I went to the A2 Milk company AGM. Here's what I learned

I went along to the A2 Milk Company Ltd (ASX:A2M) AGM. Here's what you need to know about it.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Yesterday I headed along to the A2 Milk Company Ltd (ASX: A2M) AGM in Auckland.

As a shareholder I was keen to meet the team face-to-face. I also wanted to get a better feel of how the company is thinking about competition.

I like going along to AGMs. They let me gauge the mood of other investors and provide insights that reading the ASX releases alone doesn't offer.

This meeting had an interesting vibe. As I settled in with a coffee (made with A2 milk) there was a mix of positive energy (smiles, laughing, talking) and nervousness, likely due to the slowdown in share price over the year.

I took a library of notes, but here are the big takeaways:

  • Growth in the U.S. market has been "excellent" in the first half of FY20. The focus of the US market is fresh milk, rather than infant formula.
  • Pleasingly, the company's EBITDA margin has grown in the first half of the financial year, but will soften in the second half because costs are creeping up.
  • No, there won't be dividends coming any time soon. Despite strong cash flows the focus is to keep reinvesting in growth and build market share.
  • CEO Jane Hrdlicka addressed slowing birth rates in China, A2 Milk's key infant formula market. The company isn't fazed by the slow down and still sees China as a strong growth market and a big opportunity.

Question time!

The most interesting insights came at the end when shareholders could pepper the board and executive with questions. And pepper they did! I've summarised some of the most interesting points raised:

  •  Is there any risk to supply from droughts in Australia? No, there is no concern for supply relating to drought conditions.
  • Does long-term growth in A2 production pose a competitive risk? Chair David Hearn said that in the next 20 years A2 could very well become the dominant milk type produced globally. However A2 Milk's focus is to build the brand and grow it's early mover advantage and pricing power the way Dyson did with stick vacuums.
  • Are there plans for new products? A2 Milk's focus today is very much on the strong market opportunity for current core products. New products would be a distraction with too high opportunity cost.

Foolish Takeaway

I left the AGM with a foam toy cow for my desk and an impression that the company was in great shape. The business relies heavily on its brand to separate it from the competition, so I'll be watching this closely going forward.

Motley Fool contributor Regan Pearson owns shares of A2 Milk.

You can follow him on Twitter @Regan_Invests.

The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Oil industry worker climbing up metal construction and smiling.
Energy Shares

ASX 200 energy shares lead the market as US trade deals fuel optimism

ASX energy shares lifted 3.94% as more US trade deals led to improved market sentiment.

Read more »

A female ASX investor looks through a magnifying glass that enlarges her eye and holds her hand to her face with her mouth open as if looking at something of great interest or surprise.
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

A smiling businessman in the city looks at his phone and punches the air in celebration of good news.
Broker Notes

These ASX 200 shares could rise 50% to 60%

Brokers believe these shares could deliver big returns for investors.

Read more »

A girl is handed an oversized ice cream cone with lots of different flavours.
Best Shares

8 ASX All Ords shares that tripled in value in FY25

Just 8 out of the 500 companies making up the ASX All Ords achieved share price growth of 200% or…

Read more »

Broker written in white with a man drawing a yellow underline.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

Woman with a scared look has hands on her face.
Broker Notes

Bapcor shares fell more than 30% yesterday. Should investors buy in the dip?

Is this a value opportunity?

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Broker Notes

Broker raises price targets on 2 ASX 200 shares to buy

Ord Minnett has just upped its 12-month share price targets on 2 buy-rated ASX 200 stocks.

Read more »

Man with rocket wings which have flames coming out of them.
Share Gainers

Guess which ASX All Ords stock just rocketed 34% on strong earnings growth

Investors just sent this ASX All Ords stock surging 34%. Here’s what’s happening.

Read more »