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Key Guidance:
1. “Revised forecast for fourfold increase in finished consumer packaged infant formula and no toll manufactured product. Prior in market guidance suggested a threefold year on year increase of manufactured finished consumer packaged infant formula.”
2. “Expecting increased margin performance across all product categories”
https://www.nzx.com/files/attachments/226487.pdf
https://www.nzx.com/files/attachments/226481.pdf
So, the infant formula business is kicking in big time, production is increasing at 400%, margins are up, and the forward PE for SML is 16.
Although of course that's a pre agm guidance PE, watch for analysts upgrading earnings estimates over the next few days also.
SML were running a2 platinum infant formula stage 2 and had been for a few days, it was truly fascinating to watch the cans being filled, packed into boxes, palleted for export, and stored into the warehouse without a human hand having touched them, about a can per second coming off the line.
During the agm it was apparent that differentiated infant formula customers are increasingly becoming very important to the business now, presently a2m but also additionally munchkins going forward now.
There was a specific mentioned that they are striving to continue as the sole supplier of product to a2m, despite a2m having said publically that they are exploring additional producer options or a plant build.
I was left with the impression that they are absolutely pulling out the stops to bring new a2 farms on stream and to crank out platinum product as fast as is possible. It's a huge opportunity for FY16 and FY17 that SML have recognised and are executing well on in my opinion.
