SAMR???, page-186

One always has to be careful drawing conclusions that are outside the realm of the post as it is presented.

However to answer your question it would be worth looking at the overall market for the products they offer and where those markets are heading, personally I sense they are seeking niche products in smaller market segments but the concern is their sales channels to get those products to the markets. The latest quarterly highlights some issues in regards the development stage the company is at, the progress being made and the costs that will have to be carried for some time yet before they come back in to the black.

Their "organics" play is an interesting one as they are seeking to garner an early lead on the organic cow milk sector by funding a vertical integration approach and when matched with the fresh relationship with the current largest organic milk producing co-operative make for some interesting times ahead. Add to this their partial cross-ownership of BnP essentially restricting competing parties from getting an easy start and forcing them down alternative or capital intensive paths of their own. However their own capital demands and time required to actually start producing their intended organic powder products will test many as they are by my estimate over 18 months away from production irrespective of a conditional agreement for supply to one party in China and possibly others in India and Vietnam. Even these elusive heady markets raise some basic questions about scale of processing that is being developed and more importantly the volume of raw milk production that their JV partner, ODFC, can supply. The organic milk market is still minute in this country with a total milk production of less than 1% of the total cows milk production (~9 billion litres pa) putting organic milk somewhere around the sub-80 million litres per annum in today's terms. If WHA got hold of all that milk it could push out about 8 million kilograms of milk powder (note" many variables to get this calculation but it is a rough rounding of 10 litres = 1 Kg powder using standard Holstein kgms production figures). So lets say 8 million Kg's of powder processed, blended, canned, packaged, labelled and ready for market at $40/kg tin). That's $320m revenue for the entire Australian production of organic milk. Tough call for WHA. Then to add to their strategy risk is the emerging competitors like ACM (Australian Consolidated Milk), AHF are off trying the organic thing as well and so are a few others, including Bellamy's. Let alone indirect competitors like A2M with a different approach and a clear head start on all the same markets let alone the bigger international players who can drop capital in a new business initiative on organic products if they so wish. I will add the cost of producing organic milk at the farm level has a cost multiplier of between 1.24 and 1.75 times the cost of producing normal cows milk so the cost to WHA for the raw ingredients will impact any profit from their organic play. I have not included many other contributing factors or risks as it would take pages and too much time.

Your other question regarding the management of the company...I wont comment other than to say there is an entrepreneur amongst them all and they are doing what they believe is going to beneficial and they see a rainbow and they are chasing it with the help of shareholders funds. Perhaps Australia needs more entrepreneurs and maybe Canberra needs to recognise this and consider how it can help foster it and re-ignite some enthusiasm for those that tread outside the confines of sameness.

Whether WHA is the one is yet to be seen and you would have to ask the Oracle. Who is the Oracle may you ask?...