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Speaker 1: First, China's birth rate has slowed to a crawl. Basically,

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Speaker 1: it's bad news for A two milk. Why because A

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Speaker 1: two milk does a lot of business in China. When

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Speaker 1: the news came out that their birth rate was now

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Speaker 1: only six point six three per one thousand people, A

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Speaker 1: two's share price plummeted. In fact, the share price fall

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Speaker 1: was so bad, so sudden, that the ACX actually paused

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Speaker 1: trading for a bit and asked A two for a

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Speaker 1: please explain? Is everything okay? Is there anything more you

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Speaker 1: need to tell us? Matt Montgomery is a full size

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Speaker 1: bar senior and listener's with me now, Matt, good evening,

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Speaker 1: Good evening, ryng, thanks having me, Good to have you.

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Speaker 2: Why is this so bad for A two?

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Speaker 3: Yeah? So, I mean, I wouldn't go as far to

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Speaker 3: say so bad. But if you think about the context

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Speaker 3: of A two, about two thirds of their revenue was

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Speaker 3: Chinese in formula, and it's the majority of their earnings. So,

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Speaker 3: as you mentioned birth, Chinese birth rates were out yesterday afternoon.

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Speaker 3: They were down seventeen percent year on year, about ten

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Speaker 3: percent below what we had expected and a similar magnitude

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Speaker 3: relative to what A two had expected. So it's the

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Speaker 3: key value driver for the business. But what I would

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Speaker 3: emphasize is that you know, this has been a trend

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Speaker 3: for some time in China, the declining birth rates, and

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Speaker 3: that hasn't precluded A two from growing. So they've been

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Speaker 3: able to take market share and clearly looking forward for

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Speaker 3: them to grow, they're going to have to continue to

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Speaker 3: take market share in light of these trends.

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Speaker 1: Yeah, it might be fewer babies, but they're still a

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Speaker 1: hall of a lot of them, right.

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Speaker 3: Yeah, So seven point nine two million was the number yesterday.

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Speaker 3: That was down from nine point five to four million

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Speaker 3: in the year prior. It's quite a skip change when

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Speaker 3: you think about your twenty sixteen twenty seventeen berths was

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Speaker 3: sort of sixteen seventeen eighteen million a year, so it's

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Speaker 3: been quite a sharp reduction versus less than a decade ago.

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Speaker 3: But as you point out, it's still quite a big number.

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Speaker 2: Price doing now, is it recovered?

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Speaker 3: Yeah, so share price fell about eleven percent yesterday on

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Speaker 3: the insiet X. It fell a further one percent today,

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Speaker 3: so you know, meaningfully more muted reaction and as you mentioned,

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Speaker 3: it got put into holt on the Australian Stock Exchange

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Speaker 3: yesterday as part of a regulation over there, when a

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Speaker 3: stock falls by more than ten percent without an announcement

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Speaker 3: by the company, it automatically goes into a halt.

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Speaker 2: Where else are they looking to do business? Man? Well,

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Speaker 2: I mean obviously they're not just doing business in China,

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Speaker 2: But where are the growth opportunities?

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Speaker 3: Yeah? So you know two, as I mentioned, two thirds

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Speaker 3: of the revenue as in formula in China, that still

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Speaker 3: remains an area of growth for them, as I mentioned,

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Speaker 3: because they are taking market shares. Outside of that, You've

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Speaker 3: got value drivers through the liquid milk business in Australia

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Speaker 3: and the US. And actually, I think more interestingly than

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Speaker 3: both of those is that they're starting to expand into

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Speaker 3: the Vietnamese market from a formula perspective, and they are

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Speaker 3: expanding the product range within China, so going into the

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Speaker 3: adults and senior powders market in China, which is growing

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Speaker 3: sort of twenty to thirty percent parandom for them, and

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Speaker 3: they have been launching sort of kids powders within China

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Speaker 3: to try sort of prolonged the life cycle of their

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Speaker 3: consumer base, transitioning from formula then into kids powder. So yes,

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Speaker 3: the headline numbers week, but they are diversifying the business

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Speaker 3: and having success and growing share, but also that diversification.

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Speaker 2: Hey have you done your big race yet?

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Speaker 3: Matt? Yeah, I did. I did a decent round a

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Speaker 3: month until ago.

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Speaker 2: So what was it again? Remind me?

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Speaker 3: I was the Kefler Challenge down on the Kiffler track

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Speaker 3: around Melford there, so yeah, one of four point fifties.

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Speaker 3: I wasn't alone, but I wasn't exactly breaking course records

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Speaker 3: like like some people.

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Speaker 2: Where do you place?

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Speaker 3: Ah was sort of top top Quartalle'd say.

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Speaker 2: And was it sixty k's Have I got that?

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Speaker 3: Yeah? It was?

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Speaker 2: Oh, good on you. You haven't broken yourself. Well done

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Speaker 2: top quart ale, he says, Matt, thank you. Met Montgomery

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Speaker 2: for scythe Bass Senior Analyst.

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