What a great introduction. Good morning, everyone, and welcome to The a2 Milk Company's 2025 Annual General Meeting. My name is Pip Greenwood, and I'm honored to serve as the Chair of the Board. It's a pleasure to have so many shareholders joining us here in the room and online. I can confirm a quorum is present, and I now formally declare the meeting open. Before I start, before we start, I would like to introduce my fellow directors and management who are here with me today. To my right, we have David Bortolussi, our Managing Director and CEO, Dave Muscat, our CFO, Kate Mitchell, our Chair of Audit and Risk Management Committee, and Jaron. I'll have to get this right. Jaron's got the longest title in the company: Chief Legal and Sustainability Officer and Company Secretary.
To my left, we have Sandra Yu, the Chair of the People and Remuneration Committee, Lain Jager, Grant Dempsey, and Antonio Rivera, who is known to us as Tonet. Also present today, we have our auditors from Ernst & Young, our external legal advisors, and our share registrar, MUFG Pension and Market Services. Today, you will hear from me as Chair of the Board and from our Managing Director and CEO, David Bortolussi. After this, we will then put forward the resolutions as described in the notice of meeting and respond to questions put to us by shareholders. With the formalities taken care of, it is now my pleasure, on behalf of the board, to update our shareholders on The a2 Milk Company's progress over the last year. 2025 marks a significant milestone of the company's 25th anniversary.
This is a moment to reflect on our journey, celebrate our achievements, and look ahead with ambition. From pioneering the a2-type protein proposition to becoming a trusted brand across China, Australia, New Zealand, the U.S.A., and emerging international markets such as Vietnam, our commitment to quality, innovation, and sustainable growth continues to define us. FY 2025 has been another year of strong execution. Despite ongoing macroeconomic challenges and evolving market dynamics, we remain focused on delivering against our growth strategy, and our results continue to reaffirm the strength of our brand, the quality of our execution, and the dedication of our very talented team. Our financial performance was outstanding, with group revenue up 13.5% and earnings per share up 20.9% in FY 2025. We continue to make meaningful progress against our medium-term financial and non-financial goals and remain on track to achieve the vast majority of our targets.
This year, we saw the introduction of a dividend policy. Total dividends of NZD 0.20 per share were announced in FY 2025, representing a payout ratio of 71% and equating to approximately NZD 145 million being returned to our shareholders. In sustainability, we continue to advance our goals of protecting the planet, caring for our cows, rethinking packaging, progressing towards net zero, and contributing to a nature-positive future. We are committed to supporting the planet and the communities in which we operate. Our people are the heart of our success. We continue to foster a safe, diverse, and inclusive environment where our teams feel valued and supported. On behalf of the board, I'd like to thank our incredible team across Australia, China, New Zealand, and the U.S.A. for their dedication and hard work in contributing to our strong FY 2025 results.
Since the end of the financial year, we have made significant progress in our supply chain transformation strategy with the acquisition of a world-class nutritional manufacturing facility in Pōkeno and the divestment of our interest in MVM. The board actually had the privilege of visiting Pōkeno yesterday, which was a really exciting time for us all. David Bortolussi will speak about these transactions in more detail in his address shortly. These transactions strengthen our strategic position and provide us greater certainty over future capital needs. As a result, the board was pleased to announce its intention to declare a special dividend of NZD 300 million, subject to regulatory approvals in connection with Pōkeno's two existing China IMF products. We expect to provide further details on the special dividend within the next 12 months.
Turning to governance, board renewal and succession planning have been a key focus since I commenced my role as Chair. Last year, we welcomed Tonet and Lain to the board, bringing deep expertise in global IMF supply chain and international agribusiness leadership. More recently, Grant joined the board, bringing extensive strategic and financial leadership experience. Lain and Grant will be standing for election today, and you will hear from them later in the meeting. These changes reflect our commitment to ensuring the board has the diverse perspectives and capabilities needed to support the company's strategic execution. My fellow directors and I remain focused on growing shareholder value and serving our shareholders with purpose. Before I close, I'd like to address my own reelection as a director, as I am standing for reelection today. I've had the privilege of serving on the board since 2019 and as Chair since November 2023.
I'm proud of the progress we've made and excited about the opportunities ahead. I bring extensive commercial and governance experience, including my current role as Chair of Westpac New Zealand and Director of Westpac Banking Corporation. I've previously served on the boards of Spark New Zealand, Fisher & Paykel Healthcare, Vulcan Steel, and Russell McVeagh , where I also served as Chair and Interim CEO. I remain committed to realizing the company's strategic ambitions and representing the interests of our shareholders. Thank you for your continued support and the investment in The a2 Milk Company. I now invite David to address the meeting. Thank you.
Good morning, everyone, and thank you for joining us today at our annual meeting. My name is David Bortolussi. I'm the Managing Director and CEO of The a2 Milk Company. Over the past year, we've continued to deliver strong financial results and made substantial progress on transforming our supply chain. These outcomes are driven by execution of our growth strategy and the exceptional work of our talented teams around the world. Today, I will share with you our operational and financial highlights from the past year, a slight adjustment to our strategy following the recent transactions, progress on our supply chain transformation, and an update to our FY 2026 outlook. Before I do that, let me recap on a2's journey to date. From humble beginnings in the year 2000, when the company was formed in New Zealand by scientist Dr.
Corrie McLachlan and his business partner Howard Patterson to focus on the a2 protein difference, we've grown into a global business operating in Australia, China, New Zealand, North America, South Korea, and Vietnam. We have a product portfolio that spans all life stages, from infant and kids through to adults and now seniors. It is therefore fitting that we celebrate our 25th year since formation by acknowledging the achievements of our team, past and present, that have built The a2 Milk Company into what it is today, reporting record sales with sales growth across all of our markets and categories, and recently announcing a major step forward in our supply chain transformation that I'll speak to later.
It's been a remarkable journey to date, which all of us should be proud of, and I want to thank our shareholders that have supported the company along the way, including those here today with us. More recently, we reported a strong FY 2025 result to the market in August. We continue to execute our growth strategy, which saw us deliver record sales of NZD 1.9 billion and double-digit growth in revenue, EBITDA, and EPS. We moved from a top five to a top four brand position in the China Infant Milk Formula, or IMF, market, driven by strong performance in both English and China label. We launched new products for infants, kids, and seniors, and we expanded into new markets. As shareholders, you will be aware that last year, at our annual meeting, we introduced a dividend policy for the first time in our company's history.
Since then, we've declared and paid dividends totaling NZD 0.20 per share with a payout ratio of 71%. This marked an important milestone in our journey to deliver sustainable returns to our shareholders. Moving to our FY 2025 financial results, we delivered full-year revenue growth of 13.5%, and importantly, earnings grew at a faster rate. EBITDA was up 17%, and net profit after tax and EPS were up 21% with strong cash conversion. On the right-hand side of the slide, you can see that we've driven significant growth since FY 2021 when we refreshed our growth strategy, achieving a compound annual growth rate in revenue, EBITDA, and EPS of 12%, 22%, and 27%, respectively. Looking at our geographic segment and product category performance on the next page, our growth continues to be driven by our China and other Asia segment, led by English label IMF and other nutritionals.
Since FY 2021, we've grown our China and other Asia segment sales by a compound annual growth rate of 22%. Our ANZ segment sales were flat, with growth in our Australian liquid milk business offsetting declines in the daigou channel. Our U.S. business continued its strong growth, and MVM experienced a significant increase in external ingredient sales, mainly driven by higher GDT pricing and milk volumes. From a category perspective, our total IMF sales grew by 10%, with English label the standout performer, up 17%, driven by growth in our CBEC and O2O channels and a shift towards the English label category. China label was up 3.3% with record market share, which was actually a very good result in a market that declined by 5.6% and also having to manage significant supply constraints. Liquid milk sales grew by 14% in total, with ANZ up 10% and the U.S. up 22%.
Other nutritionals continued to grow at a fast rate, up 23%, supported by our new kids and seniors milk powder products launched during the year. Turning to market share, our overall China IMF market share continued to reach record levels, resulting in a2 rising to the number four brand position in the world's largest IMF market with 8% overall market share. This is a major milestone for our company, which launched its first IMF product only 12 years ago, competing against the global leaders in the category and very capable, strong domestic players. We continue to ramp up our innovation with key new product launches during the year in the infant, kids, and seniors nutrition segments.
Our early results are encouraging, and we are hopeful that a2 Genesis, kids advance, and our seniors range featured on this page here will continue to be key growth drivers in our FY 2026 results and beyond. As we look ahead, we remain committed to investing in product innovation as a core pillar of our growth strategy to deliver benefits to our consumers at every life stage, from the infant and toddler years to healthy aging. We progressed our emerging market strategy, expanding the reach of our English label products into Vietnam through the launch of a2 Platinum in the first half and a2 Gentle Gold in the second half. The launches are showing positive early signs driven by our focus on building brand awareness, expanding our distribution across mother and baby stores, and activating in trade to promote trial and adoption.
As we continue to expand our footprint in emerging markets, we're also deepening our relationships in the most established and strategically important market, being China. I'm pleased to share that recently we expanded our long-standing strategic partnership with China State Farm to now include English label IMF products in the cross-border e-commerce channel, starting with a2 Genesis from early next year. This marks a significant milestone in our relationship with China State Farm, which began in 2013. Over the past 12 years, we have worked closely with China State Farm to build our China label IMF business, helping us to grow to over 100 distributors and reach around 30,000 mother and baby stores across China, as well as key online platforms. China State Farm's expertise and operational capability have been critical to our success in China.
This expansion has been well over 12 months in the making, and it was formally recognized with a signing ceremony at China International Import Expo a couple of weeks ago in Shanghai. It reflects not only the strength of our partnership with China State Farm, but also the strong relationship between China and New Zealand. Moving now to our investment in the a1 protein-free science, which is central to our a2 Milk brand proposition. Over the past year, we've continued to build on that foundation with the results of three new studies released in relation to maternal and infant nutrition and seniors cognition, further expanding knowledge of the unique benefits of a2 Milk. We actually have our Chief Scientific Advisor, Dr. Andrew Clark, here with us today.
If any of you have any further questions around those studies or the a2 protein difference, feel free to catch him after the meeting closes. Shifting focus to sustainability on the next page, we have a clear roadmap in place to guide us towards achieving planet-positive outcomes and net zero by 2040. Over the year, we've reduced emissions significantly, supported on-farm initiatives, and improved packaging performance. Moving now to a brief strategy update, we have updated our growth strategy after completing our supply chain transformation transactions. Firstly, we have adjusted our transformed supply chain priority to focus on execution of our important transformation program at a2 Pōkeno and on building capability to support our innovation and growth. Secondly, we've placed more emphasis on entering new markets and called this out as one of our key strategic priorities.
Moving to the next slide, we are tracking well towards our medium-term financial and non-financial goals and remain on track to achieve the majority of our targets. Our strong FY 2025 performance has brought us much closer to our medium-term revenue ambition of NZD 2 billion, and our supply chain transformation will support a more significant increase in EBITDA margins in FY 2026. Our English label IMF and ANZ liquid milk businesses are back on track, and our emerging market outlook has improved following the launch of IMF in Vietnam this year, which we're excited about. I'll now turn to the progress we've made in transforming our supply chain, which is a key enabler of our future growth. In August, we announced two transactions that will transform our supply chain and market access, enabling us to build a better, higher growth, lower-risk end-to-end business with significant value creation potential.
The first transaction relates to the acquisition of a fully integrated nutritional manufacturing facility located in Pōkeno here in New Zealand that I'll refer to as a2 Pōkeno. Importantly, it has two existing China label IMF registrations and already produces two of our English label IMF products. The second transaction we announced relates to the divestment of MVM to Open Country Dairy to optimize our asset footprint following the acquisition of a2 Pōkeno. There is a clear strategic rationale for these transactions. In essence, the combined transactions enable growth and share gains in China through market access and innovation, accelerate the development of a world-class nutritional manufacturing capability, and they capture attractive financial returns through vertical margin capture and incremental brand contribution.
In terms of financial returns, by FY 2030, the combined transactions will deliver over NZD 100 million of incremental brand sales and over NZD 60 million of additional EBITDA through incremental brand contribution and vertical margin capture. We've been working on this strategy for several years and considered many options. Without doubt, the transactions we've completed are our preferred strategic, operational, and financial outcome. Turning to our newly acquired a2 Pōkeno facility, which is strategically located in the Waikato region. This world-class site has proven capability in IMF manufacturing and is already producing two of our English label products. Importantly, we've secured a long-term agreement with Fonterra for a1 protein-free milk, ensuring supply flexibility and supporting our long-term growth ambitions. We will be investing significantly in the facility and expanding our team to enable the growth. The next page highlights a key aspect of the strategic rationale for the acquisition of a2 Pōkeno.
Of the top 10 players in the China IMF market, a2 is the only brand in the top 10 with a single China label product, with the competition having between 5 and 21 registrations. It's obviously challenging to capture the full potential of the market in a market in China that's so large and complicated with only one product available to us. The acquisition of a2 Pōkeno is expected to increase our China label IMF product registrations from one to three in the near term, which will enable us to expand our product portfolio, develop differentiated consumer and trade propositions to increase market share, including in lower-tier cities.
An expanded China label portfolio will help us maximize our IMF opportunity in China by providing greater access to the larger segment of the China IMF market, with the China label segment of the market accounting for approximately 80% of the total market. In the short term, we will transition existing products to our a1 protein-free milk base, and we are in the process of seeking regulatory approval to bring them under the a2 brand while planning for future innovation and a third registration slot. Since announcing these transactions, we have made significant progress. We have successfully completed the acquisition of a2 Pōkeno facility and the divestment of MVM. We are advancing the regulatory processes to bring the existing China label registrations under the a2 brand. More specifically, we have achieved NPI's approval of our updated RMP and have applied for GACC approval. That is customs approval in China.
The next step beyond that is applying for SAMR approval of the amendments to the registrations. We've already completed some blending and canning batches for a2 Platinum at the Pōkeno site in collaboration with Synlait, head of transition in the first quarter of 2027, and have commenced short-term and long-term product development trials. We have made strong progress in our capital investment program at Pōkeno and awarded several key contracts and have commenced our IT integration and ERP upgrade projects. We've been hiring people in manufacturing leadership and operational roles over time. We'll add more than 100 new roles to the facility, providing significant development opportunities to our existing and future team members. At the same time, we've ensured a smooth operational separation of MVM. To conclude this section, we are excited to secure a world-class asset to help us build our supply chain of the future.
At this early stage, our transformation program is tracking in line and in some cases ahead of plan. Turning now to our FY 2026 and the company's outlook, I'm pleased to say that we've started the year strongly with IMF, other nutritionals, and liquid milk product categories all trading ahead of expectations. In addition, changes to actual and forecast currency rates, reflecting depreciation in the New Zealand dollar, are expected to inflate sales and expenses, with the impact on EBITDA not expected to be material. Having regard to both of these factors today, we've increased our FY 2026 guidance for revenue growth from high single-digit percent to low double-digit percent. We have also reconfirmed our EBITDA margin guidance to be approximately 15%-16% and increased our net profit after-tax guidance to now be slightly up on FY 2025 reported.
Lastly, we increased our guidance for capital expenditure to reflect the accelerated progress of our a2 Pōkeno capital investment program. Finally, turning to capital management, the transactions discussed today provide us with clarity in relation to our future capital needs. As noted by our Chair in her address, the board intends to declare a special dividend of NZD 300 million, subject to obtaining regulatory approvals to bring the new China label registered products under the a2 brand, which is expected to take up to 12 months from when we announced the transactions back in August. The special dividend is expected to be unimputed and fully franked. That brings me to the end of my presentation. In closing, we've delivered a strong FY 2025 result, executed two transactions and a milk supply agreement that substantially supports our growth strategy, and have demonstrated disciplined capital management.
It's been a massive year for our team, and I do want to thank them all publicly for their exceptional contribution and impact. We're only a small team at a2 of just over 500 people, and the team's achieved remarkable things this year, and I really want to thank them for that. For our shareholders, I look forward to answering any questions you may have after the formal business section of the meeting or afterwards, after the meeting closes, whatever suits you. Thank you very much for your time. I'll now hand back to our Chair.
Thank you, David. We now turn to the matters that require resolution, as outlined in the notice of meeting, with a poll to be conducted for each resolution.
The poll will be conducted at the end of each resolution, and your ballot papers and online voting card will be collated by our share registry. The resolutions set out in the notice of meeting are considered as ordinary resolutions. To be passed, that requires the approval of a simple majority of votes by the shareholders entitled to vote and voting on the resolution. Shareholders here in Auckland will be able to cast your votes by filling out the ballot form that you received at the registration desk, and which will be collected at the end of the formal part of the meeting. Those attending the meeting online will be able to vote by clicking the Get a Voting Card box on the online portal. If you require further information and guidance on the voting process, please refer to the notice of meeting.
There will be an opportunity for shareholders to ask questions both on the resolutions being put to the meeting today and more generally at the end of formal business. When I call for questions, for those of you who are attending in the room, please raise your hand and wait for a microphone to be delivered to you. Please clearly state your name prior to asking your question. We will also be responding to questions from shareholders attending virtually via the online portal. For shareholders attending via the online portal, please submit your questions on the resolutions or general business now. I would like to take this opportunity to remind everyone that this meeting is being webcast, so you will also be heard by an audience outside of this room.
If we are unable to get through all the questions today within the time allocated, we will respond individually after the meeting. We will now move to the resolutions. Resolution one relates to the auditor's fees and expenses. Pursuant to the Companies Act, the company wishes to authorize the directors of the company to fix the fees and expenses of the company's auditor, Ernst & Young, for the ensuing year. Are there any questions with respect to this resolution? Do we have any questions in the room? No? Do we have any questions online?
There are no questions online at this time.
I now propose that the directors of the company be authorized to fix the fees and expenses of the company's auditor, Ernst & Young, for the ensuing year, and I put the motion to vote. Thank you. The next resolution concerns my re-election as a Director.
I've asked Kate Mitchell, the Chair of our Audit and Risk Committee, to chair this part of the meeting. Thank you, Kate.
Thank you, Pip. Pip is retiring by rotation in accordance with the company's constitution and the NZX listing rules and offers herself for re-election. The board recommends Pip to you as a Non-Executive Independent Director and unanimously supports her re-election. You have already heard from Pip as our Chair earlier in the meeting, where she also addressed her re-election. I now propose that Pip Greenwood be re-elected as a Director of the company. Are there any questions from shareholders concerning this resolution? Do we have any questions in the room? No? Do we have any questions online?
We do not have any questions online at this time.
Thank you.
I now propose that Pip Greenwood be re-elected as a Director of the company, and I put the motion to vote. Thank you.
Thanks, Kate. The next resolution concerns the re-election of Sandra Yu as a Director. Sandra is retiring by rotation in accordance with the company's constitution and NZX listing rules and offers herself for re-election. The board recommends Sandra to you as a Non-Executive Independent Director and unanimously supports her re-election. I will now invite Sandra to address the meeting.
Good morning. I'm honored today to stand for re-election to the board. Over the past three years, I've had the opportunity to contribute to the company's journey through a period of strategic evolution, particularly in strengthening our position in China and progressing the company's supply chain transformation.
As Chair of the People and Remuneration Committee, I've worked closely with my fellow directors to ensure executive remuneration frameworks are fair, performance-linked, and aligned with shareholder interests, as well as supporting the company's focus on diversity, inclusion, and talent management. As an experienced company director and global executive, I bring over two decades of experience in consumer goods and infant nutrition, including the leadership roles at Mead Johnson and Unilever, where I focused on global brand transformation, innovation, and modernizing go-to-market strategies through digital platforms. I believe my experience in China and across Asia continues to be highly relevant to the company's ambition, and I look forward to continuing to support the board and management in the years ahead. Thank you and cheers.
Thank you, Sandra. I now propose that Sandra Yu be elected as a Director of the company. Are there any questions from shareholders concerning this resolution?
Do we have any questions in the room? No? Chante, do we have any questions online?
There are no questions online at this time.
I now propose that Sandra Yu be elected as a Director of the company, and I put the motion to vote. Thank you. The next resolution concerns the election of Lain Jager as a Director. Lain joined the board in December last year and is retiring in accordance with the company's constitution and the NZX listing rules and offers himself for election. The board recommends Lain to you as a Non-Executive Independent Director and unanimously supports his election. I now invite Lain to address the meeting.
Thank you, Pip. Good morning, and thank you for the opportunity to introduce myself as I stand for the election to the board.
My background is in international agribusiness, most notably as CEO of Zespri International, where I led the company through a decade of global growth, innovation, and strong financial performance. Since stepping down from Zespri, I've remained active in the sector through private investments and governance roles, and I'm excited by the opportunity to bring that perspective to The a2 Milk Company. I believe the company is uniquely positioned in the global infant formula business, particularly in China, and I'm passionate about contributing to the company's continued success. I look forward to working with the board and management team to support company growth and value creation for all shareholders. Thank you for your support.
Thank you, Lain. Are there any questions from shareholders concerning this resolution? Any in the room? No? Any online?
We have no questions online at this time.
I now propose that Lain Jager be elected as a Director of the company. I put the motion to vote. Thank you. The next resolution concerns the election of Grant Dempsey as a Director. Grant joined the board in September this year and is retiring in accordance with the company's constitution and NZX listing rules and offers himself for election. The board recommends Grant to you as a Non-Executive Independent Director and unanimously supports his election. I now invite Grant to address the meeting.
Thank you, Pip. Good morning. It's a privilege to be standing here for election following my recent appointment to the board. My career has spanned senior roles in finance, strategy, and governance, including investment banking and most recently as CFO of two ASX 50 companies. I've worked closely with boards and executive teams throughout my career on complex transactions, capital management, and strategic transformation.
Since retiring from my executive roles last year, I've focused on governance. I currently serve as Chair of Firmus Technologies and a small number of other ASX and private non-executive directorships across infrastructure, industrials, and technology. I'm focused on ensuring strong financial discipline and transparency and bringing a deep understanding of strategic oversight and risk management. I believe my experience will complement the already significant skills on the board, and I look forward to contributing to the company's next phase of growth. Thank you.
Thank you, Grant. Are there any questions from shareholders concerning this resolution? Are there any in the room? Looking around. No? Chante, any online?
We have no online questions.
Thank you. I now propose that Grant Dempsey be elected as a Director of the company. I put the motion to vote. Thank you.
Resolution three seeks shareholder approval to increase the Non-Executive Director fee pool by NZD 310,000, from NZD 1,365,000 to NZD 1,675,000. This adjustment reflects the increased scope and complexity of governance responsibilities, the expansion of the size of the board, and benchmarking against peer comparators. The proposed increase will provide flexibility to fairly compensate current and future non-executive directors over time while maintaining alignment with shareholder interests. Further details in relation to this resolution have been outlined in the notice of meeting, and the PwC benchmarking report has also been made available to shareholders on the company website. As noted in the notice of meeting, a voting exclusion applies to this resolution. Are there any questions from shareholders concerning this resolution? Is there any in the room? No? Are there any online, Chante?
We have no online questions.
I now propose that the Non-Executive Director fee pool be increased by NZD 310,000, from NZD 1,365,000 to NZD 1,675,000, and I put the motion to vote. Thank you. On to our next resolution, Resolution four. To align with recent practices for New Zealand and Australian executive remuneration, the board has committed to submitting the CEO's long-term incentive plan, Grant, as a resolution on an advisory basis for the purposes of the NZX listing rules to the annual meeting, which is subject to this resolution today. The company's LTI plan is designed to reward performance in support of the achievement of the company's growth strategy by targeting profitable long-term revenue and EPS growth, which requires appropriate investment. An overview of the key terms of the proposed grant of rights to David is set out in the notice of meeting.
The board considers the performance hurdles of the LTI plan sufficiently challenging and aligns with shareholder value creation. The board recommends you vote in favor of this resolution, and we unanimously support this grant of performance rights to David Bortolussi. As noted in the notice of meeting, a voting exclusion applies to this resolution. Are there any questions from shareholders concerning this resolution? Any in the room? No? Chante, any online?
We have an online question from Eve Quayling. Can you please explain what "on an advisory basis" means in this resolution?
That means that it's non-binding on the company, but will be taken into account in any future consideration. Are there any other questions?
We have no other online questions.
Thank you.
I now propose that the acquisition of 324,606 performance rights by the company's Managing Director and CEO, David Bortolussi, by grant under the company's long-term incentive plan be approved, and I put the motion to vote. Thank you. That concludes the resolutions, and there were a few of them, presented to the shareholders for vote. Please now submit your vote for each resolution. Please select for, against, or abstain. For those attending in person, representatives from our share register will now collect your voting cards. For those attending the meeting online, voting will close shortly. The results of the polls will be released to the NZX and ASX following the meeting. We'll just give pause for a minute while we just give time for the ballots to be collected. Okay, I think the voting's complete. We now move to general business.
I'd like to offer you the opportunity to raise any general questions. Please make your questions concise so that everyone who wants to raise a question has the opportunity to do so. If we're unable to get through all the questions today, as I mentioned earlier, within the time allocated, we'll respond individually after the meeting. I'd now like to open the floor for any questions from shareholders. Do we have any questions in the room? We've got one up here.
John Clearwater, shareholder. I'm very excited to see the results from the scientific study of the improvement in cognition for seniors. With the big increase in numbers of seniors around the world, I feel that this should be the base for a really determined push in this region, expanding to other countries and building further research. Please, I have a request.
Please, please, when you have publications and good research to report, please give them at least space for an abstract, or better, a whole page for each of these studies, because I think they are very important for the understanding of the shareholders in the wider world.
Thank you, John. Yeah, we're excited about the research. And for Andrew, Andrew put you as head of scientific research, which David introduced earlier. Do you want to just talk to the study very briefly, and then I'll comment on the?
It's good to see you here again, John. I see you on a regular basis, and so thanks for your attendance. Look, 2025 has been a great year for a2 Milk Company's research.
Not only have we had three clinical publications that have been supported by the company, but a number of other groups around the world have independently been publishing studies as well. On top of our three, there have been another three that talk towards the benefits, digestive benefits, and lower inflammation that a1 protein-free milk imparts compared to conventional milk. Talking to the three studies that were presented earlier, the maternal nutrition was very much a breakthrough study. It demonstrated that a mother consuming a2 Milk transferred the benefits through to her infant, which was breastfeeding. What was very comforting about this was we first got reports anecdotally, testimonials received from parents, and it was a great pleasure to be able to explain to people. We now have the underpinning science for these benefits that has been reported over the years.
Looking at the stage one infant formula study, once again, it was a case of scientifically demonstrating something that was witnessed by consumers, that a number of infants who consume a1 protein-free milk-based infant formula have better digestive comfort, which was reflected in their crying, sleeping, and which is great for the parents. The final study, which was presented, the MCI, or mild cognitive impairment, demonstrated that removing the a1 protein from milk enhanced the benefits that the elderly enjoy, from dairy owing to improved cognition, as measured by the Montreal Cognitive Assessment, which is a gold standard measurement of cognition in the elderly, as well as audio-verbal learning tests. Okay. I'll be happy to talk to you further afterwards.
Thanks, John. As you pointed out, we do see the senior nutritionals as an opportunity for growth.
There are actually the three products we've launched over there. You can have a look at the product packaging. There are three different types of prducts. I don't know, David, if there's anything you want to add?
I think Andrew covered it.
Great question. Thank you. Any other? I think I can get a packet of seniors to improve my cognition. I don't think it's actually available in New Zealand, but hopefully in the future, yes. Any other questions? We have one over here. Just wait for a microphone.
I've been a shareholder for quite a long time in a2 and have appreciated all the work that's been done with over the few traumas that we've had. One of the things is, and to support a2, other than the dividends that you give me, I drink your milk.
I'm just, and I've found it increasingly difficult to buy a2 Milk. It used to be in limited numbers in all the supermarkets, but today it's not there. I'm forced to drink another one, which my wife doesn't appreciate because she said it's much too creamy than when I do. I want to know where, when is it going to be available, if at all, in New Zealand?
That's a great question, sir. Sorry, what was your name?
Sorry, Walter Smale.
Thank you. David will tell you I'm a bit of a dog with a bone about the fact that we're not supplying a2 Milk in New Zealand. The Frontier arrangement had come to an end, and Frontier didn't want to renew it. We have been exploring other options, and I think we have found a supplier.
Hopefully in the future we will have a2 Milk in our supermarkets. I don't know if you want to add anything, David?
No, it's still a work in progress, but we hope to be able to update the market shortly. It's hard to tell when you're negotiating those sort of arrangements. We hope that it's positioned differently and more available in the market as well. We are very keen to restore our distribution of a2 Milk in New Zealand.
We have launched in Australia very successfully lactose-free a2 Milk. Hopefully in the future we'll have a broader range here in New Zealand.
Thank you very much. Thank you.
We have one question at the back.
Hello. Hello, shareholder. No, that's not the reason. You just don't want them to buy the product so that they will want it.
End of the day, if you do not have the product, you will have people go, "Where's a2? Where's a2?" My daughter-in-law is always saying, "Where's a2?" It is a good idea not to supply, isn't it? I just want to say thank you for this today. Very incredible what your people have done and how you have, well, given so much positive news. Just incredible. Especially also you are doing the whole milk business in America. How is that going, by the way? Does Trump have anything to do with it, or is it just that you just go on as usual and hope you will leave in three years' time?
Do you want to answer that?
I am sorry, I missed your name, but.
Small shareholder.
Small shareholder. No problem. There is no sign of any impact from the Trump administration, no business there. It is a domestic business.
Our whole milk business there, our core range of whole milk and 2% is growing very well, particularly in the grocery and mass channel. On top of that, we have our grass-fed innovation, which for New Zealand shareholders will seem like that's not that significant. In the U.S. market, grass-fed is a rarer form of milk because of the farming practices there, and it's been well received by the market in the natural channel, which is growing very well. In the club channel, on top of that, we've gained additional distribution over the last year as well. It is going very well, the liquid milk business in the U.S. in terms of growth. We are up 22% last year. Our challenge has been to improve the profitability of that business, which we've made real progress on over the last few years.
It wasn't long ago we were losing over $30 million in the U.S., and last year we lost $9 million, and we hope to improve on that this year again with a view of getting to break even by FY 2027. In addition to that, we're exploring the possibility of long-term approval for our infant milk formula in the U.S. as well. Still work in progress, still a challenge on profitability, but we're getting there.
The U.S., or?
U.S.
I mean, we obviously have to go through the FDA approval to get our infant formula approved for our long-term sale in the U.S., but no particular issues. Any other questions in the room? One over here.
Hello, I'm a shareholder from Australia. Just a thing I've noticed over time, there seems to be in supermarkets a focus on UHT milk rather than fresh.
I've noticed fridge space has declined in a lot of supermarkets. I'm just wondering, is a2 Milk seeing that happen? Has there been any push towards non-refrigerated, like non-fresh milk from the marketplace that might change how a2 Milk might direct things in the future?
Are you talking about New Zealand or Australia in particular?
I'm from Australia, and that's what I've noticed in Australia. I don't know if that's particularly happening here, but I have noticed a large reduction of fridge space in many supermarkets. The shelves for the UHT is just growing. It's phenomenal.
Do you want to talk to that? I mean, we have seen an improvement in our growth in our liquid milk in Australia, but we do offer UHT products. Do you want to?
Maybe what you're observing is perhaps over the years there's been an increase in plant-based alternatives, which are offering UHT at ambient temperature rather than being in the chiller space. That's sort of happened a bit over time, and that growth has moderated where it's relatively, it's only low single-digit growth in plant at the moment. In fact, in the U.S., the plant category is in decline. In relation to the chiller space of fresh milk in Australia, it's been relatively steady over recent years. For our business, we've increased our number of facings and distribution across the trade as well, because it's not only what stores you're in, it's actually the depth of distribution as well, which we've increased as well. You layer on top of that our lactose-free product. We've actually gained a lot of distribution and facings, yeah.
Yeah, okay, so you're maybe replacing some other brands, which is good.
Yeah, our market share's up. We're sort of at 11% market share overall. And our lactose-free business is over 20% market share now of the category, which is the fastest growing category in the dairy market, yeah.
Okay. Thank you.
Thank you for your question. Any further questions in the room? I'll just move to ask whether we have any online questions.
We have an online question from James Noble in regards to the increasing chatter about artificial intelligence-driven share market bubble and possible burst. What defensive steps or other will has a2 Milk take to mitigate this risk?
Do you want to answer that?
Sure. I think whether or not the AI-related company's valuation is above or below fundamental value, I don't think that's particularly a concern for a2.
We're more thinking, as most companies are, that the AI is around for the long term. It's quite a discontinuity and a transformation for most businesses and individuals globally. We are thinking more about how do we adopt and leverage that going forward in the front end of our business, in our sales and marketing activities, particularly in China. Also, not only in terms of how we execute, it's how we actually influence the AI-related searches, which is different to previous web searches. That's a challenge for us. In the back end of our business, we're thinking about adoption in various areas. We use it for cybersecurity and other aspects of our business, including supply chain and that. We're thinking more about adoption.
In terms of steps to protect against that, I mean, we do use it obviously in our cybersecurity protection mechanisms to make sure we protect our data and information and have policies in place in respect of that as well. I don't think it's a direct concern for us at the moment.
Next question from online.
We have a question from Eva Queeding. What will the company's strategy be if your market share in China drops significantly? Will you stay in China trying to turn things around or try to explore new markets in Europe?
I think, as David mentioned, our performance in China has continued to grow, and it's a real focus for us as a company. In terms of Europe, I think there are some real constraints for New Zealand to be supplying into Europe. It's not something that we're focused on at the moment.
Is there anything you want to add to that?
No, just by way of context, the China infant market, why we and many other companies focus on that, it's over half the world's infant market in total in terms of value and an even greater share in terms of the profit pools associated with it. It is a very, the second biggest market is the U.S. We have a great position, like we're number four brand in the market now. If the China market or our share within it has concerns in the future, I mean, our first reaction is to double down and make sure that we address that and improve that situation because it's such a fundamental part of our business. Beyond China infant milk formula, our strategy is to expand into adjacent categories in China and then also into new markets.
Pip's comment about Europe is absolutely right. I mean, we're more focused on Asia, Southeast Asia, and potentially the Middle East in time as opportunities for us because the level of a1 protein-free intolerance in those markets is much higher, and there are certain reasons why they're attractive markets to us as well.
Thanks, David. Is there any further questions online?
We have had a couple of questions on this topic, so we will ask a representative question. Is there any update on the Australasian class action against a2 Milk?
There is no current update for the market at this time. We're continuing to work through that with our lawyers. We've got an update as a board coming up in early December, but there's nothing to update the market on at this time.
We have another online question from Susan Zesto.
Can you tell us how a2 Milk products are being received in Vietnam? Which products are resonating with the mothers and consumers?
We had a board visit to Vietnam just a few weeks ago, which was a really exciting opportunity for us to see the products and market. Do you want to talk about that more broadly, David?
Yeah, it's a really exciting market for us. It's probably the most exciting market in Asia outside of China. There are just over 100 million people in Vietnam. There are about 1.4 million, it's very hard to get precise information, there are about 1.4 million births per year, and there are various aspects about the Vietnamese market that make it attractive to us. The total value of the market is in the order of NZD 2 billion and probably about half of that, NZD 1 billion, is addressable to us.
We recently launched our Platinum product and our Gentle Gold product. Platinum has had longer in the market and has been really well received by consumers. The feedback and the reviews that we're getting are terrific. Gentle Gold, it's early days yet, but there's actually a bigger segment available to us with Gentle Gold entering the market as well because Platinum's a more premium product. In addition to the infant category, we're also making available our other nutritionals products, whether they be adult fortified milk powders or our UHT product or fortified UHT products for kids and adults as well. We're really excited about the Vietnamese market and look forward to that developing over time.
Thanks. Chante, do we have any further questions online?
We have no online questions.
Thank you.
Ladies and gentlemen, on behalf of the board, I'd like to once again thank you for joining us today. It's great to see so many of you here and for engaging on the important matters of business and also for your support over the year. For those attending the meeting here in Auckland, we'll have some refreshments just outside the doors, so please stay and join us for those. I now formally declare the meeting closed. Thank you so much.