Corporate Actions in Two ASX-Listed Infant Formula Stocks

  • Nov 15, 2019 AEDT
  • Team Kalkine
Corporate Actions in Two ASX-Listed Infant Formula Stocks

Consumer staple stocks are non-cyclical in nature, representing products and services that are essential for consumers regardless of their financial situation. Food, beverages, household goods, feminine hygiene products, and items such as alcohol and tobacco fall under the category of consumer staples. Generally, people are unable to cut out the usage of these products from their budgets.

Here in this article, we are discussing The a2 Milk Company and Bellamy’s Australia Limited, which are into providing nutritional dairy products including infant formula, also called as baby formula, an alternative to breast milk for infants until 12 months of age. Available in both powdered and ready to drink liquid form, infant formula products are based on milk or other edible food constituents (nutritionally adequate) of animal or plant origin.

Recently, these two companies updated the market with significant developments. Let us dig into these company updates.

The a2 Milk Company Limited (ASX: A2M)

The a2 Milk Company Limited, with offices in Auckland, New Zealand and New South Wales, Australia, is a premium branded dairy nutritional company, generating revenue from the commercialisation of its products, produced from cow milk naturally containing the A2 protein type. A2M is the highest brand advertiser within the fields of milk and infant formula.

Resignation of Global Chief Marketing officer

On 13 November 2019, the company announced that Chief Marketing Officer (CMO), Susan Massasso, tendered her resignation, effective end-February and would remain on to the Senior Leadership Team until the end of June 2020. The company acknowledged the significant contribution made by her over the last six years, as the inaugural CMO of A2M.

The company’s Managing Director and CEO Jayne Hrdlicka commented:a2 milk company limited At the same time, search is underway for a new Chief Marketing Officer (CMO) to lead the next phase of the company’s growth and development.
Launch of New Employee Share Plans

In an ASX release on 21 October 2019, the company announced to have issued ordinary shares to some employees under two employee equity programs, which excluded executives and senior managers who are eligible under the company’s Long Term Incentive Plan to receive awards.

Gift offer -The eligible employees of the company in New Zealand, US, and Australia, who are not participating in the LTI Plan, received a gift issue of ordinary shares of roughly $500.

Share Match Program - The qualified workers of the organisation were additionally welcomed to use their own assets to gain up to $2,000 of offers in the company. If a qualified employee who acquired shares under this scheme on 21 October 2019 continues to keep holding the shares until September 2021, the company would match the acquired shares with one matching share for every share acquired.

2019 Annual General Meeting (AGM)

The company is scheduled to hold the AGM on 19 November 2019. Following are the resolutions to be considered during the Annual General Meeting:

  • Resolution 1 - Auditor’s Fees and Expenses
  • Resolution 2 - Election of Director (Pip Greenwood)
  • Resolution 3 - Adoption of New Constitution

The a2 Milk Company reported strong financial performance during the year ended 30 June 2019, registering a 41.4 per cent year-on-year growth in total revenue to $1.3 billion and a 47 per cent increase in net profit after tax of $287.7 million. Its infant nutrition market share in China increased to 6.4 per cent, with group infant formula revenue up 46.9 per cent to $1.1 billion.

More on the financial performance of the company for FY 2019 can be read here.

FY20 Outlook
  • The company expects to register continued growth in revenue across key regions, on the back of growing investments towards branding and marketing in China and the United States.
  • For FY2020, EBITDA as a percentage of sales is anticipated to be consistent with the EBITDA margin of 28.2 per cent recorded in 2H19.
Stock Performance

The company’s stock traded flat at $12 on 15 November 2019, with ~ 735.38 million outstanding shares and a market cap of $8.82 billion. The 52 weeks low value of the stock is at $9.160, while 52-week high is at $17.300. The year to date return of the stock is 15.38 per cent.

Bellamy’s Australia Limited (ASX: BAL)

BAL is a provider of organic, nutritious food products for children and babies. The company, which was officially listed on the Australian Stock Exchange in 2014, produces products including cereal, pasta, snacks, rusks, infant formula, etc.

Bellamy’s Australia Limited

FIRB Approves Proposed Acquisition Scheme

On 15 November 2019, the Foreign Investment Review Board (FIRB) gave a notice, unveiling no objection of the Commonwealth to the proposed acquisition of Bellamy's by a wholly owned subsidiary of China Mengniu Dairy Company Limited, through a scheme of arrangement. However, the scheme implementation is subject to court approval, BAM shareholder approval at the scheme meeting scheduled on 5 December 2019, and satisfaction or waiver of certain other customary conditions.

The BAM directors have given their unanimous recommendation, for voting in favour of the scheme in the absence of a superior proposal.

Change of Interest of Substantial Holder

On 12 November 2019, the company announced a change in the substantial holding of Bicheno Investments Pty Ltd in BAM to a current voting power of 13.06 per cent with 14,803,771 votes from the previous voting power of 17.13 per cent with 19,416,464 votes.

AGM Results

On 31 October 2019, the company updated the market with the results of the Annual General Meeting. The resolutions passed during the meeting were as follows:

  • Re-Election of Mr Rodd Peters as a Director
  • Re-Election of Mr Wai-Chan Chan as A Director
  • To Adopt the Remuneration Report (Non-Binding Advisory Vote)

FY2019 was a challenging period for the business, as the demand for its products in China was impacted by regulatory change, a lower birth rate and increased competition. Net revenue during the period declined to $266 million and normalised EBITDA stood at $47 million.

More on the company’s financial performance for FY19 can be read here.

FY20 Outlook
  • Group revenue anticipated to grow 10-15% compared with the previous year
  • Growth is expected to accelerate in 2H20, backed by the roll out of new products
  • Group EBITDA margin expected to be consistent with the prior year
Stock Performance

The stock of BAL settled at $13.200 on ASX on 15 November 2019, up by 1.931 per cent from its previous close. The company has ~ 113.37 million outstanding shares, while its market cap stands at $1.47 billion. The 52-week low value of the stock is at $6.710, while 52-week high is $13.220. The stock has generated a positive return of 37.62 per cent in the last six months and a positive return of 70.62 per cent on a year to date basis.


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