesis has now achieved a 1.8% share on CBEC, with over 60% of off-take coming from early-stage products.

Our retailers, dispute users under the brand ambassadors, are excited to welcome our new A2 iMac babies to the market very soon.

I don't know, I don't know what to hand to you, to take you through the English level and other financials.

Thanks, Chef, and good morning, everyone.

Speaker #3: More recently, following the USA label IMF recall, off-take momentum has been indirectly impacted. However, we are focused on rebuilding momentum in the first half.

Starting at 5:32, our English label, IMF revenue grew 23% to $788 million.

Speaker #3: Slide 34 previews updates to our A2 Platinum and A2 Genesis formulations. A2 Platinum will receive its first major update since 2022, with an enhanced advanced nutrition formulation premium packaging and traceability.

Road in a Civic and Oto channels, with a growing contribution from A2 Genesis, which now represents 6% of total English label sales, and rapid expansion in new markets, particularly Vietnam.

Speaker #3: A2 Genesis will be upgraded with additional HMOs and a change to the probiotics to strengthen its super premium positioning. Both of these products will be manufactured at our A2 Poker Note facility, with the in-sourcing of A2 Platinum significantly increasing production volumes and bringing vertical margin capture benefits to the group.

Third quarter, Q2, Platinum sales were strong following industry recalls. However, off-state momentum slowed in the fourth quarter, indirectly impacted by the USA label. IMF recall announced in May 2026, net of some modest switching benefits from the China label.

In ANZ, our English label IMF sales declined due to lower dual-channel sales, while A2 Gentle Gold continues to drive growth in Australian retail channels.

Moving to slide 33 and looking at market share.

Speaker #3: Continuing to the next slide, our new market strategy continues to advance with Vietnam starting to scale. Distribution has expanded to more than three and a half thousand stores and English label sales grew strongly during the year.

From a market perspective, English level now represents 20% of the total China IMF market.

However, market growth slowed significantly in the second half following industry recalls.

Speaker #3: We are also continuing to assess and progress further opportunities across Southeast Asia and the Middle East. Turning now to other nutritionals on slide 36, sales grew nearly 60% to $216 million led by our kids and seniors fortified milk powders.

ATMC was the leading share gainer on CBC.

Driven by A2 Platinum and A2 Genesis performance.

A2 Genesis has now achieved a 1.8% share on CBC, with over 60% of offtake coming from early-stage products.

Speaker #3: Our kids range continues to grow strongly, with the product also responding as a substitute for stage three and stage four China label IMF users during the fourth quarter supply chain disruption.

More recently, following the USA label IMF recall, Take momentum has been indirectly impacted.

However, we are focused on rebuilding momentum in the first half.

Slide 34 previews updates to our A2 Platinum and A2 Genesis formulations.

Speaker #3: Our seniors and adult rangers hold leading category positions, and our new height support kids UHT has resonated well with consumers since launch. And we saw strong growth in emerging markets for our macro milk products.

A2 Platinum will receive its first major update since 2022, with enhanced Advanced Nutrition, premium formulation, packaging, and traceability.

Speaker #3: Turning to slide 37 and taking a look at some of our individual products more closely, as previously mentioned, our China label kids milk powder is growing rapidly, with half on half sales up around 80% and retaining the number one ranking amongst international brands in MBS stores.

A2 Genesis will be upgraded with additional HMOs and a change to the probiotics to strengthen its super premium positioning.

Both of these products will be manufactured at our A2 Perino facility, with the insourcing of A2 Platinum significantly increasing production volumes and bringing vertical margin capture benefits to the group.

Speaker #3: We continued to build brand awareness and user recruitment for our broader kids portfolio through our Octonauts 2.0 campaign, including a customized episode featuring the A2 brand, character integration on pack, and a full suite of co-branded gift boxes across the A2 kids portfolio.

Continuing to the next slide.

Our new market strategy continues to advance, with Vietnam starting to scale.

Distribution has expanded to more than three and a half thousand stores, and in-store sales grew strongly during the year.

Speaker #3: Looking ahead, we will continue to innovate our kids milk powder range with new functional formulations to address areas of strong consumer interest. Continuing on to the next slide, we entered a new category through the launch of our China label pediatric supplements range during the second half.

We are also continuing to assess and progress further opportunities across Southeast Asia and the Middle East.

Turning now to other nutritionals on slide 36.

Sales grew nearly 60% to $216 million, led by our kids and seniors fortified milk powders.

Speaker #3: The range is focused on immunity, gut health, brain, and eye health, and anti-allergy. Early consumer response has been encouraging, supported by professional endorsement. And we see significant potential to expand the platform over time including expanding into English label.

Our kids' range continues to grow strongly with the product, also responding as a substitute for stage 3 and stage 4 China label IMF users during the fourth quarter supply chain disruption.

Our seniors and adult Rangers hold leading positions in their category.

Speaker #3: Now turning now to slide 39, which previews our English label pediatric supplements range, due to launch in the first half of FY27. Our English label supplements range is manufactured in Australia to TGA standards, and will be available for sale in Australian New Zealand and China CBEC.

Now, New Pipes Support Kids UHT has resonated well with consumers since launch.

And we saw strong growth in emerging markets for our macro milk products.

Turning to slide 37 and taking a look at some of our individual products more closely.

Speaker #3: We'll be first to market with Australian-made liquid calcium sachets, one of the largest and fastest growing categories. And we intend to launch the range into Vietnam subject to achieving registration.

As previously mentioned, our Channel label kids' milk powder is growing rapidly, with half-and-half sales up around 80% and retaining the number one ranking amongst international brands in MBS stores.

Speaker #3: And with that, I'll now hand over to Jarom to take you through ANZ.

Speaker #1: Thank you, Yohan, and good morning, everyone. For those I haven't met, I'm Jarom McVicker. While I've been with A2 for some time, this is my first results presentation since stepping into the ANZ leadership role in April, and it is my pleasure to take you through the ANZ results today.

We continue to build brand awareness and user recruitment for our broader kids portfolio through our Octonauts 2.0 campaign, including a customized episode featuring the A2 brand.

Character integration on pack.

And a full suite of co-branded gift boxes across the A2 Kids portfolio.

Looking ahead, we will continue to innovate. Our kids' milk, Carter range, with new functional formulations to address areas of strong consumer interest.

Speaker #1: Turning to slide 40, our Australian liquid milk business delivered another strong year with net sales revenue up 17% to $245 million driven by growth in both our A2 milk core and A2 milk lactose-free ranges.

Continuing on to the next slide. We entered a new category through the launch of our China label pediatric supplements range during the second half.

The range is focused on immunity gap, healthy brain and eye health, and anti-allergy.

Speaker #1: We outperformed the category, growing overall share to 11.7% and lactose-free reached a record share of 22.6%. We were also proud to be the first national lactose-free brand with the launch of A2 milk lactose-free in Coles WA.

Early consumer responses have been encouraging, supported by professional endorsement, and we see significant potential to expand the platform over time, including expanding into English label.

Speaker #1: We delivered premium brand exposure across our priority markets through our exclusive Australian Open partnership as the first dairy milk partner of the Australian Open in its 120-year history, with our bespoke co-branded frappes becoming viral sensations on social media driving exceptional visibility and brand engagement, including through mass sampling.

Now, turning to slide 39, which previews our English label pediatric supplements range due to launch in the first half of FY27.

Our English Level supplements range is manufactured in Australia to TGA standards and will be available for sale in Australia, New Zealand, and China SEBEC.

Speaker #1: Moving to slide 41, slide 41 highlights the lactose-free opportunity which has been a major driver of category growth. A2 milk lactose-free is the only product in the Australian market that is both A1 protein-free and lactose-free.

We'll be first to market with Australian-made liquid calcium sachets, one of the largest and fastest growing categories, and we intend to launch the range into Vietnam, subject to achieving registration.

I'll now hand over to Jeremy to take you through, and...

Speaker #1: Lactose-free retail sales value has grown over 6% in the last year, and is approaching 10% of the total dairy milk category. The A2 milk company continues to gain share in this fast-growing category and is the number two brand in the segment.

Thank you, and good morning, everyone. For those that I haven't met, I'm Jaron McA. I've been with A2 for some time, and this is my first results presentation since stepping into the ANZ leadership role in April. It is my pleasure to take you through the ANZ results today.

Turning to slide 40.

Speaker #1: This gives us confidence in the broader opportunity for A1 protein-free and lactose-free milk, including in markets such as the USA. On that note, I'll hand over to Kevin to take you through the USA results.

Our Australian liquid milk business delivered another strong year, with net sales revenue up 17% to $245 million, driven by growth in both our A2 Milk Core and A2 Milk galactose-free ranges.

Speaker #2: Thanks, Jarom. Turning now to slide 42, the USA had an excellent year, with net sales revenue up 29% to $179 million. And importantly, achieved EBITDA break-even in the second half for the first time.

We outperformed the category, growing overall share to 11.7%, and lactose-free reached a record share of 22.6%.

We were so proud to be the first national lactose-free brand with the launch of A2 Milk Lactose Free in Coles.

Speaker #2: Growth was underpinned by double-digit gains across our core and grass-fed ranges, increased household penetration and distribution, and A2 milk is now a top 10 US liquid milk brand and is the fastest growing.

We delivered premium brand exposure across our priority markets through our exclusive Australian Open partnership as the first dairy milk partner of the Australian Open in its 120-year history, with our bespoke co-branded prep. Ace became a viral sensation on social media.

Speaker #2: From an IMF perspective, we managed a small voluntary recall of discontinued USA label IMF batches as announced in May this year. This recall was isolated to the USA market and is completed and closed with immaterial impacts on USA financials.

Driving exceptional visibility and brand engagement, including through mass sampling.

Moving to slide 41.

541 highlights the lactose-free opportunity, which has been a major driver of category growth.

ASU Milk lactose-free is the only product in the Australian market that is both A1 protein free and lactose-free.

Speaker #2: Our long-term FDA approval for IMF continues to progress, with a final factory inspection completed recently. Moving to slide 43, we continue to strengthen the brand in the USA, with awareness and net promoter score both improving and a new food service partnership with state and SHAKE.

Retail sales value has grown by over 6% in the last year and is approaching 10% of the total dairy milk category.

Your milk company continues to gain share in this fast-growing category and is the number two brand in the segment.

Speaker #2: Looking ahead, and building on the strong momentum we have seen in lactose-free in Australia, we see an opportunity to bring the same differentiated proposition to the USA.

This gives us confidence in the broader opportunity for A1 protein-free and lactose-free milk, including in markets such as the USA.

On that note, I'll hand over to Kevin to take you through the U.S.A. results.

Speaker #2: In the first half of FY27, we will launch a 2% lactose-free product with selected retail partners. In addition, we are also considering opportunities to enter the higher growth protein segments of the market with products currently under development.

Thanks, Jaron. Turning now to slide 42, the USA had an excellent year with net sales revenue up 29% to $179 million and, importantly, achieved break-even in the second half for the first time.

Speaker #2: I will now hand back to David.

Speaker #1: Thanks, Kev. That concludes today's presentation on our hand back to the operator for the Q&A.

Speaker #4: Thank you. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad.

Growth was under 10%, with double-digit gains across our core and grass-fed ranges. Increased household penetration and distribution, and A2 milk is now a top 10 U.S. liquid milk brand and is the fastest growing.

Speaker #4: If you wish to cancel your request, please press star two. And if you're on a speakerphone, please pick up the handset to ask your question.

Speaker #4: Your first question comes from Peter Marks from Goldman Sachs. Please go ahead.

From an IMF perspective, we managed a small, voluntary recall of discontinued USA label IMF batches, as announced in May this year.

Speaker #5: Good morning, guys. Thanks for taking my question. I was wondering if we can break down the EBITDA margin guidance a bit further. Is there anything in there that we should be thinking about gross margins and what are you thinking in terms of marketing and then the other cost line as well?

This recall was isolated to the U.S.A. market and is completed and closed with immaterial impacts on U.S.A. financials.

Our long-term FDA approval for IMF continues to progress, with a final factory inspection completed recently.

Speaker #5: I think that would be really helpful. Thanks.

Moving to slide 43.

Speaker #1: Yeah, no problem. But I'll ask Dave to give you some color on that. Yeah.

Speaker #5: Yeah, sure. Hey, Peter. Yeah, there's a lot of noise in the FY26 results. So probably the best way to think about it is to start with the FY25 EBITDA margin, the 16.6%, which has which doesn't have any Pocono in it, which is, I suppose, in line with the break-even result we're expecting in FY27.

We continue to strengthen the brand in the USA, with both awareness and Net Promoter Score improving, and a new food service partnership with Steak 'n Shake.

Looking ahead and building on the strong momentum we have seen in lactose-free in Australia, we see an opportunity to bring the same differentiated proposition to the USA.

Speaker #5: So it's probably the best, cleanest starting point. So if you're thinking about that 16.6, we're guiding in FY27 to approximately 15%. So you're talking 1.6 percentage points.

In the first half of FY27, we will launch a 2% lactose product. We've selected retail partners,

In addition, we are also considering opportunities to enter the high-growth protein segments of the market with products currently under development.

Speaker #5: One thing that's very important to factor in is that most of the vast majority of that decline will actually be gross margin, I'll come back to marketing in a second.

I will now hand back to David.

Thanks, Kay. That concludes today's presentation. I'll now hand back to the operator for the Q&A.

Speaker #5: It'll mostly be gross margin. And driven by probably two factors, mainly, so one is mix. So if you think about the fact that we've called IMF to be broadly flat for next year and strong growth in the other nutritionals and liquid milk, there's quite a reasonable amount of mix dilution coming through.

Thank you. If you wish to ask a question, you will need to press the star key followed by the number 1 on your telephone keypad. If you wish to cancel your request, please press star 2. And if you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Peter Marks from Goldman Sachs. Please go ahead.

Speaker #5: It'll improve through the year, but on average through the year, there'll be mixed dilution. And also, there are some COGS pressures coming through through milk, through lactose, and a little bit still through whey as well.

Morning, guys. Um, thanks for taking my question. I was wondering if we can break down the epidural margin guidance a bit further.

Um, is there anything in there that we should be using about gross margins? And what are you thinking in terms of marketing and then the other cost line as well? I think that would be really helpful. Thanks.

Speaker #5: So that'll be the two sort of headwinds. Against that, we'll have some probably some FX tailwinds. And we're cycling a little bit of air freight, but most of that 1.6, call it gross margin.

Speaker #5: Marketing will be up, but in terms of reinvestment rate, but it's more of a probably more of a phasing story. In terms of the first half being up by quite a lot, and it's probably from a full year perspective, it probably normalized, but it'll be up as probably more slightly than gross margin.

Speaker #5: Sorry, or COGS, sorry. And then we'll get a little bit of leverage on SG&A. So that's probably the way to think about the shape of the EBITDA for next year.

Speaker #5: And then probably I may as well cut it off now because I'm sure we'll get the question later is around the around the phasing around the phasing for next year.

Speaker #5: And we've talked about obviously mentioned before the 15% approximate EBITDA percentage for next year. With second half waiting, probably the two callouts, if I'm thinking about the average where you get to from an average for the full year, our marketing will probably be around two around probably two percentage points reinvestment rate higher than you'll get for the average for the for the full year.

Website. If you're thinking about that 16.6. We're guiding in FY, 27 to approximately 15%. So you're talking 1.6 percentage points, 1 thing that's very important, uh, to factor in is that most of the vast majority of that, that decline will actually be gross margin. Um, I'll come back to Marketing in a second. It'll it'll, it'll mostly be gross margin and driven by uh, probably 2 factors mainly um,

So 1 is mix. So if you think about the fact that we've called IMF to be broadly flat for next year and strong growth in the other, nutritionals, and liquid milk. Um, there's quite a reasonable amount of mix dilution coming through. It'll improve through the year, um, but on average through the year, there'll be mixed dilution. And also, um, there are some cogs pressures coming through, um, through milk through

Speaker #5: And our gross margin is probably going to be a percent worse than where you'll get to from a full year perspective. So hopefully those building blocks give you enough to be able to sort of build your build out your numbers for next year.

Speaker #5: That's very helpful. Thanks. Can I just follow up with the COGS pressures and everything that's going on with the business at the moment? How are you thinking about pricing?

Speaker #5: Do you think you can offset some of those with price increases, or is it just too much going on? Or does the new products and the formulation refreshes and the packaging refreshes actually allow you to take a bit of price?

Toasts a little bit still through way as well. So they'll be the 2 s headwinds against that will have some probably some FX Tailwind. Um, and we're cycling a little bit of Air Freight but most of that 1.6 call it gross margin marketing will be up. But um, in terms of reinvestment rate, but it's more of a probably more of a phasing story, uh, in terms of the first half being up by quite a lot and it's probably from a 4 year perspective, but probably normalized, but it'll, it'll be

Speaker #5: Interesting how you think about that.

Speaker #1: So it's David. We are taking price effectively in some of the categories in markets, but it's overall, it's not necessarily mitigating margins. So for example, in our China labeled product, we've increased price a little bit, but a lot of that's going back to the trade to support margins and activation.

Happens. You know probably more slightly than gross margin um sorry or cogs sorry um and then we get a little bit leverage on um on sgna. So that's probably the way to think about the shape of the ebit da um for next year.

Speaker #1: In our platinum product, as we transition in effect, pricing will be similar, but there's there'll be slightly smaller pack size, so price per kilogram, if you like, will go up a little bit.

Speaker #1: And then in milk, we've taken a bit of price as well, but reflecting the increases in time gate milk prices as well. So we are taking price, but it's not necessarily being accretive to margin overall.

Um, and then probably, I may as well cut it off now because I'm sure I'll get the question later is around the, um, around the phasing. Um, around the phasing for next year and we've talked about obviously, mentioned before the 15% approximate heater percentage for next year. Um, with you know, second half waiting probably the 2 call outs. If if I'm thinking about the the average where you get to from an average for the full year, um our marketing will probably be around 2 around probably 2 percentage points.

Speaker #5: Very helpful. Thanks.

Reinvestment rate higher than you'll get for the average for the full year. Um, and our gross margin is probably going to be a percent worse than we would get to from a full year perspective. So,

Speaker #4: Thank you. Your next question comes from Sam Tega from City. Please go ahead.

Hopefully, those building blocks give you enough to be able to, um, sort of build out your numbers for next year.

Speaker #5: Good morning, guys. Thank you. What would your China label market share in July for the month across all stages? And when do you think you'll get it all?

Speaker #5: Sorry, by the time of the AGM, do you think you'll get back to where you were previous supply shortages?

Speaker #1: Sam, we're not providing the China label share data for July. Are we necessarily have that all at the moment? Suffice it to say it's down quite a bit.

That's very helpful. Thanks. Can I just follow up, you know, with the cogs pressures? And you know everything that's going on with the business at the moment. It, how are you thinking about pricing? Like do you think you can offset some of those with with price increases or is it? They're just too much going on, or does the to the new products and the formulation refreshes and the packaging refreshes actually allow you to take a bit of price? It's just amazing how you think about that.

Speaker #1: We would probably estimate that our off-take at the moment sort of in the order of probably about 40% of what it might have been at the if you take the last reported results through to December.

Speaker #1: So it's come off quite a lot, but it's rebuilding back now. We're not providing guidance specifically, again, for the AGM. We expect a gradual recovery over the course of the year.

Speaker #1: Probably get back to roughly the same run rate by the end of the year that it was sort of pre the supply chain disruption.

Speaker #1: If that helps you. So progressively from where we are now back to sort of 100% of that run rate. And then for most reported sales point of view, that would then mean that it wouldn't be until the first half of FY28 that we'd be at the same level of total sales that we were pre-crisis.

Um, whether it's D we we are taking price, effectively in in some of the categories in in markets, but but its overall, it's not necessarily, um, mitigating margin. So for example, um now China labor product with increased price a little bit, but a lot of that's going back to the trade, to support margins and activation um in our Platinum product. Um, as we transition in affect pricing will be similar, but but there's, uh, there'll be slightly smaller, um, pack size, so price to kilogram if your local go up a little bit. And then in milk, we've taken a bit of price as well but um, reflecting the increases in time goat milk prices as well. So we are taking price, um, but it's not necessarily being accretive to margin overall.

Very helpful, thanks.

Speaker #5: Makes the.

Thank you. Your next question comes from Sam Tigger from Citi. Please go ahead.

Speaker #1: Thanks, Sam. It could be it could be it could be better than worse for that, but that's just sort of our expectations of what we're planning for at the moment.

Speaker #5: Okay. No, that's great. Thanks. And which of the user reacquisition initiatives that you have in place now in China have you found to be most impactful?

Good morning, guys. Thank you. Um, what was your China label market share in July for the month across all stages? And when do you think you'll get it all—like, by the, sorry, by the time of the AGM, do you think you'll get back to where you were before the supply shortages?

Speaker #5: And are you planning any tweaks to them going forward?

Um, Sam, we're not. We haven't—we're not providing the China level share data for...

Speaker #1: Yeah, Sean, do you want to talk about our past and new user reactivation, or recruitment initiatives we have at the moment?

July. Um,

Speaker #5: Yeah. So we have a I mean, a pretty good track record. I mean, to recruit new users, like what happened in the I mean, the past year, first quarter, and then we quickly turned around the new user recruitment.

We don't necessarily have all that at the moment. Um, so far, to say, it's down quite a bit. Um, we would probably estimate that our...

Our off-take at the moment is, sort of, in the order of probably about 40% of what it might have been at the, um, if you take the last reported results through to December. So it’s come off quite a lot, but it’s rebuilding back now.

Speaker #5: I mean, in the second quarter. So I mean, the most effective activation makes for new user recruitment start with what we call the mama class, targeting at pregnant women, which we are executing in like a thousands of activation per year.

We're not providing guidance specifically, again, for the AGM. We expect a gradual recovery over the course of the year.

Probably to get back to roughly the same run rate by the end of the year that it was, sort of, pre the supply chain disruption.

Speaker #5: I mean, as the I mean, number one party. Then the second one, I mean, if you look at, we have several thousand of promotion group, but the ambassador in the store, they are also the key driver to get new user in the MBS store.

the first half of FY28, that with the

The same level of, um, total sales that we were pre-crisis.

Speaker #5: And certainly, we also have other activation, like I mean, low show. I mean, also partially contribute to the new user recruitment. I mean, across all the early stage and late stage.

Makes sense. That's helpful. And then, which of the it could be, it could be, it could be better than worse for that, but that's just sort of our expectations. What we're planning for at the moment.

Okay. No, that's great, thanks. And which of the user reacquisition initiatives that you have in place now, in China, have you found to be most impactful and...

Speaker #5: Plus, I mean, last but not the least, we have a medical marketing team, who are targeting at I mean, a special channel. I mean, like maternity center, all the hospital.

Are you planning any tweaks to them going forward?

Yeah, sure. Do you want to talk about a past user or a new user?

Speaker #5: I mean, for the early stage new user recruitment. Right.

Reactivation or recruitment initiative—we haven't.

Speaker #1: And I think you and other of the market picked up that we've also sort of got gift with purchase, benefits of returning to the brand, and also enhanced loyalty program.

Speaker #1: So overall, at the moment, our user recruitment conversion rates and activities have got in place at the moment at or above historic levels in terms of the conversion of the activity, not necessarily in aggregate, but at the conversion rate.

Speaker #1: So really encouraging at the moment.

Speaker #5: Excellent. And last question. What are the biggest learnings from the supply chain challenges? And appreciate that quite a number of the factors were outside your control, but what tweaks might we make to the operating model going forward to avoid this happening again?

Speaker #5: Thank you.

So, you know, we have a I mean a pretty good track record. I mean, to recruit new user. Like what happened in the I mean, the past year for supporter and then we quickly turn around the new user equipment. I mean, in the second quarter. So I mean the most effective activation makes for new user recruitment. Start with the what we call the M Class targeting at a pregnant woman which we are executing in like a thousands of activation per year. I mean as a as the I mean number 1 party then the second 1 I mean if you look at we have a several thousand of people promotion go but the Ambassador in the store they are also the key driver to get the new user.

Speaker #1: Oh, Sandy, you're right. I mean, a lot of this was outside our control in terms of the industry factors that led to recalls, new standards, testing methodologies, and all that at both in the New Zealand side as well as the China side.

Speaker #1: But the underlying thing that we need to address is having more consistent level of imagery throughout the supply chain at the right stages of the supply chain.

Speaker #1: And we've struggled with that mainly due to some challenges we've had with similar supply over time. However, having said that, Sinlai has recovered well in recent months, and we have no real concerns about supply going forward, but we must work together with Sinlai to ensure that we have more consistent supply going forward.

In the MBS store. And certainly, we also have other activation like, I mean, uh, local. I mean, the also partially contribute to the, uh, new user recruitment. I mean, across all the wage and, uh, these days. Plus, that means last but not least, we have a medical marketing team who are targeting at. Uh, I mean, a special Channel. I mean the uh, like maternity Center or the hospital, I mean, the uh, for the early stage new user recomment.

Speaker #1: And indeed, from our Pocono facility going forward as our English label product and our new China label products, hopefully become more material over time.

Right. And then, I think you and others in the market picked up that we've also sort of, like, done well with purchases, benefits of returning to the brand, and also enhanced the loyalty program, so overall at the moment, um, you—

Speaker #1: We need to do the same ourselves. So we're not saying we're perfect, but we've got to ensure that we have more consistency in our production and inventory management throughout the system.

Speaker #5: Great. Thank you.

Speaker #4: Thank you. Your next question comes from Tom Careth from Barren Jelly. Please go ahead.

Got in place at the moment at or above historic levels in terms of the conversion of the activity—not necessarily in aggregate but at the conversion rate—so really encouraging at the moment.

Speaker #3: Yeah. Morning, guys. Just to follow on from Pete's question there, just on marketing. So you're saying it'll be a lot higher in the first half, that 2% points.

Speaker #3: Can you maybe just give us some color on how much of that relates to the Pocono products and just how should we think about, I guess, the marketing spend in relation to those that launch that you're doing this half?

Excellent. And and last question, you know what are the biggest learnings from this supply chain challenges and appreciate that? Quite a number of the factors. Were outside your control. But you know what, tweaks, might we make to the operating model going forward to avoid uh this happening again. Thank you.

Speaker #1: Tom, the support for new products coming to market, not only the China label products, is appropriate, but relatively modest compared to the total investment that we have in brand and new user acquisition overall for both the Jetsu China label product and A2 Platinum.

Oh Sandy, you're right. I mean a lot of this was outside our control in terms of the industry factors that led to recalls, new standards, testing methodologies, and all that at both in the New Zealand side as well as the China side. Um, but the, the underlying thing that we need to address is having more consistent level of, of inventory, throughout the supply chain at the right, at the right stages of the supply chain and we've struggled with that. Um,

Speaker #1: I mean, obviously, the A2 Platinum is a combination of both. We're facing out A2 Platinum and bringing in our new upgrade. But I mean, we have a baseline level of investment in always-on digital and everything else.

Speaker #1: We've got a significant investment in early stage new user recruitment. And then we cycle in and out of new innovation coming to market, of which we have a fair amount coming to market in the next quarter, which we wanted to highlight to our investors.

Speaker #1: So there's an appropriate amount, but don't think that it is by any means a sort of majority of our investment on the new products and ignoring the base business.

Mainly due to some challenges. We've had with similar Supply Over time, however, having said that, um, since I has recovered well, um, in recent months and we have no real concerns about Supply going forward. But we must work together with simulator ensure that we have more consistent Supply going forward. And indeed, from our poker night facility, going forward, as our as our, you know, English label product, and our new channel label products, um, hopefully become more material over time. We need to do the same ourselves so we're not saying we're perfect, but we've got to ensure that we have more consistency in our production and inventory management throughout the system.

Right. Thank you.

Speaker #3: And it is can you maybe just talk through the incrementality of the Pocono products and how we should think about maybe market share when we're talking about share in 12 months' time, like where should we be in share then?

Thank you. Your next question comes from Tom Keris from Baron Joey. Please go ahead.

Speaker #3: Maybe versus now if the plan's going to play out.

Speaker #1: So back a year ago, we sort of mapped out in connection with the acquisition what we expected the new China label products to contribute in sales, and also gave some earnings sort of margin to perspectives on it as well.

Um, yeah, good morning guys, um, just to follow on from Pete's question, then just on marketing. So you're saying it'll be a lot higher in the first half that 2 percentage points. Can you maybe just give us some color on how much of that relates to the Pocono products and, and just, how should we think about? I guess the marketing spend in relation to, to those, um, that that launched that you that you're doing this off?

Speaker #1: But it was over $100 million of incremental sales over the next few years. At close to our average China segment EBITDA margins. Where we are at the moment is our thinking is that that.

Speaker #1: With the launch, which is slightly ahead of plan, like being able to launch these products in October, having just commenced the manufacturing and that, which is great to be in market earlier, we're hoping that they might contribute if you look at the phasing there, I think there's a phasing chart in the earlier presentation, 12 months ago.

Speaker #1: I think hopefully they'll make a stronger contribution earlier. I won't be specific about that. And one of the reasons I say that, Tom, is that through the supply chain disruption that we've experienced and our recovery program, we've deliberately constrained the distribution or the way to distribution of our Jetsu product.

Of which we have a fair amount coming to market in the, um, in the next quarter, which we wanted to highlight to our investors. So there's an appropriate amount, but don't think that it is by any means a sort of majority of our investment on the new products and ignoring the base business.

Speaker #1: So we're at about two-thirds of what we were pre-supply chain disruption. Which actually opens up a bit more sort of available distribution for one of those products, which will play a more discreet or incremental role.

And and it is you maybe just talk through the incrementality of of the Pocono products. Um, and and how we should think about maybe market, share when we're talking about share in, in 12 months time. Like, where, where should we be?

in share then, you know, maybe versus versus now if the plans kind of play out,

Speaker #1: So if you put that all together, I think earlier launch perhaps a little bit more white space in distribution. I think we are hopeful that we'll get a greater contribution earlier, but we won't provide any specific guidance on that at the moment.

So back.

Speaker #3: Okay. Great. Thanks, Dave.

Speaker #4: Thank you. Your next question comes from Craig Wolford from MSG Marquee. Please go ahead.

Speaker #5: Morning, team. Just firstly, just want to clarify what your guidance inferred about the second half and if that's an indication of more normal margins.

In connection with the acquisition. What we expected. The, the new China label products to contribute in in sales and also goes to earnings, sort of margin for perspectives on as well, but it was over hundred million dollars of incremental sales over the next few years. Um, at you know, close to our average China segment either margins, where we are at the moment is, um, are thinking, is that that

Speaker #5: If I've interpreted your commentary right, it's more like a 12% EBITDA margin in the first half and I guess by inference closer to 18 in the second half of '27.

Speaker #5: Is that second half relatively clean? Is that a guide of how margins look once all the supply chain noise settles down?

With the launch, which is slightly ahead of plan like being able to launch these products in October having you know, just commit to the manufacturing and that which is, which is great to be in Market earlier. We're hoping that they might contribute. If you look at the phase in there, I think there's a phase in chart in the, in the earlier presentation, 12 months ago, I think hopefully they'll make a stronger.

contribution earlier. I won't be specific about that, and one of the reasons I say that, Tom, is that through the

Speaker #1: Craig, yeah. I won't comment on your percentages you called out, but what I will say is just be wary of the marketing because of the because we're basically saying that the first half will be reasonably up from a in terms of percentage points sort of implies second half will be probably down relative sort of normal run rate.

supply chain disruption that we've experienced in our recovery program. We've deliberately constrained the distribution, or the way to distribution, of our garu product.

Speaker #1: So that's probably a little bit to come back on that margin from a marketing perspective. But I think the second half should be a better indication of what we're seeing in the future.

Um so we're at about 2/3 of what we were prii chain disruption, which actually opens up a bit more sort of available distribution for 1 of those products which will play a um a more discreet or incremental role. So if you put that all together I think earlier launch that's a little bit more white space in distribution. I think we are hopeful that we'll get a greater contribution earlier but we won't provide any specific guidance on that at the moment.

Okay, great. Thanks though.

Speaker #2: Directionally. Directionally, right.

Speaker #1: Yeah.

Speaker #5: Okay. Can I read the English label performance in FY26? Is there any way to tease out I'll see very difficult. Any way to tease out underlying performance versus some of the customers that might have shifted to that channel the CBEC channel because of the shortages?

Thank you. Your next question comes from Craig Wolford, from MSG Marquee. Please go ahead.

Good morning, morning, morning team. Um, just firstly, just want to, uh, uh, clarify what your initial guidance was in the first about the second half. And, you know, if that's an indication of more normal margins, if I've interpreted your commentary right? It's more like a 12% EBITDAR margin in the first half, and—

Speaker #1: From the China label, Craig, going across to English label, is that what you're saying?

Guess by, in France, positive 18 in the second half of 27.

Speaker #5: Yeah. You're going from I think it was 19.1%.

Speaker #1: Yeah.

Speaker #5: A year ago to 19.5. Is that organic or switch?

Is that, um, second half relatively clean? Is that, uh, you know, a guide of power margins, once all the supply chain noise settles down?

Speaker #1: So just in terms of I might want to add to this, but just in terms of the switching, we did mention in our update to the market that there was some switching from Jetsu to Platinum.

Speaker #1: And there was some, but I think perhaps that's been amplified by the market. So I think there's been probably expectation that's greater than what it was.

Speaker #1: So in essence, it was relatively small, the switching from China label to Platinum. Most of the users, unfortunately, have gone to other brands, which some have retained with us and their job is to get them back, so.

Um, Craig, yeah, I won't comment on your percentages. You called out, but, um, but what I will say is just just, just be wary of the, um, the marketing, um, because of the because we because we're basically saying that the first half will be, you know, reasonably up from a, you know, in terms of percentage points, sort of implies second, half will be probably down relative sort of normal run rate. So that's probably a little bit to come back on that margin from a, um, from a marketing perspective. But, you know, I think, I think the second half should be a better indication of what we're seeing in the future.

Directly Direction directly right? Yeah.

Speaker #1: I don't know if that helps.

Speaker #5: Well, I guess the natural follow-on is it's quite a good result on English label because it was fairly static over the last 18 months at 19.1 and it's up to 19.5.

Okay. Um, can I, with the, uh, English label performance in FY26?

Speaker #5: So what would you attribute that to?

Uh, is there any way to tease out—some very difficult way, anyway—to tease out underlying performance versus some of the...

Speaker #2: Yeah. So I think, yeah, so market share growth is I guess two factors. One is, of course, continued investment in A2 Platinum and in particular new user recruitment.

Council has not shifted to that.

Speaker #2: So we've seen particularly over the last 12 months an improvement in our stage one, stage two share. And the second thing is the introduction of Genesis as well.

Channel, the CBC channel, because of the shortages.

uh, from the

Speaker #2: So that adds a greater addressable market for us because it gives us exposure to the faster-growing HMO segment within English label. And we've been able to capture on our MAC basis in CBEC now a 1.8% share.

From China label, probably going across to English levels. Don't you say, like you're going from—I think it was 19.1%. Yeah, I think. Is that organic or is it switch?

so, just in terms of,

Yeah, I might want to add to this, but just in terms of the...

Speaker #2: So those two together, then if you look at an over an 18-month period of contributed to the EL share gains.

Speaker #5: Right. Thanks, yeah.

The switching, like we did mention in our update to the market—there was some switching from J to, um, to platinum, and there was, um, but I think perhaps, um,

Speaker #4: Thank you. Your next question comes from Richard Bowick from CLSA. Please go ahead.

Speaker #6: Good morning, all. David, just want to talk specifically about winning back some of the lost China label share. How much can you target or can you identify those A2 customers that have switched away?

That's been amplified by the market. So I think there's probably been expectation that's greater than what it was. So, in essence, it was relatively small—the switching from China label to platinum.

um,

Is unfortunately have gone to other other brands which, you know some have retained with us. In our job is to to get them back. So

I don't know if that helps.

Speaker #6: And I was also curious just sort of think through, is there a point when it's too late to get them to switch back? And then the other sort of dimension to that question is, does transition from stage one to two and two to three does that present opportunities to win those customers back?

Well, I guess the national following is it's quite a good result on English Label. It was fairly static over the last 18 months at 19.1, and it's up to 19.5, so all you should do that too.

Speaker #6: Just like to sort of talk through those points if you could, please.

Speaker #1: Yeah, sure, Richard. So in terms of targeting those users that may have lapsed so we can do that in certain areas, but it's not by no means do we have a comprehensive CRM tool that tracks everything across all channels.

Speaker #1: And it's just because of the nature of the China market, there's consumers by offline and online through different platforms and things that's hard to keep that all hard to capture a lot of that information.

Speaker #1: So with, say, for example, an offline in the key in the sort of national key accounts and some of the regional key accounts we have our promotional ambassadors in store who keep quite close contact with the consumers in the regularly purchased from those stores.

Yeah. So I think. Yeah, so the market share growth is I guess. 2 factors, 1 is um, of course. Um, continued investment in, um A2 platinum and in particular in you as a recruitment. So we've seen particularly um, over the last 12 months and Improvement on our stage 1 stage 2 share. And the second thing is the introduction of Genesis as well. So that adds um a a greater addressable market for us because it gives us exposure to the faster. Growing HMO, segments within English label. Um, and we've been able to capture, uh, and on our mat basis in C, are now a 1.8% share. So, those 2 together,

Speaker #1: And through WeChat channels and everything else. So we have good line of sight over that. But through our loyalty program overall, there's a portion of consumers that do subscribe to our total loyalty program.

Speaker #1: And then within the e-commerce platforms, there are loyalty programs. There as well. So we have some line of sight over our users that we can target and retarget.

Speaker #1: Your second part of that was, is it too late? For some of our it's probably what's important.

Speaker #6: Is it too late, right?

Speaker #1: Yeah. So just in terms of the timing. So for early stage users, if they have switched to another brand, most mothers with a young infant would be not inclined to generally not inclined to switch back unless they've had problems with those with the new product that they are using.

Speaker #1: Some will. Some may wait for the next stage of transition, which is the second part of your question, which is when you transition from one to two to two to three, that provides another opportunity to regain those consumers.

Speaker #1: And of course, as those consumers did, change to other brands, the competition couldn't help but offer them attractive deals on full case or one or two cases, which means that they've got significant some of them have significant pantry inventory to consume as well before they would contemplate switching back to us.

Speaker #1: So that's why there's several other reasons why it's going to take some time for those consumers to come back to us. And we're also refocused on ramping up the momentum of our new user recruitment.

Speaker #1: And then for later stage users or just highlight that stage three users, the infant or toddler is obviously more robust and consumers that have got greater flexibility in modifying feeding patterns or potentially using alternative nutrition or other products and then switching back is much more convenient for the consumer.

Speaker #1: And on stage four in particular, whilst we're out of stock in stage four for a long period of time, due to similar supply, we did have our kids' nutrition kids advanced product that we refer to, which has been incredibly successful and also supported some of those consumers that we're using or users that we're using stage three and four product as a substitute product.

Speaker #1: So it's complicated. We don't have full line of sight of everything at the moment. The plan that Sharon and the team have put in place is being executed well.

Speaker #1: And there's some encouraging signs, but it's too early to be quite definitive. We'll give updates to the market as we go. Next at the AGM and again at the half-year or in between if we need to.

Speaker #6: And just timing-wise, so David, if is it sort of it's to win these back, will you presumably the sooner the better and so therefore the AGM update that will give you the best insight?

Speaker #6: I mean, that seems like it's unlikely to be a second half-weighted winning Chinese label customers back. That's going to be a first-half story.

Speaker #1: Yeah, there'll be some well, we're hoping that there'll be a significant proportion that will come back. And some are already come back because we're a largely out of largely out of stock, Richard.

Speaker #1: And so a great proportion had left. And so to even be at 40% off-take at the moment or thereabouts, that's already a significant return to the brand.

Speaker #1: And that's improving every week. So we'll see where we're at at the AGM. We'll certainly provide an update then. If it's materially different, up or down, we'll obviously let the market know if that's critical.

Speaker #1: But overall, at the moment, we're expecting, as I said earlier, like if we're around 40% now, to be back to 100% or thereabouts run rate by the end of the financial year.

Speaker #1: So progressive recovery throughout the year. So we're going to be very we're very careful about how we're going about this. So the number one priority for us is to ensure that we maintain our really strong brand health that we have for the A2 brand.

Speaker #1: And the last thing we want to do is to rush into this and not preserve that, the distribution and the great sort of trade support that we have in the market as well as looking after our consumers.

Speaker #1: And that's why we have constrained our distribution at the moment. And we're progressively going to expand that over time. And we're not discounting product and pushing it into consumers or expanding our distribution rapidly, which could run the risk of ending up with a lot of slow-moving inventory in the trade and create freshness issues and pricing and impact the whole ecosystem, which is really important to the A2 business model.

Speaker #1: So in essence, we're going about this in a really measured, careful way, mindful of what our consumers need and what the health of the A2 brand for the interest of the long term.

Speaker #6: Yep. Okay. That all makes sense. Thanks, David.

Speaker #2: Thank you. Your next question comes from Adrian Alban from Jordan. Please go ahead.

Speaker #7: Oh, good morning, team. Just, David, just keen to understand when you talk about constraining if you like the distribution for Zito in particular, is that when you provided you a sort of July update, and you were sort of thereabouts at target inventories, is that against the constrained construct?

Speaker #7: I'm just trying to sort of reconcile where we might have been forecasting to where you're sort of at now with a new view on the distribution in terms of releasing it slowly as you got confidence.

Speaker #1: Yeah. Yeah, that's correct, Adrian. So it's against a constrained distribution that we're at target. And obviously, we factor in a certain number of weeks cover and obviously the and that's a forward-looking month cover or weeks cover measure that we have.

Speaker #1: And obviously, the off-take was uncertain at that point, but generally, you're correct that we were referring to us being at roughly at target inventory on a constrained basis for the offline channels.

Speaker #1: Obviously, that's not relevant for online.

Speaker #7: Okay. And then, as you sort of I think you've talked about sort of 40% off-take to 100, would you expect that that distribution would go back to where about possibly ceding some of the constrained people with the new products initially, but is that a reasonable assumption as well?

Speaker #1: Yeah, I think that we'll head back towards in the order of sort of 25 to 30 thousand deals that we had previously. I can't be specific.

Speaker #1: I'm exactly when that's going to happen, but I think we'll head towards that by the end of the year. So if you sort of factor in that, there will be a little bit of trade inventory level expansion as we move from weighted distribution of around two-thirds now to closer to 100% over time, if that's where you're coming from.

Speaker #7: Yep. Okay. No, that's fine. Just in terms of the English label seem to slow quite a bit in the second half as you've sort of talked about the market commentary.

Speaker #7: And I guess your market share dipped a little bit in that fourth quarter relative to the Kantar stuff, if you sort of indicatively look at the smart path.

Speaker #7: Can you sort of talk a little bit more about what's happening right now relative to that exit rate?

Speaker #1: Yeah, I might hand over to you, but we did definitely see a decline in off-take following the US recall announcement. So I mean, again, that product is a different product.

Speaker #1: There's no physical issue with the product. It was just the obviously the unfortunate the similar name, etc., and being picked up in China. So anyway, I'll hand over to you.

Speaker #3: Yeah. So as David said, so if you look at the second half, the third quarter was growing strongly. It was a continuation of the trend in the first half.

Speaker #3: Where I guess it was the biggest challenge was in May and June when the US label recalling came out. There was an indirect impact.

Speaker #3: And yes, you can see in the fourth quarter, probably smart path is the best indicator of the impact. Where you can see it's effectively a 10% down for May and June.

Speaker #3: Well, we expect is, of course, that to rebuild in the first half, but you can see it on the data on the slide 33, fourth quarter 26 is 17.9 versus the MAT of 19.6.

Speaker #7: Okay. And so the expectation is that that would be that dent would be sorted over the first half, is what you're sort of saying?

Speaker #7: You're already seeing progress that that's coming.

Speaker #3: Yeah, correct. Correct. Yeah. So that's happening. Yeah.

Speaker #7: Just a final question from me. Just in terms of the whole obviously, the whole serialized and testing was a big priority for the company over well, particularly over the period since you reported the February result.

Speaker #7: Can you just sort of update us on where you're at with that? Is it sort of is it back to normal now against the new testing regimes that are required, or is there any outstandings required on that work program?

Speaker #1: Adrian, we've so I think the testing methodologies and levels have been reasonably well established internationally. However, I do note that New Zealand has really the only country that has introduced very definitive standards or requirements.

Speaker #1: At some of the tightest levels, which is great. We have no problem with that at all. It's just that it did evolve a lot quickly over time for both regulators and company participants.

Speaker #1: So we have gone through testing of all of our product we've made adjustments to our supply chain. There is no concern around the safety of our product in relation to.

Speaker #1: So they're right. I can't, as an infant company, you can't promise there's never going to be any quality or safety issues. But we have we have really solid certificates of analysis from suppliers.

Speaker #1: We do testing on celluloid throughout the supply chain as part of our release processes. We make those test results available to our consumers. I mentioned earlier in the call about the batch-by-batch testing results.

Speaker #1: You can see Nil Detect on all of our products every batch. So it's very thorough process that we have in place now. So no concerns whatsoever.

Speaker #1: And most of the industry has adapted rapidly as well, but we've been very transparent about that.

Speaker #7: Okay. Thank you. That's great.

Speaker #2: Thank you. Your next question comes from Marcus Kelly from UBS. Please go ahead.

Speaker #7: Good morning, team. I just wondered if we could revert back to the high level of the guidance. Is it right in assuming that in terms of the infant formula guide, that you're talking about growth in English label in a decline in China label at a high level?

Speaker #1: We haven't been explicit about that, Marcus, but I mean, certainly in the first half, that would be the case. Over the full year, it's probably it remains to be seen.

Speaker #1: It's probably closer than you may expect. We'll just have to wait to see how that plays out. We haven't provided specific guidance on that.

Speaker #1: But yeah, certainly in the first half, it's English label will outperform China label on a reported sales basis. Yeah.

Speaker #7: Okay. I suppose then just on English label, so you're are you anticipating growth in English label for the year?

Speaker #1: Yeah. I mean, at this stage, we would expect that if anything, English label is likely to be ahead of China label. But it depends.

Speaker #1: It depends on how the new products perform and everything. So I mean, it's early in the year, but yes, that would be our sort of expectation at the moment.

Speaker #1: But the difference between the two if you're expecting English label to way outperform China label, given what's happened to China label, that's not necessarily going to be the case.

Speaker #1: It's probably a bit more nuanced than that.

Speaker #7: Yes. I suppose when you think about English label, I appreciate the comments around your market share in the fourth quarter. You don't necessarily see that in the second half revenue performance.

Speaker #7: And so you obviously got Vietnam going well. You've got new products coming well, you're getting back in the stock on new products. It just sort of trying to gauge what I'm missing in terms of the English label performance potentially in the next 12 months.

Speaker #1: Well, in the second maybe not in the next 12 months, but when you're looking at there's a little bit of movement in trade inventory as well that you might want to factor in as well in the second half because we finished the year we finished the December half slightly low in English label trade inventory.

Speaker #1: And then at the end of the year, slightly higher because of the late fourth quarter drop-off in offtake. So that explains a little bit of the higher if you're trying to sort of understand the high the relativity of the reported sales growth versus the market share numbers, that explains a little bit of that.

Speaker #7: Right. Okay. So that drop-off.

Speaker #1: Then you've got new market you've got underlying growth. You've got new emerging markets, and then you've got a little bit of trade inventory level movement as well.

Speaker #7: Okay. Thank you. And then it looks like the two new China label products are both in the ultra-premium category. Is that different to what you were initially thinking?

Speaker #7: And maybe you can just give us a little bit more color in terms of maybe the price points of those two products and how you plan to roll them out from a store perspective?

Speaker #1: Sure. Do you want to talk to the yeah. Yeah. So both of the product is a positioned

Speaker #3: as ultra-premium product. Because I mean, A2Z2 is I mean, the heritage is like both perceived by the consumer under the healer as the ultra-premium product.

Speaker #3: And we also represent I mean, ultra-premium I mean, segments. So for the digestion, it's going to be the I mean, like a lower-tier city expansion.

Speaker #3: Because I mean, this I mean, patent MLCT and plus OPO plus full nutrition benefit really I mean, appeal to the lower-tier mom who wants basically everything.

Speaker #3: And also, I mean, you can if you can see from the market, even in the lower-tier city, there are still like 40% above ultra-premium contribution in the lower-tier city with mom inspect to buy the best product for their baby.

Speaker #3: Yeah. So I mean, this product going to the lower-tier city with ultra-premium positioning, digestion, full nutrition, benefit, and the plus a higher treat margin, which is also very effective in the lower-tier city.

Speaker #3: Because typically in the lower-tier city, you rely more on the rehealer's recommendation. Yeah. Then the A2 H1, which is the A2 organic, are serving as I mean, ultra-premium product.

Speaker #3: Typically, organic is a very unique segment in China market. Only appealing to certain consumer in the higher-tier city. So this product has to be a higher price and also represent the best source of milk A2 New Zealand.

Speaker #3: Yeah. valuable, precious source of milk to make this product. So it's going to dispute along Zishu in the higher-tier city. It tops all key accounts.

Speaker #3: Hopefully, generate incremental volume appealing to this segment.

Speaker #1: So you're right, Marcus. We a year ago, as we were developing our plans, we thought this would either play in the super premium to ultra-premium space and we have led towards the ultra-premium as we've done more work on our go-to-market strategy.

Speaker #1: Taking into account distributor and trade feedback on it as well. So we think this is the right positioning. And the full nutrition formulation that the two-run product has, we think supports that as well.

Speaker #1: If it doesn't, whatever that if it doesn't, whatever purpose hold that price point, we can always yeah. We can always wind that back a little bit that it's very difficult, as you know, to take a product up after you've launched it at a certain price point.

Speaker #7: And so both products priced at a premium to the existing product?

Speaker #1: The organic product will be at a premium to Jochu, but we won't we're not being specific about the two-run. Product pricing relative to Jochu at this stage.

Speaker #7: Okay.

Speaker #1: It'll be close. I'm just not saying it's going to be above or below, but it'll be close. But in the ultra-premium segment.

Speaker #2: Thank you. Your next question comes from Phil Kimber from E&P Capital. Please go ahead.

Speaker #8: Hey, guys. It's such a question. On the market growth, you expect I think you've given the total China infant formula market grew at 0.7, but that was over the whole year.

Speaker #8: And at the half, it grew 3.6 for just the first 25 or 26 weeks. So it looks like it's gone backwards about 3% now.

Speaker #8: And China label and well, English label looks like maybe flattened China label down. What's your expectation for the market to grow or decline in FY27?

Speaker #8: And when you look at the various stages I mean, should we anticipate that that momentum increases as it declines faster? Or am I sort of missing something in that?

Speaker #1: No. It's always hard to thinking about the China infant market. But we think at the moment, our thinking is that the number of newborns will probably be up this supported by the marriage rate, which increased last year.

Speaker #1: So you've got the impact of the dragon year still working its way through the system and the later stages. And then you've got birth rate, obviously declined a lot last year, but will probably be up marginally this year.

Speaker #1: So overall, we would expect Phil we'd expect the market to be down low single digits only down slightly next year, low single digits. Probably early stage reasonably robust sort of flat to marginally up.

Speaker #1: And later stage to be down because of the tail end of the dragon year working its way through the system, if that makes sense.

Speaker #8: Yeah. And when you say you're talking fiscal 27 there or calendar 27?

Speaker #1: Yeah. Yeah. FY27. Yeah. But the birth newborn numbers, I'm referring to calendar year because that's the basis which they're reported.

Speaker #8: Yeah. And then my second question, just around seem like and you mentioned having to work with them to improve supply. In terms of are there any I mean, there's been rumors on the wires around ownership changes there.

Speaker #8: I don't know if there's anything you can talk to on that or where you think that might end up, that business. From your point of view?

Speaker #1: We get every six months there seems to be rumors about us doing something in relation to Sinlight. Look, I won't comment on speculation. All I'll say is that we've had a long and strong relationship with Bright and Sinlight.

Speaker #1: Despite some of the supply challenges that we've had, we work day-to-day really closely with Sinlight. The Jochu China label registration is very strategically important to us.

Speaker #1: We intend to partner with them in the long term. And the only other thing I'd say is that the acquisition of Pocono and the hundreds of millions of dollars that we've invested in that and the upgrade is probably indicative of our supply chain strategy.

Speaker #1: So nothing more to say on that, Phil.

Speaker #8: Phil. Thank you.

Speaker #2: Thank you. Your next question comes from Steven Ridgewell from Craig's Investment Partners. Please go ahead.

Speaker #9: Yeah. Good afternoon. David, first question for me is just on the new China label products. Just wondering if you could please give us a broad implication as to the revenue contribution that's baked into the guidance for flat overall formula sales from those new products.

Speaker #9: And then this relates to that. Would you be expecting these new products to have a positive contribution at the EBITDA level in FY27, or given launch cost, is that perhaps more of a expectation for FY28, please?

Speaker #1: I'll go back to the comments I made earlier in the calls, Steven, in the Q&A session. I forget who it was to. But last year, if you have a look, when we announced the acquisition, we said that the two labels were contributing incremental over $100 million to sales.

Speaker #1: And there's a chart in there which shows the sort of expected ramp-up of that. For the reasons I said before, I'd expect that to be great.

Speaker #1: Like earlier, then what that chart would indicate. We definitely I mean, the chart would indicate we probably expect $10 million or less this year, which was there's not quite right.

Speaker #1: So it'd be more than that, but it's certainly not going to be the majority. So it'll be a reasonable number, but we're not providing specific guidance on that.

Speaker #1: In terms of the contribution, probably diluted in the second quarter when they launched. But it created in the second half.

Speaker #9: Cool. Thank you. And then just going back to the broad brush sort of recovery plan for China label sales, I guess at a high level, just given we're seeing social media sentiment improve through the data you've provided, search rates are improving, and stock is broadly available for China label, I guess a high level, why are we not seeing a stronger pickup in sales already?

Speaker #9: I mean, I think it's a down 60% does seem pretty steep. There's quite a big mountain to climb to get back to the 100% of pre-crisis.

Speaker #9: recovery plan, in the detail, you'll be looking at it. Do you sort of assume a large number of those customers are gone for good and that you're really relying on over-indexing market share gains for new mothers to get back to that pre-crisis level of sales?

Speaker #9: And if that's the case, I'm just wondering if you'll be able to share more data points with us to perhaps provide comfort on that recovery plan.

Speaker #9: Thank you.

Speaker #1: Well, I think, David, so being out of stock for most of the four quarters, as I said, has had a pretty significant impact on our user base, particularly early stage.

Speaker #1: So now at about 40% off-take run rate, we've lost the majority of our early stage customers through forced product switching to other brands. And we're probably maintaining the majority of our later stage users as I said before, it's challenging to get those early stage users back quickly, but there will be opportunities to say as they consume the pantry stock that they have and as they change stage, going forward opportunities to acquire them.

Speaker #1: Overall, I guess by definition, given what we're saying, we are assuming that we will over-index in terms of our new user acquisition going forward.

Speaker #1: And in terms of data point, the best thing I can offer you is that the conversion rates on the activity we have in place at the moment by the different channels and mechanisms that we go about are either at or above where we were pre-supply chain disruption.

Speaker #1: And we're investing more in marketing this year. In absolute terms, if you run the math on it, it's a significant increase in marketing weighted to the first half as well.

Speaker #1: And we've got the full support of our retailers as well. And distributors. So for example, some of when these types of things, it's one of the most critical things in the trade is to hang onto the shelf space that you have.

Speaker #1: And overall, we've got the same, if not greatest shelf space despite being with our product for a considerable period of time. Some of our retailers have actually given us an extra bay as well, which is incredible support.

Speaker #1: So anyway, Sharon and the team are doing a terrific job in China to, one, to manage the fourth quarter, but now in executing our recovery program and so far, so good.

Speaker #1: But it's early days.

Speaker #9: Cool. Thank you.

Speaker #2: Thank you. Your next question comes from Julia Destuck from Morgan Stanley. Please go ahead.

Speaker #10: Hi everyone. Just wanted to come back to your comments around the outlook for the English label category into FY27. Given you noted in the release around kind of competitor recall impacts in the second half, given they seem to be normalizing now, could you just speak to maybe in more detail your outlook for the next kind of 12 months on both the competition side and therefore prospects for customer acquisition as well?

Speaker #1: Yeah. Yeah. How do you want to do that? Like category and.

Speaker #9: Yeah. Yeah. So I think obviously, if we look at the English label, market overall, and you look at the first half, it was growing strongly.

Speaker #9: Obviously, the second half was impacted by the competitor recalls. Around. So although English label now makes up 20% of the total China IMF market, obviously, the second half has been impacted by all of that.

Speaker #9: So of course, the major brands within the EL segment have had challenges in this space. For ourselves, of course, May, June, we had our own challenges.

Speaker #9: What we observe from competitors is that it does take a few months for that to rebuild. And so we would expect the same from ourselves.

Speaker #9: So I guess if you look at the English label market, the underlying demand for the product coming from overseas is still there. Notwithstanding the challenges that the sector has had with those recalls.

Speaker #9: And we would expect that Horizon and Genesis, so our Platinum and Genesis, will support our growth and rebuild into FY27.

Speaker #10: Got it. And then just on the reformulation of the Genesis product, I think you mentioned earlier that it was to kind of reinforce the premium positioning of the product.

Speaker #10: Maybe not in those specific words, but could you just speak to kind of why the upgrade of that product now and what you're seeing in the market that might potentially be a catalyst for improving that kind of premium positioning?

Speaker #9: Yeah. So if we look at Platinum, the product has been in market for a number of years, but we haven't really upgraded the formulation meaningfully since 2022.

Speaker #9: And of course, consumer expectations along ingredient profiles such as HMO have changed in that period. So what we want to do is make sure that we improve the formulation of the product, plus also improve the usability of the product.

Speaker #9: So a good example of that is the new Platinum product has the scoop in the lid. But historically, we have had the scoop in the powder, which we know is can be a bit annoying for consumers.

Speaker #9: So we've improved both the formulation and the usability to keep in line with consumer expectations. And then also on the Genesis product, we've upgraded the formulation to have six HMOs.

Speaker #9: We know consumers are looking for variety of HMOs within their formulation. And of course, once we launched, we had three HMOs and we've upgraded to six HMOs, plus upgraded the probiotic itself to a human-resonant bacteria.

Speaker #9: So that also improves the positioning of the product. So yeah, the English, both the upgrades for the English label products are to keep in line with the consumer expectations.

Speaker #10: Thanks.

Speaker #2: Thank you. Your next question comes from Will Twist from Forces Bar. Please go ahead.

Speaker #11: Morning, guys. If you look at kind of the initial recovery campaign that's underway, a lot of it is quite heavily focused on product quality and testing.

Speaker #11: Is that actually in response to anything you're seeing from consumers in terms of being concerned about the quality of the product and not just the product availability over the fourth quarter?

Speaker #1: Well, no, not specifically for our product, but there has been a lot of concern amongst Chinese consumers in the infant and toddler category given what's happened in the market in the first quarter of this year.

Speaker #1: And also in other categories like nappies or diapers have had issues as well. And there's been another recent sort of infant formula, but another brand, I won't comment on it specifically, but another concern recently as well.

Speaker #1: So I think generally Chinese consumers, mothers are very conscious about the importance of quality in our category and they're very sensitive to it. So we're just doubling down on that and making sure they've got 100% confidence in our brand in the category.

Speaker #1: And the other part of the confidence is not the quality, it's the supply which is what the main issue that we had, which is we didn't have product in market.

Speaker #1: So we're giving them confidence around the availability of product. And the distribution retail has been back in all the national tier accounts. With in some accounts with additional shelf spaces, really positive.

Speaker #1: And what we were refreshing our point of sale and everything going forward. So there's a lot of work around that just providing our consumers with trust on quality and supply, which is the most important thing in our category.

Speaker #11: Okay. That's helpful. Thank you. And then if we think about supply chain costs, we know there were some additional costs kind of embedded on the cost base for FY26.

Speaker #11: Can you just talk to or provide some more color around how much cost is in there relative to a normal baseline and then what the outlook is for some of those items into FY27?

Speaker #1: Hi. Well, it's Dave. We're not really getting into the ins and outs of the second half supply chain costs, gross margin. There's significant additional costs.

Speaker #1: There's some mitigating factors and some going the other way. I think the best way to think about it, like I said before, is start with your FY start with a clean year, which is FY25, and build it from there.

Speaker #1: And I sort of gave you the building blocks a little bit earlier.

Speaker #2: Thank you. There are no further questions at this time. I'll now hand back to David Bortolissi for closing remarks.

Speaker #1: Thanks, everyone, for joining the call. Before I finish, I'd like to thank our A2 team for their incredible effort and impact during the year.

Speaker #1: It's been a challenging end to the year, and I think our teams, particularly our China team and supply chain team, have done a wonderful job mitigating that impact and now focused on our recovery plan going forward and all the other growth opportunities we have in the business.

Speaker #1: So thank you to our team and for our investors and analysts. I look forward to catching up with you shortly over the next week or two.

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