The a2 Milk Company

2023
AnnualReportWe pioneer the futureof Dairy for good

The a2 Milk Company has
made significant progress
in FY23 towards its
strategic goals

REVENUE$1,593m$1,446m$1,207m
$52m
$241m

$265m

$914m

$1,022m$304m$1,108m

FY22

FY23

INFANT MILK FORMULA (IMF)

FY21 FY22 FY23

FY21 FY22 FY23

NET CASH$757 million**
*

21.2c

16.5c

$123m

$81m

$123m
FY21 FY22 FY23

OTHER

EPS

$156m

NPAT*
$219m

EBITDALIQUID MILK

10.9c

FY21

$196m

$181m

$159m

Attributable to owners of the Company.

** Including term deposits and borrowings, excluding subordinatednon-current shareholder loans.

Contents
Chair's letter

2

CEO's year in review

4

Building a sustainable growth business

14
15

Who we are
What we do

16

How we create value

18

What makes us unique20

Our strategy

21

Our reporting approach

24

Progress towards our goals

25

Risks and opportunities

50

Corporate governance

60

Governance60

Directors

64

Executive Leadership Team

66

Remuneration

68

Financial statements

76

Company disclosures

135

ANNUAL REPORT 2023

1

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

Chair’s
letterDavid Hearn

Dear Shareholder,
On behalf of your Board, I am delighted to announce the continued
strong performance of The a2 Milk Company in FY23. Throughout
the year, the Company has demonstrated an unwaveringcommitment to executing our growth strategy, delivering strong
results and several important achievements. I am particularly proudof this given the very challenging macroeconomic landscape andexternal headwinds we are facing in key markets.
We have embraced our refreshed purpose to pioneer the futureof dairy for good and our vision to create an A1-free world where
dairy nourishes all people and our planet. These guiding principles
are now living through our business, guiding the Company to
execute our goals more effectively in the years ahead.
Delivering results on a consistent basis is the hallmark of building
successful businesses. Therefore, I am pleased to note that theresults that we have delivered in FY23 are in line with the mediumterm ambitions we have set for the business. In particular, ourstrategic China label infant milk formula (IMF) brand, a2 至初®,was the standout performer, delivering another year of doubledigit growth. It is also encouraging that, despite significant market
contractions, the work we are doing to support our English label
IMF business has laid a good foundation for continued progress inthe future.
During the year, we also achieved a number of important
regulatory milestones. We are incredibly pleased to have received
confirmation of re-registration from China’s State Administration
for Market Regulation (SAMR) for our upgraded China label IMF
product in June 2023. The achievement of this re-registration has
been an enormous team effort over a number of years. Our team’s
dedication, resilience and expertise during this journey has been
extraordinary, and I am incredibly proud of every member of thea2MC team involved in this achievement.
I would like to acknowledge the support we received from SAMR,New Zealand’s Ministry for Primary Industries, our strategic partners
in China, China National Agriculture Development Group Co., Ltd
and China State Farm Agribusiness (CSFA), and our manufacturing
partner, Synlait and its major shareholder Bright Dairy, throughout
the process. During the year we also renewed our exclusive importand distribution arrangements with CSFA for a further five years.
We are pleased that CSFA will remain the exclusive import agent
for our China label IMF product.
2

THE a2 MILK COMPANY

These significant milestones highlight the strength of ourrelationships with strategic partners in China and our sharedconfidence in the future. The approval provides us with continued
access to China’s substantial registered domestic IMF market, which
remains the key focus of our growth strategy. It also allows us tocontinue building on the strong brand trust and loyalty we havedeveloped with Chinese families over the past decade.
During the year, we also received confirmation from the US Foodand Drug Administration (FDA) that our application for temporary
permission to import, sell and distribute a2 Platinum® IMF productfrom New Zealand into the USA was approved. While the USA
represents a significant opportunity to develop our brand in the
IMF category over the long-term, the FDA application process forpermanent approval to import and sell IMF product remains achallenging process and timeframe.
In addition to strong financial performance and key regulatory
decisions, we also undertook an important capital management
activity during the year. Exiting the previous fiscal year withimproving confidence in our strategy and execution andhaving determined that the Company had surplus capital to
our requirements in the short-term, we announced we would
undertake an on-market share buyback. We commenced this in
the first half of FY23 and completed the NZ$149 million buyback
programme in the second half.
Our capital management framework continues to prioritise
investments in growth initiatives and maintaining balance sheet
flexibility ahead of shareholder capital returns. The business has
increased its supply chain transformation focus during the year withnew leadership and structure, increased in-sourcing and progressed
other growth capital expenditure projects supporting our long-term
strategic growth goals. However, when there is capital surplus toachieving these priorities, we will make a disciplined assessmentof the potential to return capital to shareholders and the mostappropriate option to do so.

On behalf of the Board, I sincerely thank David Bortolussi, ourManaging Director and Chief Executive Officer, for his leadershipand impactful contribution to executing our strategy in very
challenging market conditions. At the Executive Leadership Team
(ELT) level, there have been a number of changes during the year,
including the appointment of David Muscat as Chief Financial
Officer and Chopin Zhang as Chief Supply Chain Officer, the role
expansion for Eleanor Khor as Managing Director – ANZ and
Strategy and Kevin Bush taking on the role of Managing Director– USA. I thank David Bortolussi, the ELT and every member of thea2MC team in all our regions for their contributions this year.
We have also made significant progress with regard to Board
renewal during the year, delivering on succession plans for longserving directors and announcing new appointments.
In November 2022, I announced my intention to stand down as a
Director and Chair of the Board at the Annual Meeting in November
2023, following almost ten years with the Company. As a result, Pip
Greenwood, who has now been on the Board for over four years,
was unanimously elected to replace me as the Chair. Pip has the
skills and experience to lead the Board and I am delighted to handover the reins to such an outstanding director.
During the year we also announced that Julia Hoare, the Company’s
Deputy Chair, would step down from the Board after over nine
years of service. On behalf of the Board, I would like to express our
sincere appreciation for Julia’s outstanding service throughout her
tenure at The a2 Milk Company. Julia’s commitment and dedication
have been instrumental in the Company’s success, and we are
grateful for her invaluable contribution over the years.
Kate Mitchell was appointed to the Board in June 2023 and hastaken over as Audit and Risk Management Committee Chair. Kate
has significant governance experience and is currently Chair of The
New Zealand Merino Company and Link Engine Management and a
director of Heartland Group Holdings, Farm Right, and Christchurch
International Airport, for which she also serves as Chair of the Risk,
Audit & Finance Committee.
We also appointed David Wang to the Board during the year.
David brings extensive expertise across the Asia-Pacific region in
manufacturing and supply chain with over 30 years’ experience inindustrial and consumer goods businesses, including 15 years insenior executive leadership roles in China and international markets.

I would like to extend my gratitude to all my fellow Directors fortheir efforts and significant contributions during the past year. Theirexpertise, guidance, and tireless work have played a vital role inshaping our strategic direction and ensuring the Company’s growthand prosperity.
Reflecting on the past decade for The a2 Milk Company, it has beena truly extraordinary journey. It has been my privilege to have beena Director and Chair of your Company through this transformative
period. As the pioneer and leader of the A2 protein category, we
have transformed from a fresh milk business in Australia to a global
nutritional dairy products company. We have developed a leading
brand in the China IMF market, the largest IMF market in theworld. We faced, and continue to face, a rapidly evolving businesslandscape and uncertain times, including the global pandemic that
not only shifted the business environment for us but the entire
global economy from supply chain through to end consumer
behaviours, as well as several regulatory changes that disrupted
the industry we operate in. Together, we adapted, pivoted, andcontinued to work through these challenges to be successful.
Looking ahead, the Company is well-positioned to achieve its
strategic goals and thrive to seize additional market opportunities in
the future. Your Board and the ELT are committed to the Company’s
purpose and vision. The strategy is in place and, with a continued
disciplined approach to execution, will continue to gain traction.
To you, our shareholders, thank you for your trust and support. To
our customers, thank you for your loyalty. To our strategic partners,
thank you for your long-term support and collaboration. We arecommitted to delivering value for shareholders and positively
impacting the world – to pioneer the future of dairy for good.
I look forward to seeing you at the Annual Meeting in November,which will be my last. In the meantime, I wish you and your family
the best of health.
Yours faithfully,David Hearn
Chair
20 August 2023
ANNUAL REPORT 2023

3

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

CEO’S YEAR IN REVIEW - DAVID BORTOLUSSIStrong performance in avery challenging market
The Company’s revenue for FY23 was up 10.1% driven
by strong growth in the China & Other Asia segment
up 37.9%, with the USA and MVM segments also up.
Group financial performance1,2,3
The a2 Milk Company (“the Company”, “a2MC”) today announces its financial results for the year ended
30 June 2023. Key results are as follows:
FY23 ($M)

FY22 ($M)

VARIANCE (%)

Revenue

1,592.9

1,446.2

10.1%

EBITDA4

219.3

196.2

11.8%

Net profit after tax- Attributable to owners of the Company

155.6

122.6

26.9%

Basic earnings per share (EPS) (cents)

21.2

16.5

28.7%

Net cash

757.2

816.5

(7.3)%

5

The Company’s revenue for FY23 was up 10.1% driven by strong growth in the China & Other Asia segment
up 37.9%, with the USA and MVM segments also up 27.1% and 9.2% respectively, partially offset by a
30.2% decrease in the ANZ segment mainly due to an intentional change in English label distribution strategy.
Revenue growth slowed to 3.0% in 2H23 mainly due to a sharp decline in English label IMF Daigou market
value in 2H23 and cycling higher lockdown-driven sales in 4Q22. Higher revenue growth of 18.6% in 1H23
was mainly due to China label IMF sales cycling lower sales in 1H22 due to channel rebalancing and USA sales
benefiting from 2H22 new product launches. Notwithstanding, an important milestone was achieved in FY23
with China & Other Asia segment revenue exceeding $1 billion (representing 62.9% of total revenue) for the
first time demonstrating the importance of the Company’s China focused growth strategy.

1
2
3
4

5

4

All references to full year (FY), halves (H) and quarters (Q) relate to the Company’s financial year, ending 30 June.
All figures are in New Zealand Dollars (NZ$), unless otherwise stated.
All comparisons are with the 12 months ended 30 June 2022 (FY22), unless otherwise stated.
EBITDA is a non-GAAP measure and does not have a standardised meaning prescribed by GAAP. However, the Company believes
that in combination with GAAP measures, it assists in providing investors with a comprehensive understanding of the underlying
operational performance of the business. A reconciliation of EBITDA to net profit after tax is shown in the Company’s FY23 Investor
Presentation (slide 55) dated 21 August 2023.
Including term deposits and borrowings, excluding subordinated non-current shareholder loans.

THE a2 MILK COMPANY

“ We reached new highs in
China brand awareness,trial and loyalty metrics
and were a top-3 sharegainer in the China IMF
market overall, withrecord market share.”

ANNUAL REPORT 2023

5

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

CEO’S YEAR IN REVIEW CONTINUEDFINANCIAL HIGHLIGHTS$1,593m

$219m

$156m

21.2c

$757m*$149m

Brand healthTop-3 share gainer

SAMR

Reached new highs in China brandhealth metrics

Achieved top-3 share gainer in China
IMF market overall

Received new GB brandre-registration

Innovation

China State Farm

Sustainability

Ramped up innovation through new
product launches in all categories

Extended exclusive partnership with
China State Farm Agribusiness

Advanced sustainability programmes
across climate, nature and packaging

Revenue

10.1%

Earnings per share
28.7%

EBITDA

11.8%

Net cash

NPAT attributable to ownersof the Company 26.9%

Share buyback completed

OPERATIONAL HIGHLIGHTS* Including term deposits and borrowings, excluding subordinated non-current shareholder loans.

6

THE a2 MILK COMPANY

“We are pleased to havereceived approval from
China’s State Administration
for Market Regulation for the
re-registration of our Chinalabel IMF product a2 至初®.”Gross margin percentage6 of 46.5% was 0.5 ppts higher reflecting
benefits from a2 Platinum® English label refresh positioning anddistribution model changes and the cycling of other nutritional
stock write-downs recognised in the prior year, partially offset byunfavourable foreign exchange on cost of goods sold. Increases
in farmgate milk pricing, raw materials, and other inflationarypressures were mitigated by price rises and other cost saving
initiatives. Gross margins in 2H23 were also impacted by thetiming of MVM sales which were weighted to the second half.
EBITDA increased by 11.8% to $219.3 million, primarily reflecting
higher revenue and gross margin improvements. EBITDA margin
as a percentage of revenue increased to 13.8% (up 0.2ppts),with margin expansion achieved notwithstanding an increase inmarketing investment by 13.1% and Administrative and Other
expenses increasing by 9.0%. Administrative and Other expenses
increased due to continued capability building (particularly in
China and Supply Chain teams), further investment in productinnovation and science research projects, the timing of long-term
incentives and increased travel costs post COVID-19.
Foreign exchange rates were volatile during the year. Grouprevenue benefited from favourable foreign exchange movementsin the order of $40 million, primarily in 1H23. However, thecombined realised and unrealised foreign exchange impact on
cost of goods sold, administrative and other expenses on EBITDA
was not material in part due to hedging.
Depreciation and amortisation was similar to prior year at $18.2
million, net interest income increased to $21.6 million due tohigher interest rates and the effective tax rate reduced to 35.0%
primarily driven by the alignment of the accounting and tax
treatment of foreign exchange contracts. NPAT including amounts
attributable to non-controlling interests was $144.8 million, an
increase of 26.2%. The non-controlling interests represent China
Animal Husbandry Group’s (CAHG’s) 25% interest in MVM.
Excluding this loss of $10.8 million, NPAT attributable to ownersof the Company was $155.6 million.

6
7

The balance sheet remains in a strong position with closing
cash and term deposits of $802.2 million and net cash of$757.2 million. The lower cash balance compared to June 2022
mostly reflects the $149 million used to execute the on-market
share buyback. In accordance with the Company’s Capital
Allocation Framework, a2MC has decided to prioritise investment
in growth opportunities (focused on Supply Chain transformation)and balance sheet strength, ahead of returning further capital toshareholders at this point in time but will continue to review thison a regular basis.
Inventory at the end of the period was $193.4 million, higher
than at the end of 1H23, mainly due to stock building of Chinalabel IMF inventory to accommodate the timing of new China
GB registration and product transition, as well as a sharp decline
in the Daigou channel and the timing of Synlait supply which
resulted in higher English label inventory at year end. Channel
inventory and product freshness remained at target levels acrossthe business. The Company’s China label inventory levels andproduct freshness at 30 June 2023 (96% of expiry dates >18
months from manufacturing date) were in line with Company’splans for the new GB product transition.
Excluding interest and tax, operating cash inflow was$127.4 million, representing cash conversion of 58%7 which was,as anticipated, lower than the prior period due to the catch-up
of FY22 payments in China which were impacted by COVID-19
delays (outside the Company’s control) as well as prepayments for
China label stock build to support transition.

Gross margin percentage is calculated as sales less cost of goods sold, divided by sales.
Operating cash conversion defined as net cash flow from operating activities before interest and tax divided by EBITDA.

ANNUAL REPORT 2023

7

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

CEO’S YEAR IN REVIEW CONTINUED

China market update8
The overall China IMF market declined 12.1% in volume and14.4% in value in FY23. The decline in BCD cities exceeded
Key&A cities particularly in the second half, with Key&A market
value decreasing by 13.1% in 2H23 and BCD market value
decreasing by 18.3% in 2H23. The market decline reflected thedecrease in newborns overall, socio-demographic differences
between Key&A and BCD cities, challenging macroeconomic
conditions impacting retail sales, and increased competitive
intensity and promotional activity driven by excess industry
capacity and the commencement of the market-wide transition
to new GB standards.
The number of newborns in China declined by 10.0% in CY22
to 9.6 million9 which is likely to decline further in CY23 having
regard to various factors and data points, including sociodemographics, prevailing youth unemployment rates, recent
marriage numbers and pregnancy indicators. The Company still
expects a post COVID-19 recovery in birth rates in the mediumterm with the longer-term birth rate inherently uncertain. The
lower birth rate in CY22 along with the rolling impact of fewer
births in prior years reduced China IMF market Stage 3 sales (thebiggest segment of the IMF market) in particular which declined
by 20.6% in 2H23 and accelerated to be down 23.5% in 4Q23.
China label market value declined 14.9% in FY23 with 2H23
down 17.3%. The MBS channel was down 12.7% in FY23
and DOL was down 4.5%. Within China label channels, a2MC
continues to be supported by a mix shift to the ultra-premium
price segment (although this segment also declined in absoluteterms in FY23), rapid growth of the A2 protein segment andincreasing brand concentration with the top-10 brands now
accounting for 77% of the total China label market.

English label market value decline stabilised in FY23 down 14.0%
with 2H23 down 11.5%. Within English label channels, theDaigou channel experienced a sharp decline of 39.5% in FY23,
while O2O was down 17.9% in FY23 and CBEC experienced
sustained growth up 8.3%10, continuing the significant mix shiftacross English label channels. a2MC’s distribution strategy isfocused on continuing to develop the CBEC and O2O channels
where it continues to gain share.
In the context of challenging socio-demographic, macroeconomic
and IMF market conditions, a2MC’s growth in FY23 in China label
IMF of 27.8% and total IMF of 8.4% was very encouraging.

Regional performance
1. China & Other Asia
Growth in value and volume of the China & Other Asia segment
was driven by continued execution of the Company’s growthstrategy particularly in China label. Revenue of $1,002.2 million
was up 37.9%, with EBITDA of $254.1 million up 75.1%. The
combination of increased investment and higher impact marketing
campaigns had a positive impact on key brand health metrics in
2H23, which in turn supported increased sales and market share.
New highs in overall China brand health metrics were achieved
with total a2MC IMF prompted brand awareness increasing from
52% to 63%, unprompted brand awareness increasing from 17%
to 23% and top of mind brand awareness increasing from 7% to
9%, and trial and loyalty metrics increasing as well11.

8 Kantar Worldpanel 0-6 years old Baby & Kids panel: National IMF market tracking (Key&A + BCD cities); unless otherwise stated.
9 China National Bureau of Statistics.
10 Smart Path China IMF online market tracking: for CBEC only retail sales (by value).
11 a2MC internal data based on the Company’s brand health tracking. Average brand health metrics for each financial year based on 3 surveys in FY21 and FY22, and2 surveys in FY23. Sample skews to a2MC target consumers ie higher income earners based in provinces / cities that are the focus of sales and marketing activities.
8

THE a2 MILK COMPANY

“Our strong performance was supported
by significant marketing investment inbrand building campaigns as well as
innovative trade activation initiatives.”

China label IMF
The strong performance in China label IMF sales in 1H23
continued into 2H23 despite the declining market and heightened
volatility with the market transitioning to new GB products.
Consumer demand for a2 至初® remained strong with market
value share improvement both in-store and online. Sales fora2 至初® China label IMF increased 27.8% to $559.3 million,
with 2H23 sales up 16.0%. Growth was supported by continued
strong execution of the Company’s growth strategy throughsame store sales volume growth and favourable pricing andforeign exchange.
The strong performance was supported by significant marketinginvestment in brand building campaigns as well as innovative
consumer campaigns such as caravan tour roadshow events todrive brand awareness and trial in BCD cities, and a corporatesocial responsibility campaign with Operation Smile toengage consumers with impact.
MBS weighted distribution increased as well as same store sales,
driving growth in Key&A and BCD cities. Offline distribution
declined slightly to 25.9k stores at the end of June 2023 from
26.5k at the end of June 202212. A significant number of store
closures occurred in the market during the period reflecting
challenging retail and category conditions. The Company isbuilding share in national key accounts, pursuing regional key
accounts, as well as targeting greater penetration of BCD cities,
whilst developing new strategies for accelerated growth in certain
prioritised provinces.
Retail market value for the MBS channel was down 12.7% in
FY2313, with 2H23 down 15.9%, reflecting challenging China
IMF market dynamics including store closures and increased
discounting of old GB product prior to transitioning to new
product. a2MC’s market value share in MBS increased to 3.4%
at the end of June 2023 compared with 3.0% at the end of June
2022, making a2 至初® one of the fastest growing international
brands within MBS in FY23.

Accelerating online growth is a strategic priority for China label
IMF and performance in DOL is a key measure of success. Retailmarket value for the DOL channel was down 4.5% in FY2314,
with 2H23 down 13.6% cycling 4Q22 lockdown impacts. a2MC’s
market value share in DOL increased to 3.3% at the end of June
2023 compared with 2.5% at the end of June 2022, and was
the number 2 share gainer in the channel. Within this channel
the Company’s share of early-stage product sales has increased
significantly as more users shift to online channels at all stages of
their IMF lifecycle.

English label IMF15
The China & other Asia segment benefited from continued
execution of the Company’s English label IMF distribution strategy,
resulting in a further sales mix shift towards the CBEC channel,
as well as improved brand health metrics following increased
investment as part of the a2 Platinum® English label refresh.
Overall, English label IMF sales of $386.2 million were up 51.0%,
with 2H23 growing 37.3% on prior year.
a2MC continued to prioritise overall channel economics as part ofits inventory management plan and promotional activity in CBEC.
English label sales during key sales events were up moderately,with market pricing across CBEC platforms and reseller channels
at target levels, and emerging platforms seeing stronger growthfrom a lower base. Platform rankings on mainstream platforms
were maintained or improved in the Double 11 and 618 sales
events, and a2MC ranks as one of the leading IMF players on
Douyin (TikTok).
The Company is focused on CBEC growth and building digitalmarketing and e-commerce capability to further improve its
execution which is having an impact, particularly on new user
recruitment. Retail sales for the overall CBEC channel were up
8.3% in FY2316. Despite market value growth in 2H23 slowing
to 2.9% from 13.8% in 1H23, a2MC’s was the number 1 sharegainer in CBEC with market value share increasing to 22.6% at
the end of June 2023 compared with 19.4% at June 2022. Similar
to DOL, a2MC’s share of early-stage product sales also increased
significantly in CBEC which is becoming increasingly important
relative to the Daigou channel.

12 a2MC internal data tracking of stores with active sales in the past 6 months.
13 Nielsen MBS retail measurement service: mother and baby stores only retail sales (by value). FY23 versus FY22.
14 Smart Path China IMF online market tracking: domestic online platform sales (by value). FY23 versus FY22.
15 English label IMF includes sales via CBEC, Korea, and Hong Kong Resellers.
16 Smart Path China IMF online market tracking: for CBEC only retail sales (by value). 12-month rolling share. FY23 versus FY22.

ANNUAL REPORT 2023

9

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

CEO’S YEAR IN REVIEW CONTINUED

Liquid milk and other nutritional products

Liquid milk and other nutritional products

Sales of liquid milk in China & Other Asia segment were up
36.7% to $15.2 million and revenue from other nutritional
products was also up 87.9% to $41.4 million, benefitting fromstronger execution, brand awareness and mix shift from ANZ
channels to CBEC. The strong performances in these categories
were supported by increased marketing investment through brandbuilding campaigns.

Australian liquid milk sales were up by 7.1% to $184.1 million,
with 2H23 growth of 8.5%, driven by a full 6-month contribution
from price increases taken in 1H23 in response to higher raw milk
prices and other input and logistics cost increases, favourable
foreign currency movements plus continued strong performancefrom the launch of a2 Milk® Lactose Free.

2. Australia and New Zealand
The Australia and New Zealand (ANZ) segment result was
driven by lower IMF sales to ANZ resellers / Daigou due to an
intentional change in a2MC’s distribution strategy, partially offset
by the positioning and pricing benefit associated with the a2
Platinum® refresh. Overall, ANZ sales volumes were down withsegment revenue of $371.7 million, down 30.2%, and EBITDA of$93.5 million, down 46.0%.

IMF resellers and retailWith Daigou channel market value down 39.5% in FY2317 andthe change to the Company’s English label distribution strategy
in 2H22, IMF reseller and retail sales decreased 50.6% to$162.5 million. The Company has proactively changed its English
label distribution model to more controlled channels and to moretransparent and performance-based distribution partnerships inall channels. These declines were partially offset by a significant
increase in sales to CBEC (see commentary in China & Other
Asia above). Whilst the Company’s English label IMF focus going
forward is likely to be on CBEC and O2O given the recent evolving
dynamics, it will also continue to support the Daigou channel
through multi-channel consumer marketing campaigns andreseller trade support programmes.
Development of the O2O channel has also been a key focus areafor English label distribution. In 2H23, the Company entered into
a new partnership with one of the leading distributors in China
and is focused on improving share in O2O key accounts, longtail O2O and Pop accounts complementing certain Company led
initiatives. Results relating to this partnership in the future will bereflected in the China & Other Asia segment.
In 2H23, while the O2O channel market value was down 15.7%,
its trajectory improved versus 1H23, and a2MC’s channel market
share increased significantly at the end of June 2023 versus
last year18.
Due to sample size, data classification and associated volatility
reasons, the Company focuses more on its combined O2O andDaigou channel market share based on Kantar survey data
which is the only source of market share data for these channels.
Based on this data, a2MC’s market share in the O2O and Daigou
channel increased to 20.8% at the end of June 2023 versus
19.5% at the end of June 202219.

This result was partly offset by consumption volume declines
impacted by increased cost of living, as well as several challenges
within the supply chain network impacting on-shelf availability.
a2 Milk® Lactose Free (launched in August 2022) has performed
ahead of expectations, with sales supported by distribution
expansion into Queensland, South Australia and Tasmania in
2H23. This saw market share in the lactose free segment in initiallaunch cities (New South Wales and Victoria) increase to 18.4%20
in June 2023 compared with 12.3% in December 2022.
a2MC recorded market value share of 11.3% at the endof June 202321 versus 12.4% at the end of June 2022. This
result was impacted by consumers trading down due to wider
macroeconomic factors, as well as the prior comparable period(primarily 1H22) benefitting from strong in-home consumption
from COVID-19 lockdowns. The current market share is broadly
similar to pre-COVID-19 levels, with a2MC’s MAT market volume
share increasing from 6.6% in January 2020 to 6.8%22 at June
2023. Whilst market volume for liquid milk increased during the
COVID-19 lockdown period, it decreased 4.5% from January
2020 to June 2023. Pleasingly, three a2 Milk® products achieved
rankings in the top-10 products in the dairy category in Grocery.
Consistent with IMF, revenue for other nutritional products was
also impacted by the channel mix shift to CBEC, declining 21.4%
to $25.1 million.

3. USA
Accelerating the path to profitability in the USA by FY25/
FY26 is a strategic priority for the Company. During FY23, USA
profitability improved through a combination of higher revenue
growth from both core range and new products, as well as cost
reduction initiatives. As a result, USA revenue increased 27.1% to$105.1 million while EBITDA losses were reduced to $23.3 million
compared with a loss of $36.7 million in FY22.
Sales growth was driven by a modest increase in core liquid milk
volumes, contribution from new products, pricing and favourable
foreign exchange movements. Sales in 2H23 were broadly inline with the first half, as the Company reduced promotional
spend. Despite this a2MC’s market value share in the premium
milk category for the Grocery channel increased from 2.0% inJune 2022 to 2.3% in June 202323.

17 Kantar data based on a panel of 9,000 consumers covering 0-6 year olds and only seeks to project ~40% of the population.
18 Kantar Worldpanel 0-6 years old Baby & Kids panel: National IMF market tracking (Key & A + BCD cities). 12-month rolling share. FY23 versus FY22.
19 Kantar Worldpanel 0-6 years old Baby & Kids panel: National IMF market tracking (Key & A + BCD cities). 12-month rolling share. FY23 versus FY22.
20 IRI Scan Data NSW and VIC Month ending 30 June 2023.
21 IRI Australian Grocery Weighted Scan 12-months ending 30 June 2023.
22 IRI Australian Grocery scan Weighted Scan MAT.
23 SPINS data for the Grocery channel only for the 52 weeks ending 30 June 2023 and 30 June 2022.

10

THE a2 MILK COMPANY

The lower EBITDA loss was mainly due to revenue growth, lesspromotional activity, improved input costs and distribution rates,
lower marketing spend and reduced SG&A costs. Whilst reduced
marketing investment led to a lower level of brand awareness,household penetration increased and brand loyalty and equity
ratings improved. The Company has recently changed the
management team in the USA and there will be a greater focus
on profitability going forward.
In November 2022, the Company received confirmation from the
FDA that its application for enforcement discretion to import, selland distribute a2 Platinum® IMF product from New Zealand into
the USA had been approved. a2MC is pursuing longer term FDA
approval of a2 Platinum® whilst carefully considering market entry
options. A small amount of product has been produced recently
to facilitate FDA required clinical studies and distribution trials
during FY24.

4. Mataura Valley Milk
Accelerating MVM’s path to profitability by FY26 or earlier isalso a strategic priority. During FY23, the Company accelerated
execution of its supply chain transformation strategy, including
increasing raw A1 protein free milk supply, completing theinsourcing of all a2 Milk™ Whole and Skim milk powder products,
completing production trials for insourcing of certain IMF productwith manufacturing to commence in 1H24, and commencing
production trials for a new English label IMF range, all with MVM
and new blending and canning partners prior to installing similarcapability at MVM.
Revenue of $113.9 million24 and an EBITDA loss of $26.5 million
were recorded for the period. The higher revenue reflected12-months under a2MC ownership versus 11-months in
FY22 (due to acquisition timing) net of intercompany salesof $32.3 million during the current period. EBITDA loss of$26.5 million, compared to a reported loss of $18.8 million in
FY22 (or a loss of $23.2 million on a pro-forma unaudited basis
for 12-months). The slightly higher EBITDA loss was due to thetiming of sales in a volatile commodity and FX environment;
reduced demand from third-party customers in China; increased
investment in capability (including management changes),significant product development trials; and investment tosupport future nutritional powder production.

24 Revenue excluding intercompany sales.

Sustainability progress
a2MC’s sustainability strategy is focused on taking action on
climate change, achieving nature positive outcomes, supporting
thriving farms, utilising more sustainable packaging and supporting
communities in need. The Company has previously communicatedits Planet-related goals, including achieving Scope 1 and 2 net zero
emissions by 2030 and Scope 3 by 2040. The Company is pleased
to announce that it has refined its Scope 3 reduction ambition
to include an interim goal to reduce emissions intensity by 30%
by 2030.
The Company made significant progress on implementing its
Sustainability strategy during FY23. In 2H23, MVM commenced
the installation of a new high-pressure electrode boiler and thefull electrification of the site supplied by 100% renewable energy
such as hydro and wind, which is a first in the New Zealand market
that will substantially reduce a2MC’s total Scope 1 and 2 emissions
close to net zero. To accelerate addressing Scope 3 emissions,the Company commenced an on-farm methane inhibitor pilot inAustralia with additional studies and a commercial trial planned
for FY24. The Company completed its first two nature risk andopportunity assessments covering two regions in New Zealand,
Canterbury and Southland, where the largest A1 protein free milk
pools supplying the Company are based. a2MC also entered into
an environmental research agreement with Lincoln University,
continued to roll out its Farmer Environmental Plan programme,
and increased its support for its Farmer Grant programmes.

“We advanced oursustainability
programmes, includingcommencing theelectrification of MVM
from 100% renewableenergy sources
and an on-farmmethane inhibitor
feasibility study.”
ANNUAL REPORT 2023

11

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

CEO’S YEAR IN REVIEW CONTINUED“We will continue to focus on capturing
the full potential of China IMF as wellas ramping up innovation to pursue
opportunities in adjacent categories
and new markets.”

Strategy execution update
The Company has progressively refreshed its strategy and execution
framework over the past couple of years. At the a2MC’s Investor Day
in October 2021, the Company communicated its people, planet,
consumer and shareholder related goals, outlined its five strategic
priorities and highlighted key enablers to execution. Consistent with
its strategy, the Company will continue to focus on capturing the fullpotential of China IMF as well as ramping up innovation to pursue
opportunities in adjacent categories and new markets.
From a shareholder goal perspective, the Company outlined its
medium-term financial ambition to grow revenue to $2 billion
over 5 or more years from FY21 and to target EBITDA margins in
the “teens”. In doing so, the Company highlighted the key risks
to achieving these goals and that the path is unlikely to be linear.
At that time, the Company also stated that EBITDA margins could
possibly increase to the “low-to-mid 20s” in the medium-to-longterm subject to higher than expected market recovery, English label
channel growth and market share gains.
a2MC has made solid progress towards these financial goals withrevenue growing from $1,207 million in FY21 to $1,593 million
in FY23, and EBITDA margins increasing from 10.2% in FY21 to13.8% in FY23. Over this period, market conditions have been
more challenging than expected with the total China IMF market
value down 17.4% – China label down 16.0% and English label
down 24.7%25. a2MC has increased its share of the overall China
IMF market significantly from 4.9% in FY21 to 5.7%26 in FY23 andremains on track to achieve its revenue goal of $2 billion. At thisstage, it is unlikely that EBITDA margins will increase to the “lowto-mid 20s” in the foreseeable future due to market conditions
and outlook. Notwithstanding, the Company remains committed
to an EBITDA margin goal in the “teens” targeting year-on-year
improvement.

In terms of people, planet and consumer goals, a2MC has specificnon-financial measures of success that were also communicatedto the market at its October 2021 Investor Day. The Company has
also made substantial progress on achieving these goals, including:
improving safety metrics and employee engagement; accelerating
its sustainability programmes as noted above; and from a consumer
point of view it has improved brand health, increased market shareand ramped up innovation.
In addition to its strategic goals, last year a2MC updated its Purpose
and Vision and shared this in the Company’s 2022 Annual Report.
The Company’s purpose is to “Pioneer the future of Dairy forGood” with a vision of creating “An A1-free world where Dairy
nourishes all People and our Planet” which has provided a northstar and greater emotional connection for the a2MC team andstakeholders as to why the Company exists and the world it isendeavouring to create.
More recently during 2023, the Company has refreshed its
Values and associated Standards of Behaviour which provide acultural framework and clarity around how team members should
execute the Company’s strategy individually and collectively.
The Company’s new values framework is expressed through the“BOLD” acronym standing for Bold Passion, Ownership and Agility,
Leading Constructively and Disruptive Thinking. The refreshed
Values and Standards of behaviour build on what has contributed
to a2MC’s success in the past and emphasises areas that will be
key to executing our strategy, living our purpose and achieving our
vision and goals.

25 Kantar data based on a panel of 9,000 consumers covering 0-6 year olds and only seeks to project ~40% of the population.
26 Kantar Worldpanel 0-6 years old Baby & Kids panel: National IMF market tracking (Key & A + BCD cities). 12-month rolling share. FY23 versus FY22.

12

THE a2 MILK COMPANYExecutive Leadership Team renewal
There have been significant Executive Leadership Team renewal
over the last two years, with all ELT members either new to theCompany or in expanded roles. During the year there were anumber of new appointments. David Muscat was appointed to
the role of Chief Financial Officer, having previously served in CFO
roles in Australia and Europe, bringing significant experience inthe consumer and retail sectors in various international markets,
including China. Chopin Zhang joined with over 35 years ofexperience in supply chain management, including significant
experience in China and New Zealand IMF having most recently
served as CEO at Yashili from 2017 to 2020. Chopin’s primary
focus includes transforming the Company’s supply chain to enablefurther market access, insourcing, innovation, and growth, which
is a key aspect of its refreshed growth strategy.
Additionally, there have been several internal appointments laterin the financial year. Kevin Bush, previously Executive General
Manager – ANZ, has recently been appointed to the role ofManaging Director – USA. Kevin’s main focus is driving growththrough innovation and accelerating the path to profitability in theUSA. Eleanor Khor, previously Chief Strategy Officer, has taken on
an expanded role, adding the leadership of a2MC’s ANZ businessas Managing Director – ANZ and Strategy. Eleanor’s focus is on
expanding the business in ANZ through innovation, with particularattention to realising the full potential of the new a2 Milk™
Lactose-free product.

FY24 Outlook
Market conditions
China IMF market conditions are uncertain but likely to become
more challenging in FY24 with a further double-digit decline inmarket value expected. This is due to volume declines driven by
the rolling impact of fewer newborns in recent years on laterstage IMF products, and a lower number of newborns expected
in CY23 due to the lagged impact of COVID-19 prior to an
expected increase in CY24. In addition, it is expected that average
selling prices will remain under pressure due to an increase incompetitive intensity driven by the market-wide transition to
new GB product, excess manufacturing capacity and challenging
macroeconomic conditions.

The Company expects growth in other nutritional products andmodest growth in ANZ and USA liquid milk. USA IMF sales are
expected to be immaterial. MVM sales are expected to decline
significantly due to increased levels of insourcing and lower GDTmarket pricing.

Key financials
Due to the expected market conditions outlined above, a broad
range of sales outcomes is possible. At this stage, the Company is
expecting low single-digit revenue growth in FY24.
FY24 gross margin (% of sales) is expected to be similar to FY23,
with cost of goods sold headwinds related to China label IMF reformulation and upgraded packaging, ingredients and packaging
inflationary pressures, foreign exchange changes, product andchannel mix impacts, and higher Australian farmgate milk
pricing – offset by price increases, lower New Zealand farmgate
milk pricing for IMF, MVM internalisation benefits and cost
mitigation initiatives.
The Company plans to increase its brand investment in FY24 inline with sales growth to support its new China label productlaunch and growth. Administration & Other expenses are expected
to be similar to FY23.
The Company expects EBITDA margin (% of revenue) to bebroadly in line with FY23.
Operational cash conversion is expected to be higher in FY24
partly supported by an incremental reduction in inventory cover,and capital expenditure is expected to increase to approximately$26 million mainly due to the Kyabram facility upgrade and MVM
electrification projects.

Key risks
In addition to the challenges noted above and trading upsideand downside, other risks include, but are not limited to, residual
COVID-19 impacts on supply and demand, new China label
product transition, volume impact of price increases, cross border
trade, foreign exchange movements, changes in interest rates,
farmgate milk pricing and other commodity prices, and changes
in the regulatory environment. These challenges and risks could
materially impact expected revenue and earnings outcomes.

Business and category sales
The Company will continue to execute its growth strategy in
FY24, focusing on growing share in IMF as well as commercialising
opportunities in adjacent categories and new markets.
The Company expects to continue to gain market share in China
IMF, with growth dependent on the extent of market share gains
in a declining market. China label is expected to outperform
English label, and overall IMF growth is expected to be 2H24
weighted as the Company manages the transition to its new
China label product primarily in 1H24, and due to English label
cycling a relatively strong prior period in 1H23.

David Bortolussi
Managing Director and Chief Executive Officer
20 August 2023

ANNUAL REPORT 2023

13

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Building asustainablegrowth business14

THE a2 MILK COMPANY

Financial statements

Company disclosures

Who we are
The a2 Milk Company is a dairy
nutritionals company, fuelled byits purpose to pioneer the
future of dairy for good.
The Company was founded in 2000 in New Zealand by scientist
Dr Corran (Corrie) McLachlan and his business partner, Howard
Paterson, who recognised that not all milk is the same. Dr Corrie
McLachlan joined Sir Robert (Bob) Elliot – who had earlier
discovered that proteins in milk affect people differently – topioneer research to understand these differences better.
Originally all cows’ milk contained only A2 beta-casein protein.
The A1 protein arose through a genetic mutation over many
years. Today, most regular milk contains a mixture of A1 andA2-type beta-casein proteins. Results of several publishedpeer-reviewed human clinical trials have shown that A1 protein
can cause digestion issues for some people. A scientific andproprietary way to identify cows that naturally produce A1 protein
free milk was also discovered.
Today, a2MC continues to pioneer this science and research,bringing A1 protein free milk to the world, allowing moreconsumers to enjoy its unique digestive and other potential
health benefits.
The Company produces a portfolio of products made withmilk from specially selected cows that naturally produce milk
containing only A2-type beta-casein protein and no A1. These
products include fresh milk, ultra-heat treatment (UHT) milk,
extended shelf life (ESL) milk, infant milk formula (IMF), plain milk
powders (including instant whole and skim milk powder), fortified
milk powders providing nutrition for children and pregnant
women and other dairy nutritional products primarily for the
New Zealand, Australia, China and North America markets.
The Company’s primary business activities are:
© China and Other Asia: Sales of China label and English label
IMF, liquid milk and other nutritional products in offline storesand domestic and cross-border e-commerce channels.
© ANZ: Sales of English label IMF, plain and fortified milk
powders for children and pregnant women through reseller
and retail channels, and sales of liquid milk across Australianand New Zealand retail channels. It is understood that the
majority of the infant milk formula sales to customers in ANZ
are ultimately consumed in China.
© North America: Sales of liquid milk and nutritional products in
the United States of America and liquid milk in Canada.
© Mataura Valley Milk: Production of nutritional andcommodity products for a2MC and other external customers
in overseas markets.

ANNUAL REPORT 2023

15

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

What we do
China and Other Asia
Revenue$1,002m

EBITDA$254m

Market size

Estimated China IMF market value
size for FY23 was NZD$33 billion1

Supply chain© China State Farm importation
agent and master distributor© Over 100 distributors

Our people

132 (headcount)

Strategic partners

PRODUCT PORTFOLIO

Australia and New Zealand
Revenue$486m

EBITDA$67m

Market size

Australian fresh milk market
NZD$2.6 billion2 plus cross-borderaccess to China market

Supply chain

Australia (Liquid Milk)© Smeaton Grange (a2MC)© Kyabram (a2MC)© Four third-party processing
relationships© 21 farmer suppliers
New Zealand (Nutritionals)© 75% interest in M ataura
Valley Milk
© 19.8% interest in S ynlait Milk
© 198 farmer suppliers

Our people

Strategic partners

307 (headcount)

PRODUCT PORTFOLIOPart of The a2 Milk Company

Licensee fresh milk
New Zealand16

THE a2 MILK COMPANY

Licensee fresh milk
CanadaNorth America
Revenue$105m

EBITDA($23m)

Market size

$4.1billion premium segment3

Supply chain© Three third-party processing
relationships© 9 farmer suppliers 

Our people

26 (headcount)

PRODUCT PORTFOLIO
1 Source: FY23 Market size based on a2MC internal estimation approach,which may be adjusted year-to-year, and which may result in market size notbeing directly comparable across periods.
2 Source: Circana Grocery Scan data for measured market with internal
estimates using Circana Shopper Data for unmeasured market.
3 Source: SPINS; USA Food FY23 retail milk sales in the premium segment. Note,
in FY23 the Company has updated the market size from ‘US MULO + Natural+ Regional + Independents’ to ‘US Food’ as it is a more representative metric.

ANNUAL REPORT 2023

17

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

How we create value
Inputs

Our strategy
Page 21

Our people
Through a purpose driven culture underpinned by our values,
we aim to create an environment that provides our people with
opportunities to thrive. Our success is the result of our diverse, skilled
and engaged team, aligned and focused to deliver on our purpose
and strategy. We are committed to the wellbeing and safety of ourpeople and are continuing to develop systems and processes to
identify, control, report, investigate and monitor health and safety
risks and actions across the business.

Our brand
Our trusted brand, our proprietary know-how and our A2 protein
expertise are our most valuable assets. We are committed tomaintaining and growing these assets with appropriate investment.
Through ongoing science and research programmes, we are
deepening our expertise and advancing global understandingof the potential health benefits of a2 MilkTM.

Our environment
Access to natural resources and a thriving agricultural sector
that supports healthy ecosystems is fundamental to ourbusiness. We recognise that climate change and pressures on
agricultural and food systems present a systemic challenge forour world – and we are committed to finding unique and highimpact solutions across our value chain to help address thesechallenges. Appropriately meeting this challenge will enable
us to continue providing premium a2 MilkTM based products
to our consumers and long-term value to our shareholders.

Our supply chain
Complementing our own fresh milk and nutritionals
production capability, we work closely with our suppliers andfarming community to maintain a reliable and responsible
sourcing and manufacturing supply chain. We believe this is
critical to our long-term success.

Our communities
We support communities in our key regions of New Zealand,
Australia, China and the USA, with a focus on proactive
wellness to nourish the lives of children and families andhelping them to thrive.

Our finances
We carefully balance investment in our supply chain anddistribution through both strategic partnerships and directownership. Combined with the growth of our premium products,
this approach has enabled us to build a strong and robust balance
sheet, which, guided by our capital management framework,
provides financial capital for us to deploy in the pursuit of ourstrategic objectives.
18

THE a2 MILK COMPANY

Purpose
PurposeWeWe
pioneerpioneerthe future of
the future of
Dairy for good

Dairy for good
Page xx

VisionVisionAnAnA1-freeworld
A1-free world
where Dairy
Dairy nourishes allwhere
people and our planet
nourishes
all people
and our planet

Progress
towards ourgoals

Risks andopportunities
Page 50

Page 25
The sale ofnutritional foodproducts

Page 51

Doing businessin international
markets

Page 52

PeopleStrategic priorities

Major
international
events– Invest in people andplanet leadership

Page 53

Create a safe, diverse, inclusive
and engaging place for ourpeople to thrive, support our
farmers and contribute toour communities.

Page 25– Capture full potential
in China IMF

Competitive
intensity– Ramp-up product innovation– Transform our supply chain

Page 54– Accelerate path to profitability
in USA and MVM

PlanetProtect our planet and cows,
rethink packaging, achieve net
zero and become nature positive.

Page 32
Climateand nature

Page 55

Values– Bold passion

Strategic
partnerships– Ownership and agility

Page 56– Leading constructively– Disruptive thinking
Evolving
technology andcyber security

Page 57

Consumers
Bring the unique benefits ofpure and natural a2 Milk™ to
as many consumers as possible.

Page 40

Shareholders
Create long-term, enduring value
for shareholders and a trusted,transparent relationship.

Page 45

Talent andculturePage 58
Social licenceto operate

Page 59

ANNUAL REPORT 2023

19

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

What makes us uniquePurpose

We pioneer the
future of Dairy
for good

VisionAn A1-free world
where Dairy
nourishes all people
and our planet

Values refresh
Building on the purpose and strategy refresh in FY22, the Company also refreshed its values
and standards of behaviour in FY23. The values refresh was led by the Executive Leadership
Team and a cross-functional working group from the business, across multiple geographies,
teams and working styles, to ensure the values are relevant to all team members, underpin
culture in the organisation, and support execution of the Company’s strategy going forward.

Bold
passionOwnership
and agility

Leading
constructively

Disruptive
thinking

We believe in the powerof the a2TM proposition.

We align on outcomesand prioritise initiatives.

We are proud of what
we do and how we do it.

We are pioneers and always
find a way to make it happen.

We are effective in teams anddo what we say we will do.

We encourage and develop
ourselves and others.

We think big, creatively
and logically to maximisegroup impact.

We are passionate about ourconsumers and customers.

We are flexible and act witha sense of urgency.

We are honest, direct andrespectful in our interactions.

20

THE a2 MILK COMPANY

We are better together
and unlock the powerof the collective.
We challenge existing ways
of working to achieve
better solutions.

Our strategy
Our growth strategy
The a2 Milk Company’s strategic priorities and goals remain
largely unchanged since it undertook a holistic review of its
market, brand, product and distribution opportunities, which wascommunicated to the market in October 2021.
The Company has clear goals in four stakeholder groups, People,
Planet, Consumers and Shareholders, to ensure that in addition
to achieving its commercial ambitions, it is also actively working
to deliver its sustainability priorities and is executing in a waythat further develops a trusted and transparent relationship with
its stakeholders.
The Company’s growth strategy centres on five key priorities:© Invest in people and planet leadership: While theCompany’s primary commercial objective is to deliver its
full potential in China IMF, critical to doing so is ensuring it
has thriving, high performing teams to execute its strategy.
The Company has continued to invest in people leadership,including through its constructive leadership programmes andrefreshing its values and behaviours. The Company elevatedinvestment in planet leadership to sit amongst its top strategic
priorities, by taking direct action with an ambition to lead theindustry, particularly in GHG emissions reduction, farming
practices and sustainable packaging. The Company is also
focused on supporting healthy ecosystems through initiatives
that contribute to nature positive outcomes.

© Capture full potential in China IMF: To achieve its
commercial ambitions, the Company remains primarily focusedon capturing its opportunity in IMF in the China market. To
accomplish this, the Company is increasing its control over its
CL and EL distribution, getting closer to consumers, continuing
to increase investment in its brand, and further investing in its
digital marketing and e-commerce capability.
© Ramp-up product innovation: While the Company hashistorically been focused on a narrow product range, tocontinue to drive growth in IMF and beyond, it will be
important to expand its portfolio both in CL and EL IMF, as wellas entering adjacent product categories in key markets.
© Transform the supply chain: Connected to its IMF andinnovation ambitions, the Company is working to transform
its supply chain. This includes a focus on obtaining additional
CL IMF registrations, increasingly leveraging its manufacturing
capability at Mataura Valley Milk Limited (MVM), partneringwith new suppliers to deliver new products and, over time,developing its supply capability in China.
© Accelerate path to profitability for MVM and USA: To
maximise investment in China and to improve Group returnon sales, the Company needs to ensure it accelerates the pathto profitability for both the USA and MVM. The Company istargeting achieving this during FY26 or sooner.

Purpose

We pioneer the future of Dairy for good

VisionAn A1-free world where Dairy nourishes all people and our planet

Goals

PEOPLE

PLANET

CONSUMERSSHAREHOLDERS

Create a safe, diverse,
inclusive and engaging
place for our people tothrive, support our farmers
and contribute to ourcommunities

Protect our planet andcows, rethink packaging,achieve net zero andbecome nature positive

Bring the unique benefits ofpure and natural a2 Milk™
to as many consumers as
possible

Create long-term, enduring
value for shareholders
and a trusted, transparent
relationship

1

Strategic
priorities

2

3

Invest in people
and planet
leadership

Capture fullpotential in China
IMF

Ramp-up productinnovation

Transform our
supply chain

Accelerate pathto profitability– Invest in our people
to enable them tothrive– Gain more control
over CL and EL
distribution andget closer to ourconsumer– Expand our CL and
EL IMF productportfolios– Expand CL
registered market
access– Take action torealise potential inUSA– Enter adjacentproduct categories
in relevant markets
to drive growth– Utilise MVM andinvest in New
Zealand capability– Expedite insourcingof a2™ productand 3rd party
volume tosignificantly
increase MVM
utilisation– Take direct action
to lead the industry
in GHG emissions
reduction,
farming practices
and sustainable
packaging– Increase investment
in our brand, digitalmarketing ande-commerce

45– Develop China
supply capability
over time

Enablers

Quality & Service

Brand strength

Science & Innovation

Strategic relationships

ValuesBold passion

Ownership & agility

Leading constructively

Disruptive thinking

ANNUAL REPORT 2023

21

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

OUR STRATEGY CONTINUED

Financial measures of success

Non-financial measures of success

The Company’s medium-term ambition is to grow sales from
$1.2 billion in FY21 to approximately $2 billion by FY26 or laterand to improve EBITDA margins in the ‘teens’. The sales ambitionis expected to be predominantly driven by growth in CL and EL
IMF as well as other nutritional products sold in China.

The Company is also focused on several medium-term nonfinancial measures of success, as summarised in the image below.

The key drivers for the sales growth are:
© Increasing share of CL IMF nutrition© Supporting EL channel recovery post COVID-19 and gaining
channel share© Growing other dairy and nutritional products in China throughinnovation and distribution growth© Growing in existing and new emerging markets© Expanding in milk and adjacent categories in ANZ and the USA
The Company’s ambition is to improve EBITDA margins over timeand is targeting EBITDA margins in the ‘teens’ in the mediumterm. This will depend on a range of factors, including China IMF
market conditions and channel dynamics, mix of business (IMF
channel mix and overall product mix), investment levels in brandand capability, timing and investment required to deliver theCompany’s priorities around its supply chain transformation, andachieving profitability in the USA and at MVM.
There are also key macro uncertainties that may impact the future
outlook, including:© How the China birth rate evolves and the impact policychanges may have on this
© The extent and pace of recovery in cross-border trade post
COVID-19 disruptions© How the competitive landscape will evolve in China following
the new GB registration process© The extent and pace of change in consumer product andchannel preferences© How the China regulatory framework and international
relations may evolve and impact trade
Because of these uncertainties, it is difficult to define future statetargets and when they will be achieved – the path is also unlikely
to be linear. Accordingly, future results may be materially different
to the Company’s ambition.

People: The Company is committed to creating a safe and highly
diverse and inclusive environment for its people. The Company’s
ambition is to be an employer of choice in the industry by creating
a fulfilling employee engagement experience that enables
employees to thrive personally and professionally. To facilitate
this ambition, the Company is targeting below 10 for its safety
total recordable injury frequency rate (TRIFR) with continuous
improvement, improving its employee engagement score to above
80%, and maintaining its diversity and inclusion rating.
Planet: The Company is committed to minimising its impact on
the planet and becoming a more sustainable business across a
broad range of areas. On emissions, this includes targeting net
zero emissions for Scope 1 and 2 by 2030 and Scope 3 by 2040
and a reduction in Scope 3 by 30% (per tonne of milks solids),
by 2030. For on-farm and other impact areas, this includes
targeting 100% completion of Farm Environmental Plans andCertified Animal Welfare Programmes by the end of calendar year
2023, and targeting 100% reusable, recyclable or compostable
packaging with 50% average recycled content by 2025.
Consumers: The Company has also set brand health, market
share, innovation and supply chain targets to deliver on its
Consumer goals.
For brand health, the Company is targeting greater than 25%
for unprompted awareness in China, household penetration of
16% in Australian fresh milk, and household penetration above
3% in the USA in the premium milk segment.
For market share, the Company is working to become a top five
China label IMF player with greater than 5% market share andto have the leading English label IMF range with market share forthat range of greater than 25%. For its liquid milk business, theCompany is targeting greater than 15% market share in Australia
and greater than 5% in the premium milk segment in the USA.
For innovation, the Company is looking to drive $200 million inincremental revenue from dairy and other nutritionals in China
while also driving 25% of sales from new products in Australia
and the USA.
For supply chain, importantly, the Company is also looking tosecure three or more China label IMF registrations. The Company
targets to maintain the highest food safety and quality standards,
improve supplier and customer service levels, tightly manage
inventory levels and constantly improve supply chain efficiency.

22

THE a2 MILK COMPANY

Medium term measures of success	On track	Work in progress

GOALS
CONSUMERSPEOPLE

PLANET

Brand HealthMarket Share

Innovation

Supply Chain

SHAREHOLDERS

1

2

3

4

5

6

7

	GHG
emissions
reduction

	China
unprompted
brandawareness

	MBS share	China otherdairy /
nutritionals
growth	Accessto ≥3 CLregistrations

	Medium-termsales ambitionof ~$2.0b(≥FY26)

	Safety
TRIFR1	Engagement
	Diversity &Inclusion	Environmental
plans on farms
	Animalwelfareprogrammes
	Sustainable
packaging	AU household
penetration
	USAhouseholdpenetration

	DOL share	CBEC share	O2O + Daigou
share	Australian
fresh milkshare	USA premium
milk share	Emerging
markets
development
	USA sales
from newproducts	ANZ sales
from newproducts

	CL inventory
management
	EL inventory
management	Quality
outcomes	Supply chain
efficiency

	EBITDA
margin goalin the ‘teens’
targetingyear-on-year
improvement	USA
profitability
during FY25/
FY26
	MVM
profitability
during FY26

1. Total Recordable Injury Frequency Rate (TRIFR)

ANNUAL REPORT 2023

23

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

Our reporting approach
The Company believes that by further integrating its
reporting, it will benefit stakeholders by providing
a more complete picture of how it continues to create
and preserve long-term value.

At its core, the integrated reporting concept refers to aprinciples-based, multi-capital framework in which companies
can communicate clearly and concisely about how their strategy,
governance, performance, and prospects create value in thecontext of their external environments.
One of the Company’s goals is to ensure that it creates long-term,
enduring value for shareholders through a trusted, transparent
relationship. A move towards integrated reporting is one of theways the Company is seeking to achieve this.
The Company notes the recent developments in this space,and in particular the publication of New Zealand’s first Climate
related standards in December 2022 from the External Reporting
Board (XRB). The XRB standards were guided by the International
Sustainability Standards Board (ISSB) exposure drafts, which werereleased in March 2022 and formally published in June 2023.
It is expected that this will result in a more definitive approachfor companies to follow with regard to integrated reporting. This
report has been prepared with reference to the XRB and ISSB
standards and considers the integrated reporting principles.

24

THE a2 MILK COMPANY

During FY23 the Company continued to assess materiality,
informing the Company on which topics to prioritise and reportagainst, whilst building on its strategic priorities and aligning with
the needs and expectation of its stakeholders. The materiality
assessment included stakeholder interviews, peer benchmarking
and alignment to the United Nation’s Sustainable Development
Goals (SDGs), The Global Reporting Initiative (GRI) and The
Sustainability Accounting Standards Board (SASB) standards.
The Company also acknowledges the increasing expectation ofinternal and external stakeholders to ensure non-financial metrics
disclosed externally are done so with a similar level of rigour tofinancial reporting. Over the past several years the Company hastaken steps to improve the robustness of its internal processes tocapture and report non-financial data to be included in externalmaterials. For FY23, the Company has received limited assurance
for many of the key non-financial metrics included in this report.
For further information, please see ESG assurance report on
page 81 from Ernst & Young.
The Company will endeavour to continue assessing stakeholder
requirements and expectations along with the reporting
requirements in all jurisdictions in which it operates.

Progress towards our goals
PEOPLE
Create a safe, diverse, inclusive and engaging placefor our people to thrive, support our farmers andcontribute to our communities.

SUSTAINABLE DEVELOPMENT GOALS
SDG 5: Gender equality
Target 5.5
SDG 8: Decent work andeconomic growthTarget 8.2

ANNUAL REPORT 2023

25

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

PROGRESS TOWARDS OUR GOALS CONTINUED

Targets and commitments

<10Safety TRIFR with continuous improvement>80%
Engagement

Rated >4 out of 5
Diversity and inclusion

26

THE a2 MILK COMPANY

a2MC team members supporting our communities:
Row 1 L-R: China team supporting Operation Smile, Laptop
donations to KidsCan sponsored school in Mataura
Row 2 L-R: Auckland team members volunteering at KidsCan
warehouse, Melbourne team volunteering at Foodbank Victoria,
Boulder team volunteering at Boulder Shelter for HomelessRow 3 L-R: Melbourne team volunteering for Landcare, Sydneyteam volunteering for Foodbank NSW, China team supporting
Operation SmilePassionate and thriving team
The Company is committed to creating a safe and highly diverse and inclusive environment for its people.
The Company’s ambition is to be an employer of choice in the industry by creating a fulfilling employee
engagement experience that enables employees to thrive personally and professionally.
To facilitate this ambition, the Company focuses on health andsafety, invests in leadership, promotes the employee experience,
fosters a learning environment, and celebrates diversity
and inclusion.
During FY23, the Company launched various initiatives to deliveron its ambition and to achieve engaged and effective teams whocreate long-term value for the Company and its shareholders.

FY23 progress
Health, safety and wellbeing© All worksites continued to focus on managing critical risks andpromoting a safety culture through leadership and education
across all sites. Manufacturing teams continue to focus on
managing critical risks, including the use of external resources
where appropriate.
© Reported a Total Recordable Injury Frequency Rate (TRIFR)
of 6.1, which was an improvement on the prior year. This
included team members from all the Company’s sites (including
contractors).
© Continued to provide employee assistance programme
resources to team members across all geographies.
© Further developed health and safety reporting.

© Provided free access to all team members and their families toresources and tools promoting mindfulness, meditation andmental wellbeing.
© Conducted health and wellbeing expos across Australia and
New Zealand worksites and virtually.

Investment in leadership© Relaunched a renewed set of our Company values andstandards of behaviour, reflecting the input and contributionsof over 200 team members across all worksites.
© Embedded the Lifestyles Inventory (LSI) tool to provide acommon leadership language and support the development ofleadership capability and effectiveness.
© Launched a Roles and Goals model for role clarity and aquarterly focus on goal achievement and leadership behaviours.
© Continued to roll out the 'Thrive' constructive leadershipprogramme to senior leaders, to support the development ofleadership effectiveness and constructive ways of working.
© Delivered Situational Leadership training for leaders at all levels
to provide an integrated and practical approach to effective
leadership styles.
© Implemented 'Compass', a global Human Resources
Information System (HRIS) building on the Company’s ERP
platform.

KEY METRICS DATA (FY23)1

GENDER (AS AT 30 JUNE 2023)

COHORTMALE%

FEMALE%VARIANCE TO LAST YEAR(% FEMALES)

Directors2

7

4

57%

3

43%

Executive Leadership Team2

10

7

70%

3

30%

5%

People Leaders3

118

64

54%

54

46%

13%

Remaining Team Members

331

154

47%

177

53%

-2%

Total

465

228

49%

237

51%

+2%

AGE (AS AT 30 JUNE 2023)-7%

NUMBER%

Under 30

56

12%

0%

30 to 50

310

67%

-1%
1%

Over 50

99

21%

Total

465

100%

TENURE (AS AT 30 JUNE 2023)

VARIANCE TO LAST YEAR (%)

NUMBER%

0–2 Years

217

47%

VARIANCE TO LAST YEAR (%)

3%

2–5 Years

190

41%

-3%

5+ Years

58

12%

–

Total

465

100%

1 All values subject to rounding
2 David Bortolussi has been included in both the Director and ELT calculations
3 a2MC defines People Leaders as any Team Member with direct reports

ANNUAL REPORT 2023

27

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

PROGRESS TOWARDS OUR GOALS CONTINUED

Reward, recognition and training

Recruitment© Continued to embed the Company’s global reward andrecognition platform 'LegenDairy' across all geographies. The
platform provides wellbeing and rewards, recognises tenure andalso provides an opportunity to celebrate the many examples
of individuals and teams who are going above and beyond indelivering the Company’s strategy and living its values.
© Celebrated and recognised monthly nominees forour a2 Legends awards.
© Celebrated annual a2 Legend of the Year award.
© Launched Udemy and Masterclass which provide
educational platforms to enhance and support online
learning and development.
© Implemented a Work from Anywhere policy to support allteam members in leveraging flexible work for up to two
weeks a year.

© Launched the Company’s corporate induction programme.
The purpose of the programme is to equip team memberswith an understanding of the Company’s history, purpose,
vision, strategy, and values along with the experience of visitinga farm, production site and retailers.
© Upgraded external website capability with Careers at a2,
showcasing Working at a2 and providing future team memberswith an understanding of the Company’s purpose, vision,
strategy, values and benefits, as well as current role vacancies.
© Embedded talent acquisition partnership with an external
provider as an integrated talent function in the ANZ business.
© Updated internal systems, resulting in a centralised teammember information centre for the Company.
© Evolved the operating model and organisational design
to optimise delivery of our strategic objectives.
© Launched an online recruitment module at Mataura Valley Milk
to support a better candidate experience.

Supporting a diverse and inclusive workplace© Introduced an additional five days of paid women’s health leave
for team members experiencing symptoms of endometriosis,
peri-menopause or menopause as well as those individuals
undertaking fertility treatments, including IVF. a2MC recognisesthat there are days when these symptoms and treatmentsinterfere with an individual’s ability to work.
© Introduced an on-demand platform to support team members
managing childcare and tutoring in New Zealand and Australia.

Next steps© Continue to roll out constructive leadership training programme
across the Company.
© Enhance current benefits to strengthen the Company’s value
proposition for a2MC team members and attract new talent.
© Implement refined Workplace Health and Safety
Management System.
© Implement ‘Thrive’ leadership programme with nextlevel leadership.
Xiao Li, Chief Executive Officer – Greater China, presenting Felix
Liu, Trade Marketing Director – China, with a2MC 2023 Legendof the Year Award28

THE a2 MILK COMPANY

Anti-modern slavery

Green Teams

The Company’s values and principles have an impact
well beyond its own operations. The Company believesin the vital role business plays in upholding humanrights and considers it a basic responsibility to ensurethat individuals, communities and the environment aretreated with respect.

The Company has Green Teams across each of its
offices and worksites which focus on improving thesustainable practises of the offices and worksites.

The Company is committed to high standards of responsible
conduct, social responsibility and sustainability in all areas of thebusiness, including operations and supply chain. The Company’scommitment comes not just from an acknowledgementthat it is the right thing to do, but from a recognition thatthe manner in which the Company and its partners managesocial, environmental and economic impacts is critical to longterm success. The Company released its third Modern Slavery
Statement under the Modern Slavery Act in December 2022
which is available at www.thea2milkcompany.com/ESG-reporting.

Green Teams engage and educate the wider team insustainability initiatives. A 'People and Planet Legend'award was established through the Company’s reward andrecognition platform, ‘LegenDairy’ to recognise achievementsin this space. A green office policy was also implemented by
the Green Teams, outlining the Company’s expectation of its
team members in respect to sustainable management of its
offices. Additional initiatives have included:© Enhancing onsite recycling, including e-waste.
© Hosting clothing drops, clean ups, and lunch and learn
sessions.
© Exploring low impact alternatives such as trialling the useof electric vehicles by the sales team.

FY23 progress© Adopted an anti-modern slavery response protocol with afocus on governance, risk mapping, supplier engagement andgrievance mechanisms and reporting.
© Adopted an anti-modern slavery remediation plan which sets
out the steps the Company is to take in the event it discovers
any modern slavery in its supply chain.
© Prepared an anti-modern slavery questionnaire and conductedanalysis of all suppliers to determine approach to roll out
questionnaire. The questionnaire will be rolled out progressively
initially to suppliers that are categorised as higher risk.
© Received signed ‘Pledge against modern slavery‘ from USA
farmers and seeking the same from Canadian farmers.
© Continued to conduct further work across the Company’s
supply chain, with a focus on modern slavery risks across both
the Company’s own supply chain and indirect operations.
© Continued to refine existing training programmes for all
employees and the Company’s on-farm suppliers.

Next steps© Analyse modern slavery risks with key suppliers’ supply
chains and operations.
© Update agreements with farms providing raw A1 protein
free milk to include a commitment to operate slavery free.
© Continue roll out of modern slavery questionnairewith suppliers.

Reconciliation Action Plan
The Company recognises the importance of reconciliation
between First Nations peoples and non-indigenous peoples inAustralia and in FY23 formally commenced its reconciliation
journey by committing to the Reconciliation Action Plan (RAP)
framework established by Reconciliation Australia.

FY23 progress© Published the Company’s ‘Reflect’ RAP.
© Partnered with Yarnnup, an Aboriginal advisory firm, andcommenced action towards the deliverables set out in the RAP.
Our Company artwork:
Respecting Together –Elaine Chambers

ANNUAL REPORT 2023

29

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

PROGRESS TOWARDS OUR GOALS CONTINUED

Enriching communities
The Company recognises that it has a responsibility tosupport and contribute to the communities in which it
operates. a2MC strives to make a difference by helping
communities thrive and supporting organisations thatare helping to create a brighter future for children andfamilies, and the Company’s farming communities.
The Company has developed a community support framework to
guide how to engage, invest in, and give back to the communities
in which it operates, act on relevant social issues, and contribute toother programmes that are aligned to the Company’s purpose andwhich team members are passionate about.
Support takes the form of funds and product donations to help
communities, as well investments of time from the Company’s
people to work directly with partner organisations.
As a business founded on innovation, the Company believes thatscience plays an essential role in enhancing the health and wellbeingof communities over time and by harnessing science, the Company
can deliver superior outcomes for its consumers.

FY23 progress$2.84m* in product and cash donations, including:Volunteering support
In FY23, team members across various regions donated 334 hoursof time to different organisations. This included packing lunchorders for KidsCan in New Zealand, packing and sorting food at
Foodbank in Australia, stocking supplies at the Boulder homelessshelter and volunteering at Operation Smile in China.

Proactive support© KidsCan (New Zealand)© Foodbank School Breakfast Program (Australia)© Feed the Children (USA)© Operation Smile (China)

Event-based (or reactive) support© KidsCan milk powder for cyclone and flood affected families(New Zealand)© Victorian floods farm support (Australia)© GIVIT natural disaster relief cash donation (Australia)

Additional farming community specific programmes andsupport© a2™ Farm Sustainability Fund, in partnership with
Lincoln University© Surfing for Farmers© Sustainable Agriculture Landcare Grants© Bale Up Conference support*	Donations figure includes the cost value of donated products and any
donation of cash (NZD) to communities, organisations, farmers andindividuals

30

THE a2 MILK COMPANY

The a2 Milk Company
is supporting
communities to thrive
Operation Smile (China)
About 25,000 babies born in China each year suffer fromcleft lip palate. Corrective surgery can help to transform
those children’s lives – but they cannot undergo surgery
until they achieve the requisite ‘health standard’, which
includes weight targets. The Company partnered withOperation Smile during the year to provide corrective
surgery and nutrition products to 300 children sufferingfrom cleft lip palate, before and after their operations. With
more than 6,000 medical volunteers from around the world,
Operation Smile is one of the world’s largest volunteerbased not-for-profit organisations.

$2.84m* in product andcash donations to help
communities thrive
Foodbank (Australia)

KidsCan (New Zealand)
The Company is proud to partner with KidsCan, providing New
Zealand children with the essentials to help them participate inlearning and have the opportunity for a better future. In addition
to the partnership, the Company donated milk powders to
KidsCan to support families affected by floods and cyclones.

The Company has supported Foodbank with fresh milk productdonations in New South Wales and Victoria since 2015, scaling
up support in times of heightened need. In FY23, support wasincreased by providing a cash donation to support the Foodbank
School Breakfast Program. The Company also donated a2 Milk®
products to Foodbank through the National Donor Partnership.
The School Breakfast Program provides a healthy breakfast forschool children who would otherwise go without, and delivers
important benefits for students across a broad range of physicaland mental health outcomes, including energy levels andconcentration. Through this donation, the Company was able
to support Foodbank to provide over 40 schools in some ofAustralia’s most remote Indigenous communities with access to
the School Breakfast Program.

KidsCan is New Zealand’s leading charity dedicated to helping
New Zealand children affected by poverty. The Child Poverty
Monitor in New Zealand shows 11.0% of all children living inhouseholds in material hardship regularly go without essentials.
The Company is a major partner of KidsCan to help support low
socio-economic early childhood education centres across New
Zealand to provide children attending those centres with food,clothing, and health products. In FY23, the support increased byproviding a donation of 7 laptops to a KidsCan sponsored school.
a2MC supports KidsCan’s belief that education is a child’s ticketout of poverty and that children struggle to learn when they arecold or hungry.

Feed the Children (USA)The Company partnered with Feed the Children in the USA tohelp provide struggling families the supplies they need to send
their children back to school with confidence. The combined
health and economic crises of COVID-19 continue to cause
hardship. It is estimated that one in eight children in the
USA suffer from food insecurity. In June 2023, the Company
donated funds to provide food and supplies to school children,
giving children what they need to do and be their best.

ANNUAL REPORT 2023

31

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

PROGRESS TOWARDS OUR GOALS CONTINUED

PLANET
Protect our planet and cows, rethink packaging, achieve
net zero and become nature positive.
The relationships the Company has with farmers and the natural
systems in which it operates are pivotal to its success and longterm value creation. The Company continues to work with
farmers to promote strong animal welfare practices, put in place
farm environmental plans, and invest in on-farm programmes
to support farmers in adopting practices that will contribute toa sustainable future. These key initiatives support the natural
resources utilised by the business.

The impact of climate change and the reliance on natural
resources is driving significant structural transformation across thedairy sector. The Company is actively looking at ways to reduce its
impact on climate and focus on sustainability more broadly.

SUSTAINABLE DEVELOPMENT GOALS
SDG 2: Zero hunger
Target 2.4
SDG 6: Clean water and sanitation
Target 6.3 and 6.4
SDG 12: Responsible consumption
and production
Target 12.2
SDG 13: Climate action
Target 13.2
SDG 15: Life on land
Target 15.3

32

THE a2 MILK COMPANY

NatureThe natural environment plays an essential role in the production of a2 Milk™ products. The reliance on natural
resources is driving an important shift in the way that companies manage and assess the impact they have on thenatural environment.

Targets and commitments

100%
of farms supplying raw A1 protein free milk to be certified under
an upgraded animal welfare programme by the end of CY23

100%
of certified farms supplying raw A1 protein free milk to have afarm environmental plan in place by the end of CY23

45%
reduction in nitrogen loss to waterways per kilogram of milk solids
by 2030 for farms in the Canterbury region supplying milk for
a2MC's IMF production, from a FY18 base year

Continuing to review
additional water, waste and biodiversity targets as part of work on
nature risk and opportunity assessment

The dairy sector has an extraordinary opportunity to lower
its impact on the natural environment and the Company iscommitted to delivering a positive contribution to biodiversity,
water and soils. These are critically important issues to theCompany, its strategic partners, as well as governments andregulators in the countries in which it operates. The Company
believes this will also become increasingly important as consumers
become more attuned to nature impact.
The Company acknowledges the work being undertaken withrespect to the Taskforce on Nature-related Financial Disclosures(TNFD) which is focused on developing a risk management anddisclosure framework for organisations to report and act on
evolving nature-related risks, with the aim of supporting a shift inglobal financial flows away from nature-negative outcomes andtoward nature positive outcomes.

In FY23, the Company undertook its first two nature risk andopportunity assessments covering two regions in New Zealand,
Canterbury and Southland, where the largest A1 protein freemilk pools supplying the Company are based. These regions also
represent a significant proportion of the Company’s supply chain
footprint, in particular from a production perspective. These twopilot assessments confirmed the need for the Company, with its
strategic partners and suppliers, to focus on the key risks andopportunities around:© Water quality and use© Soil quality© Biodiversity© Climate (as an element of nature)
The Company also has targets related to GHG emissions
reductions, farm environmental plans, animal welfare andsustainable packaging which the Company believes will also
contribute to nature positive outcomes. In reviewing theCompany’s supplier targets, the Company has aligned to its IMF
manufacturer on nitrogen loss targets, an initial step towards
introducing nature related targets. The Company will consider
both the Science Based Target Network (SBTN) and the Science
Based Target Initiative for Forest, Land and Agriculture (SBTI FLAG)
when setting additional nature targets.

FY23 progress© Conducted nature risk and opportunity pilot assessments where
the largest A1 protein free milk pools supplying the Company
are based.
© Established a partnership with Lincoln University in New
Zealand and commenced a research project aiming
to strengthen on-farm resilience and deliver positiveenvironmental outcomes.
© Commenced nature-related on-farm measurement pilot studies
connected to the a2™ Farm Sustainability Fund programme in
New Zealand.

Next steps© Progress towards aligning to and reporting against the TNFD
framework.
© Extend the nature-related on-farm measurement pilot studies
connected to the a2™ Farm Sustainability Fund programme in
New Zealand.
© Extend nature-related targets for other key risks andopportunities and for additional operating regions.
© Report against initial water use and quality targets.

In a similar way to the Company voluntarily aligning its climate
disclosures to the Taskforce for Climate-related Financial
Disclosures (TCFD), which included reporting impacts for the firsttime in FY22, the Company will aim to align to TNFD over time.

ANNUAL REPORT 2023

33

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

PROGRESS TOWARDS OUR GOALS CONTINUED

ClimateClimate change is driving significant structural transformation across all sectors. There will also be extraordinary
opportunity for the agricultural sector to realise increased productivity and efficiency through new technologies andpractices that lower emissions and environmental impact across the supply chains, including a particular focus on
on-farm emissions.
At the same time, external reporting expectations andrequirements are increasing. This is highlighted by the introductionof New Zealand’s XRB climate standards, the International
Sustainability Standards Board (ISSB), and the Australian Treasury’s
climate related exposure draft released in June 2023. The
Company believes it is well placed to report in line with upcoming
standards and legislation.

Targets and commitments

Net zero GHG emissions
for Scope 1 and 2 by 2030

Net zero GHG emissions
for Scope 3 by 2040

GHG emissions net zero roadmap and GHG inventory
In FY23, the Company conducted a ’boundary review’ to ensurecompleteness and accuracy over data for its Scope 1, 2 and3 emissions. Following this, the Company developed its GHG
emissions net zero roadmap which illustrates the Company’s net
zero targets and how it plans to meet these targets over time.
The Company has commenced the process to have these targets
certified by Science Based Targets.
The Company is targeting net zero for Scope 1 and 2 emissions
by 2030 and has a target to achieve net zero by 2040 for Scope
3. The Company has also introduced an interim Scope 3 target
to reduce Scope 3 GHG emissions by 30%, per kilogram of milksolids, by 2030, from a FY21 base year.
In addition to the roadmap, the Company has published a GHG
inventory report which shows the breakdown of Scope 1, 2 and3 emissions. The purpose of the inventory report is to provide
transparency on the Company’s emissions profile as well as
communicate any estimation uncertainties and assumptions.
The GHG inventory report is available on the Company’s website
at www.thea2milkcompany.com/ESG-reporting.

30%
reduction of Scope 3 emissions, per kilogram of milk solids,
by 2030, from a FY21 base year

a2MC NET ZERO GOALS AND ROADMAP
a2MC NET ZERO GOALS AND ROADMAP1Our Roadmap:

Scope 1 and 2

Scope 3BAU

By 2030 we willreach Net Zerofor Scope 1 and 2

By 2040 we willreach Net Zerofor Scope 3

2030

2040

Progressive Scope 1 and 2 emission reduction

Our Goals:

2021

Net Zero (Scope 1 and 2)
30% intensity reduction (Scope 3)

Net Zero(Scope 1, 2 and 3)

1 The GHG emissions (tCO2e) summarised in the Net Zero Roadmap is shown as one scenario for the purpose of depicting potential emissions in the future. It should
not be interpreted or extrapolated as a view of any potential scenario related to the Company's financial performance or outlook.

34

THE a2 MILK COMPANY

GHG emissions reduction programme
Scope 1 and 2 emissions account for approximately 5% of theCompany’s total GHG emissions profile, with Scope 3 emissions
comprising the other 95%. The largest proportion of Scope 3
emissions is from on-farm activities.

FY23 progress
SCOPE 1: GHG emissions from direct operations© Progressed the installation of a high-pressure electrodeboiler at MVM to replace existing coal-fired thermal heatgeneration system.

Methane inhibitors

SCOPE 3: Indirect GHG emissions

In FY23, the Company continued its work on methane abatement.
The Company currently has a feasibility study underway and isplanning to commence additional studies in FY24. The feasibility
study has required collaboration between the Company, feed
supplement providers, farmers, and other service providers. The
study has presented various challenges throughout the period,
providing opportunities for the Company to work with farmers
to ensure they are appropriately prepared. This has included
investing in on-farm infrastructure, methane emission data
capture software, animal health monitoring collars and providing
additional support where needed.

© Commenced methane abatement feasibility study on-farm,with additional feasibility studies to commence in FY24.
© Continued research to support regenerative farming practices
through the partnership with Lincoln University.

The Company is working with farmers, processors and feed
suppliers to ensure that in the future supplements are easily
accessible and ensuring animal welfare, maintaining the premium
quality of products and reducing Scope 3 emissions.

SCOPE 2: GHG emissions from electricity operations© Progressed the full electrification of the MVM site which
includes converting MVM to 100% renewable energy oncethe boiler conversion is completed later in CY23.
© Continued to utilise green energy contracts at all available sites.
© Once these activities are complete, approximately 96% of theCompany’s electricity usage will come from renewable or green
energy sources.

KEY METRICS DATA (FY23)1

GHG EMISSIONS2

Total GHG Emissions3
Scope 1

FY23

FY22

FY21

501,090

516,345493,319

24,343

22,97230,144

Scope 2 (Market based)

153

–

–

Scope 2 (Location based)4

3,356

3,221

3,426

Scope 3

476,595

490,153459,749

On-farm

374,168

403,429

376,930

Scope 1 and 2 energy consumption (Gj)239,962––

4

1 Numbers are subject to rounding.
2 Greenhouse gas emissions, calculated as tonnes of carbon dioxide equivalent (tCO2 e), have been estimated using considerations from The GHG
Protocol guidelines. Emissions and conversion factors were sourced from the National Greenhouse Accounts Factors for Australia, the UK DEFRA GHG
conversion factors and a range of other country specific sources. Where required, non direct emissions sources have been estimated using default and/or extrapolated emissions intensity rates to provide a more complete picture of our Scope 1, 2 and 3 emissions. Total emissions calculations exclude
packaging. Refer to our GHG inventory report for details on estimations and assumptions used, which can be found at www.thea2milkcompany.com/
ESG-reporting.
3 Total GHG emissions for FY23 have been calculated using market based method for Scope 2.
4 A location-based method reflects the average emissions intensity of grids on which energy consumption occurs (using mostly grid-average emission
factor data). A market-based method reflects emissions from electricity that companies have purposefully chosen. It derives emission factors fromcontractual instruments, such as green energy contracts.

ANNUAL REPORT 2023

35

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

PROGRESS TOWARDS OUR GOALS CONTINUEDHow The a2 Milk Company is helping to support the planet

Matura Valley Milk boiler upgrade
In March 2023, construction works for the MVM high-pressure
electrode boiler installation project commenced. The project
involves replacing the existing coal-fired boiler with a highpressure electrode boiler. The boiler will provide all the steam
needed for operations. Steam generation is an essential elementin milk products manufacturing, providing heat to enable thedrying of milk to powder. The coal-fired boiler contributed
to ~98% of a2MC's Scope 1 emissions in FY23. Once thehigh-pressure electrode boiler is commissioned, the boiler and
MVM site will operate on 100% renewable energy, making it
highly efficient whilst emitting zero emissions and will be thefirst of its kind in New Zealand. The Company is proud to haveinvested approximately $16 million into the boiler and site
electrification project and is grateful to its fellow shareholder
China Animal Husbandry Group, and to the Energy Efficiency
and Conservation Authority for its $5 million co-investment in
the project under the New Zealand’s Government Investment in
Decarbonising Industry fund.

OTHER ENVIRONMENT METRICS

FY23 progress
Water usage and efficiency© Water usage and efficiency have been a focus for both facilities
in the FY23 period. Whilst water usage is decreasing, it isheavily affected by product mix and the Company may see
fluctuations in water usage, particularly at MVM.

Waste and waste diversion© Both sites have continued to focus on reducing waste on
site, with new initiatives at MVM being introduced, such asincreased recycling of cardboard.

Energy consumption© Both facilities have continued to use green energy contracts,with Smeaton Grange producing energy through solar panels.
Smeaton Grange had an increase in energy usage due to a new
product mix, with expectations to see a further increase in kWhfrom FY24, at MVM, when the electrode boiler is complete.

FY23

FY22

290,908

331,2881.7

2.0

2,780,010

2,902,950

100

112

96.7%

96.6%

16,700,000

16,800,000

Manufacturing Facilities1
Total water usage ('000 litres)
Water efficiency (litres/litre of milk)
Waste water diverted to beneficial land application (litres)
Waste produced (tonnes)
Waste diversion
Energy consumption (kWh)2
1 Manufacturing facilities include Smeaton Grange and MVM
2 Numbers have been rounded36

THE a2 MILK COMPANY

Thriving farms
Farmers play a vital role in the Company’s supply chain, not only as suppliers of the precious milk source for theCompany’s products but also as stewards of the environment and as vital contributors to local communities.
In addition, the humane treatment of cows is of the utmost
importance. The Company is committed to working with andsupporting farmers to enable them to improve the impact on theenvironment.
The work undertaken by the Company to better understand its
nature and climate risks and opportunities has highlighted theneed to take a holistic systems-based approach to regenerative
agriculture to be effective in driving towards nature positive
outcomes, including net zero targets.
Over the past several years, the Company has been working
towards its targets of having 100% of certified farms supplying
raw A1 protein free milk to having a farm environmental planin place and to be certified under an upgraded animal welfare
programme by the end of CY23. In addition to that, the Company
has developed programmes and services to engage with andsupport farmers. This has included the development and supportof farmer grants programmes, on-farm measurement pilot
studies, research partnerships, methane inhibitor research, farmer
education programmes, and crisis support.

Farm environmental plans
The Company has developed a global framework for farmenvironmental plans.
The principles of the framework address the most material aspectsof environmental management in the dairy industry:© Lowering GHG emissions© Managing water quality and efficiency© Managing soil quality© Boosting on-farm biodiversity© Improving nutrient (effluent) management

FY23 progress

Animal welfare programmeBest practice standards for animal welfare on farms are central to
the responsible sourcing of raw A1 protein free milk.
The Company’s animal welfare programme meets globally
recognised frameworks for Animal Health and is evolving from theFive Freedoms Model to the Five Domains Framework of animal
welfare.
a2MC’s approach to animal welfare is to drive improvement,
reduce risk and ensure farmers are welfare centric. This is achieved
through the combination of increased audits, wider audit scope,
milk monitoring, on-farm technology and training.
A number of extensions to the animal welfare programme weredeveloped in FY23, supporting farmers to establish systems forcontinuous improvement in animal welfare and to further improve
programmes beyond the industry standard.

FY23 progress© Continued roll-out of auditor and a2MC farm services teamtraining modules.
© Staged launch of upgraded animal welfare programme acrossthe Company’s regions.
© Successful roll out of updated audit scope and frequency.
© Redefined animal welfare programme with MVM ready tolaunch.
© On target for 100% animal welfare certification by end
of CY23.

Next steps© Progress towards global certification of the redefinedprogramme.
© Invest in education and value add initiatives for farmers.

© On target to have 100% of certified farms supplying A1 protein
free milk with farm environmental plans (including MVM) by
end of CY23.

Next steps© Progress towards 100% of certified farms supplying A1 protein
free milk in New Zealand having a Fresh Water Farm Plan.

ANNUAL REPORT 2023

37

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

PROGRESS TOWARDS OUR GOALS CONTINUED

Research studies, partnerships and measurement pilots

Farmer grants programmes

The Company is committed to supporting the dairy industry byworking with technology and solutions providers to tackle someof the major issues in the industry.

The Company has two established farmer grants programmes
operating in New Zealand and Australia – the a2™ Farm
Sustainability Fund and Sustainable Agriculture Landcare Grants.

As noted in the Climate section above, the Company has been
actively involved in methane inhibitor research. The Company
is also seeking to partner with research institutions on projects
that will advance science and technology solutions to contributeto nature positive outcomes. Another of the major challenges inagriculture where the Company is investing time and resources toadvance the accurate measurement of on-farm data.

These programmes offer financial awards to contracted A1 protein
free dairy farms to support projects that demonstrate an
integrated approach to a sustainable future.

FY23 progress© Commenced methane inhibitor feasibility study in Victoria,
Australia.
© Commenced roll out of on-farm carbon audits for certified
farms.
© Completed pilot of farm environment plans in Australia, withfinal tool available to farmers.
© Established a research partnership with Lincoln University andcommenced a research project aiming to enhance on-farmresilience and deliver positive environmental outcomes.

Next steps© Continue methane inhibitor feasibility study in Victoria,
Australia and commence additional feasibility studies.
© Continue measurement pilot studies in Australia and
New Zealand.
© Expand carbon audits to certified farms in North America.
© Continue research partnership and research project with Lincoln
University.

The a2™ Farm Sustainability Fund is a collaboration between the
Company and Lincoln University, while the Sustainable Agriculture
Landcare Grants are a partnership with Landcare Australia,
both with a vision to protect, enhance or restore the naturalenvironment. Both programmes allow A1 protein free farms toapply for grants to fund farming practices that align with theCompany’s sustainability objectives and one or more of its key
environmental improvement themes:© Lowering greenhouse gas emissions© Increasing on-farm carbon sequestration© Improving farm system resilience© Improving water quality and efficiency© Enhancing on-farm biodiversity© Animal wellbeing/health© Managing and improving soil health© Expanding blue/green infrastructure e.g. living things (soil/trees/
diverse pasture)
The programmes each have an investment committee withindependent representatives assisting in the evaluation andawards process to farmers. The Company is grateful to Lincoln
University, Landcare Australia and the members of the investmentcommittees for their support of these programmes.

FY23 progress
Twenty-three awards totalling approximately $440K made under
the a2™ Farm Sustainability Fund in round 2 of the programme.
Eight awards totalling $250K made under the a2 Milk® Sustainable
Agriculture Landcare Grants in round six of the programme.

Next steps© Continue to support the a2™ Farm Sustainability Fund andSustainable Agriculture Landcare Grants, with a focus onsustainable farming practices.
© Establish farmer grant programme in the USA.

Lincoln University research partnership
The Company has established a partnership with Lincoln
University in New Zealand and commenced a research projectaiming to enhance on-farm resilience and deliver positiveenvironmental outcomes. Lincoln University is a specialist
agriculture-based tertiary institution and is committed to being
an exemplar of sustainable practices for the land-based sector
and ecosystems within it. The research project will be conducted
over a three-year period and is focused on GHG reduction, soil
health and water quality and the Company has engaged withsome of its supplier farms to participate in the research.

38

THE a2 MILK COMPANY

Sustainable packaging
Sustainable packaging is an important element in the Company’s ambition to protect the planet. It is also an
increasingly important area for many stakeholders, including consumers. The Company has a vision for as much of its
packaging as possible to be reusable, recyclable or compostable.

Targets and commitments

100%
reusable, recyclable, or compostable
packaging by 2025

70%
plastic packaging being recycled
or composted by 2025

50%
average recycled content includedin packaging by 2025

Phase outof problematic and unnecessary single-use plastics
packaging by 2025

Achieving this will require a region-by-region and product-byproduct approach over time. In the latest year there was a focus
on products sold in Australia and New Zealand. Australia first
introduced the ‘2025 National Packaging Targets’ in 2018 andupdated them in 2020. The targets require a complete andsystemic change to the way Australia creates, collects and recovers
product packaging, and are an important step on the country’s
journey towards a circular economy for packaging.
The targets are overseen by the Australian Packaging Covenant
Organisation (APCO) which recently completed a review into the2025 targets. The report written by APCO on the 2025 targets
noted that in order to meet the targets, collaboration acrossthe entire packaging system is needed and APCO is focusing its
resources on helping business bring the system together. In 2021,
a2MC became a signatory to the Covenant, strengthening theCompany’s long-term commitment to sustainable packaging. As
a signatory to the Covenant, a2MC is required to report on its
progress on an annual basis and to publish its action plan. This
covers all Australian sales which captures a significant proportionof the Company’s product portfolio including IMF. During the year,
the Company extended and aligned its sustainable packaging
targets to APCO targets for products sold in all markets.

FY23 progress© Fully recyclable packaging reduced from 90.2% in FY22 to87.1% in FY23. This reduction was due to increased productionof UHT products. However, alternative packaging solutions
are being investigated through the long-term sustainable
packaging roadmap project to meet the ‘2025 National
Packaging Targets’.
© Developed the Company’s sustainable packaging roadmap.
© Submitted its second APCO Annual Report.
© Continued to investigate innovative packaging design forsustainable solutions.
© Maintained an APCO rating of ‘Leading’.

Next steps© Continue executing against the APCO action plan and makeprogress against sustainable packaging targets.
© Explore options for inclusion of recycled content in milk
containers in Australia.

ANNUAL REPORT 2023

39

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

PROGRESS TOWARDS OUR GOALS CONTINUEDCONSUMERS
Bring the unique benefits of pure and natural a2 Milk™
to as many consumers as possible.
The Company’s trusted brand, its proprietary know-how andA2 beta-casein expertise are valuable assets. The Company iscommitted to ongoing investment to maintain and sustainably
grow these assets. In addition, the Company is focused on
responsibly marketing to consumers, delivering products that aresafe and of high quality.

Through ongoing investment into scientific research anddevelopment programmes, the Company is deepening its
expertise and advancing global understanding of the potential
health benefits of a2 Milk™. This science will underpin our future
product innovation, bringing the benefits of a2 Milk™ to abroader audience of consumers.

The Company’s premium brand is strengthening in awareness,
penetration and loyalty to varying levels across its key markets. It
has increased its investment to grow and protect its brand and its
trade marks in all product categories and regions.

There are three key focus areas to ensure the Company cancontinue to deliver a targeted and differentiated brand propositionand product portfolio:© Build and strengthen brand adoration© Create a distinctive product portfolio© Invest in science, nutrition and beta-casein education

SUSTAINABLE DEVELOPMENT GOALS
SDG 3: Good health and wellbeing
Target 3.4
SDG 9: Industry, innovation andinfrastructure
Target 9.1
SDG 12: Responsible consumption
and production
Target 12.5

40

THE a2 MILK COMPANY

Build and strengthen brand adoration
The Company is committed to increasing investment levels toimprove brand equity in its key markets of China, ANZ and theUSA. The Company targets consumers who experience perceived
discomfort consuming products that contain A1 beta-casein protein
as well as progressive and health-conscious consumers who aredrawn to the differentiated and quality proposition that a2MC
delivers. When targeting consumers who would otherwise limit
their consumption of dairy products or avoid them altogether, theCompany’s marketing approach emphasises the potential healthand well-being benefits of its branded products. a2MC aims to‘welcome these consumers back to milk’. Many consumers andhealthcare professionals report that people who experience digestive
issues drinking regular cows’ milk may experience benefits when
they switch to a2 Milk™.

Create a distinctive product portfolio
The Company is committed to innovation and continuing the
growth of its distinctive product portfolio. The Company’s productportfolio is based around the benefits of products made from milkthat contains only A2-type protein and no A1. The product portfolio
can be divided into three core categories: liquid milk, infant milk
formula and macro milk. Each is positioned in the premium segmentof their respective categories. The Company’s approach to growing
and innovating its products varies within each market in which
it operates – adapting to local consumer preferences, category
nuances, channel dynamics, regulatory requirements and overall
category maturity.

Invest in science, nutrition and A2 protein scienceeducation
As the pioneer of the A2 protein science, the Company is also thecustodian of the category.
The Company’s science priorities have always aligned with its
business strategy, and most importantly, its consumer needs.

FY23 progress and next steps
The Company increased marketing investment by 13.1% in FY23
primarily reflecting a significant step-up in China above-the-line
brand investment as well as below the line activation in line with
its refreshed growth strategy. The focus into FY24 will be onawareness and penetration.

FY23 regional highlights
China© Continued to reach new highs for brand healthmetrics, particularly in awareness with improvements
in loyalty.
© Launched new brand positioning campaign ‘a2 Milk™
Base Matters’.
© Relaunched EL a2 Platinum® with a dedicatedintegrated marketing campaign, which received aGold Award at the most recent China International
Advertising Festival.
© Disruptively launched new campaign heroing fresh
a2 Milk™ and a2 Milk™ powder.
© Increased investment in digital marketing, andexpanded into emerging online channels.
© Launched new products, fresh a2 Milk™ low fat 1L
and a2 Nutrition for Mothers™.
© Expanded offline distribution in lower tier cities –a significant driver of offline growth.
© Continued to drive a2™ brand preference andstrengthened brand reputation through meaningfulcommunity campaign (Project Smile).

Science, and the newly created nutrition function, are enablers to
support growth and delivery of key strategic priorities, and decreaserisk to the business. The Company is increasing its investment instrengthening its global leadership in A1/A2 beta-casein research.
Key strategic priorities include:© Continue to strengthen the evidence supporting digestiveand broader gut health benefits of a2 Milk™.
© Expand research to explore the immune and cognitive
benefits of a2 Milk™.
© Expand on research across different life-stages.
Overall, with research being undertaken in China, ANZ and
USA, and with the integration of the science and nutrition
functions, a2MC will expand its scientific credibility, knowledge
and understanding of the A1/A2 protein science, enabling it tocommunicate the functional story in an innovative manner.

a2 Centre of Research Excellence™
To strengthen its category leadership the Company is investingin the a2 Centre of Research Excellence™ (a2 Core™).
The objective of a2 Core™ is to centralise research expertiseand education that will:© Build credibility for A1/A2 protein science.
© Promote academic partnerships and industry collaborations
to define and shape the A1/A2 protein category.
© House research summaries, scientific references and educationmaterials for consumers, academics and health care professionals.
ANNUAL REPORT 2023

41

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

PROGRESS TOWARDS OUR GOALS CONTINUEDInternational

USA© Delivered material improvements in brand engagement,
following increased brand support to resellers, and direct
engagement with daigou.
© Executed the transition to refreshed a2 Platinum® IMF
product across all English label channels, with multichannel marketing campaigns including the in-person
relaunch in Australia and digital consumer focused
campaigns in China.
© Launched "Little Tummies Love" campaign for
a2 Platinum®.
© Launched upgraded Smart Nutrition® fortified children’s
milk and premium a2 Milk™ Powder Tub format.
© Continued to experience growth in both the CBEC andoffline to online (O2O) channels.

© New marketing campaign launched to driveincreased awareness and new consumers to brand.
© Received FDA enforcement discretion approval toimport a2 Platinum® IMF product (0–12 months).
© Continued to expand product portfolio with thelaunch of a2 Milk® Protein + Collagen nutritional
powders and a2 Milk® Grassfed liquid milk.

ANZ© Launched a2 Milk® Lactose Free in Australia in August 2022 and achieved the highest value launch in thedairy milk category for CY22 with over 1 million units sold in the Australian market in the first nine months.
© a2 Milk® products achieved rankings in the top ten products in the dairy category in Grocery.
© Continued to invest in brand and in ensuring strong in-market presence.
© Brand health metrics improved during the period.
© Brand leadership maintained with increased loyalty and household penetration.
© Largest brand advertiser in the fresh milk category in Australia.

42

THE a2 MILK COMPANY

Medium term measures of success	On track

MARKETING INVESTMENT INCREASED1	Work in progress

CONSUMERS
Brand HealthMarket Share

Innovation

Supply Chain

	China
unprompted
brandawareness

	MBS share	China otherdairy /
nutritionals
growth	Accessto ≥3 CLregistrations

	AU household
penetration
	USAhouseholdpenetration

	DOL share	CBEC share	O2O + Daigou
share	AU fresh milkshare	USA premium
milk share	Emerging
markets
development
	USA sales
from newproducts	ANZ sales
from newproducts

121

29
18

	CL inventory
management

33
15

FY21

% of sales
revenue

14.0%

38
6

FY22

	USA
	EL inventory
management

216

182

	ANZ

FY23

	China

15.9%

16.4%

	Quality
outcomes	Supply chain
efficiency

CHINA UNPROMPTED BRAND AWARENESS2
23%
17%
13%

FY21

FY22

FY23

CHINA LABEL IMF MBS VALUE SHARE4CHINA LABEL IMF DOL VALUE SHARE3
3.3%

3.4%
3.0%

2.5%
2.2%

2.0%

FY21

FY22

FY23

FY21

FY22

FY23

1 Marketing investment by region in NZD$ million.
2 a2MC internal data based on the Company’s brand health tracking. Average brand health metrics for each financial year based on 3 surveys in FY21 and FY22, and2 surveys in FY23. Sample skews to a2MC target consumers ie higher income earners based in Provinces / cities that are the focus of sales and marketing activities.
3 Smart Path China IMF online market tracking: domestic online platform sales (by value).
4 Nielsen MBS retail measurement service: mother and baby stores only retail sales (by value).

ANNUAL REPORT 2023

43

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

PROGRESS TOWARDS OUR GOALS CONTINUED

Product quality and food safety
The Company is committed to the highest standardsof product quality and food safety, especially givena large proportion of its products are consumed byinfants, young children and pregnant women. The
Company has significant proprietary knowledge andquality processes to deliver A2 protein products that
achieve these standards, as well as compliance withother market regulations and requirements.
This commitment is supported by:© A comprehensive and unique focus on A2 betacasein protein segregation and testing from farm tofinished product.
© A priority focus on food safety and quality
management audited by accredited third-party
verification agencies for both self-owned and thirdparty manufacturing sites.
© Long-term partnerships with high quality third-party
manufacturers who share the Company’s focus andambition on social responsibility.
© Relevant industry certifications including ISO 9001
(IMF), SQF and BRC (GFSI recognised certification) at
all processing facilities.
© Ongoing monitoring and compliance with relevant
regulatory requirements in the markets in which theCompany operates.
© Investment in people and training to ensure
capability to meet product quality and food safety
standards.
© True a2™ system for our powdered products for
those most vulnerable.

Responsible marketing
The Company’s approach to marketing infant nutritionaligns to the core principle of supporting breastfeedingas the primary form of infant nutrition. The Company
has developed a premium, high-quality range of infant
nutrition products to provide parents an alternative
when breastfeeding is not an option.
The Company complies with local best practice in eachof its active markets with respect to the marketing of
IMF products.

Marketing in Australia of Infant Formula(MAIF) and Infant Nutrition Council
The Company is a signatory to the MAIF Agreement
and a member of the Infant Nutrition Council, which
represents the major manufacturers and marketersof infant nutrition in Australia and New Zealand. All
members abide by a Code of Conduct including the
MAIF Agreement and The Infant Nutrition Council
Code of Practice for the Marketing of Infant Nutrition
in New Zealand.

True a2™
The Company takes great care in leveraging its
significant proprietary know-how and quality
processes to deliver products that are made with
A1 protein free milk, are of the highest quality andare safe and compliant with market regulations andrequirements.
The four pillars of the True a2™ ecosystem cover the complete productlifecycle. While the ‘Made with a2 Milk™’ and ‘Testing’ pillars arefundamental to the composition and safety of our products, the‘Independent product audits’ and ‘QR – verification system’ pillars
demonstrate a2MC’s commitment to reducing risks around food fraud.
The True a2™ ecosystem captures the Company’s proprietary know how
and processes to deliver superior quality and traceable products. This
ensures that a parent in China or a parent in Australia has the same,
highest quality powdered products from The a2 Milk Company.
Underlying the four pillars is the Company’s scientific heritage, clinicalresearch and understanding, the quality of its raw materials, its
knowledge of beta-casein protein testing from farm to shelf, and its
production and supply chain.

Made with a2 Milk™
At The a2 Milk Company, we go to great lengths to ensure that oura2 Milk™ is from cows that naturally produce milk with only the A2-type
protein and no A1. Our farmers hand select cows that naturally produce
only the A2-type protein by using a simple and non-invasive genetic test
that analyses a hair or tissue sample from each cow. These cows are thenmilked separately and the milk is segregated throughout the supply chain.

Testing
Testing is an integral part of the product development process. At
multiple stages along the a2 Platinum® and Zhi Chu® product journeys,
ingredients, packaging components, and the final product are tested.
This ensures all our a2 Platinum® and Zhi Chu® products meet the highest
quality and safety standards.

QR code – verification system
Each and every can of a2 Platinum® and Zhi Chu® products has aunique QR code, allowing consumers to obtain further information
about the product.

Independent product audits
The a2 Milk Company employs an independent third-party to verify its
a2 Platinum® and Zhi Chu® products. Oritain is a food-traceability expert
and tests samples of a2 Platinum® and Zhi Chu® products it obtains
straight from retail shelves to confirm that these products are True a2™.
This testing is scientific, ongoing and completely independent.

44

THE a2 MILK COMPANYSHAREHOLDERS
Create long-term, enduring value for shareholders
and a trusted, transparent relationship.
Delivering on this objective requires strong financial
performance underpinned by long-term strategic decision
making and supported by a robust capital management
framework. A focus on execution and close management ofbusiness risks and opportunities are also critical to delivering
successful outcomes. The Company’s strong balance
sheet provides it with the flexibility to respond to risks andopportunities in pursuit of long-term value creation in linewith the Company’s strategic objectives.
The Company continues to strengthen its strategic
partnerships to support its next phase of growth. Its
strategic partners provide a range of benefits including
manufacturing expertise, market access support, distribution
and logistics services, and consumer and regulatory insights.
Maintaining transparency with the Company’s shareholders
ensures they are informed, and updated with theCompany’s strategic priorities and decision-making
processes. The Company continues to provide more
information through its approach to integrated reporting
and a variety of reporting frameworks including the Task
Force for Climate-related Financial Disclosures, Carbon
Disclosure Project, Global Reporting Initiative (GRI) andalignment to New Zealand’s External Reporting Board (XRB)
and the International Sustainability Standards Board (ISSB).
In FY23 the Company made meaningful progress against
its medium-term financial ambitions, with strong growth
in revenue and earnings, and is well positioned for further
growth in a challenging market.

KEY METRICS DATA (FY23)+10.1%

13.8%

Revenue growth

EBITDA margin+28.7%+8.5%

Earnings per share(EPS) growth

Closing share price growth

46.7%

$149m

Return on capital
employed (ROCE)1

Share buyback
completed

The Company's medium-term ambition is to grow sales from
$1.2 billion in FY21 to approximately $2 billion by FY26 orlater and to improve EBITDA margins in the 'teens'.
1. ROCE is defined as EBIT/Capital Employed. Capital Employed is calculated
as total assets less current liabilities and cash and term deposits.

SUSTAINABLE DEVELOPMENT GOALS
SDG 8: Decent work and economic growthTarget 8.2

ANNUAL REPORT 2023

45

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

PROGRESS TOWARDS OUR GOALS CONTINUED

Capital allocation to drive growth
The Company’s capital allocation framework prioritises investment
in growth initiatives ahead of returning capital to shareholders.
There are several critical elements to be considered as part of thecapital framework.
Firstly, the Company will invest to grow its core business inexisting markets, which includes investment to build its businessin China, supply chain transformation, and other infrastructure to
support growth.
The second element is investment to expand the boundaries of its
business. This includes:© Expanding its presence in an existing market with a new
product, or entering a new market with an existing product.
© Assessing complementary mergers, acquisitions and joint
ventures to drive further growth in core markets.
Thirdly, the Company needs to ensure it maintains a level ofbalance sheet strength and flexibility to support business growth
and risk management activities, and to manage in uncertain
operating environments.

Finally, the Company will make decisions to return excess capitalto shareholders where it is in shareholders’ long-term interests
to do so.
The Company’s capital allocation framework is continuallyreviewed by management and the Board and is summarisedin the image below.

Capital management
On 20 March 2023, the Company announced the completionof its on-market share buyback. Over the course of the buyback
programme, the Company acquired 21,680,314 shares,
representing 2.9% of issued capital. The average price for thepurchases was NZ$6.87 per share (excluding brokerage costs).
The acquired shares were cancelled and the total outstanding
ordinary shares in the Company following the completion of thebuyback is 721,976,214.
As a result of the buyback programme, the Company has further
reduced its Share Capital in its Consolidated statement offinancial position and reported Share Capital of NZ$100,000 for
FY23 (FY22: NZ$149,157,000).

CAPITAL ALLOCATION FRAMEWORK
Operating cash flow generation
Capital funding

Grow the core business in existing
markets— Invest in building core business— Transform supply chain— Enable investment in systems,
infrastructure, quality, safety andexpertise— Organic growth – existing and new
products/new retail channels— Assess M&A opportunities to support
core business growth and supply
chain evolution

Expand the boundaries

Balance sheet strength and flexibility— Adjacent new product categories inexisting markets— Geographic expansion of existingproducts into new markets— Assess M&A opportunities toexpand boundaries— Capacity to support business growth
and risk management initiatives— Maintain a conservative cash reserve tomanage in an uncertain environment

Excess cash flow

Shareholder returns

46

THE a2 MILK COMPANY

Strategic partnerships and supply chain
investments
The Company has built its foundations with a number of key
strategic partnerships.
Each partner brings different strengths that enable theCompany to execute against its strategic objectives. In particular,
its strategic partnerships with China National Agriculture
Development Group, China Animal Husbandry Group and China
State Farm Agribusiness provide invaluable insights and assistancein understanding the consumer and regulatory environment in
China. a2MC also has supply and other relationships with Synlait,
MVM and Fonterra.

China National Agriculture Development
Group Co., Ltd.
China National Agriculture Development Group Co., Ltd.
(CNADC) is a leading State-Owned Enterprise (SOE) and offers
comprehensive agricultural services in mainland China. CNADC is
responsible for meeting China’s agricultural needs with 17 whollyowned or share-controlled subsidiaries, and three publicly listedcompanies. CNADC’s knowledge of the Chinese market and its
ownership of China State Farm Agribusiness and China Animal
Husbandry Group positions it as a strong partner for a2MC forthe long-term.

China State Farm Agribusiness
China State Farm Agribusiness Holding Shanghai Co., Ltd (CSFA)
is an SOE and became the Company’s exclusive logistics anddistribution partner for IMF products in China in 2013. CSFA is
the exclusive import agent for the Company’s China label IMF
products with 120 active IMF distributors and approximately
110 UHT and milk powder distributors throughout the country.
The Company renewed its agreement with CSFA for a term of
five years from 1 October 2022 and entered into a longer term
strategic co-operation agreement. CSFA’s China expertise is ofsignificant value to a2MC in managing its operations effectively.

China Animal Husbandry Group
China Animal Husbandry Group (CAHG) is an SOE and became astrategic partner when the Company purchased 75% of MVM in
2021. CAHG holds 25% of MVM and is also owned by CNADC.
The partnership with CAHG provides the opportunity to build andenhance the Company’s relationships with key partners in China.

Synlait
Synlait Milk Limited (Synlait) has produced a2MC’s IMF products
since 2012 and sources its milk from the Canterbury Plains andWaikato regions in New Zealand. a2MC and Synlait renewed theiragreement in 2019. The agreement outlined a two-year extension
to the original agreement providing for a rolling three-year termfrom 1 August 2022 (i.e. an evergreen agreement subject totermination by either party on three years notice). In addition
to its supply agreement, a2MC holds a 19.8% equity interest in
Synlait, making it the second-largest shareholder. Synlait’s largest
shareholder is Bright Dairy, a multinational food and beverages
manufacturing company headquartered in China. Bright has a
39.0% interest in Synlait and is its controlling shareholder.

Mataura Valley Milk
Mataura Valley Milk (MVM) is a purpose-built nutritionals facility
and sources milk from Southland in New Zealand. a2MC acquired
a 75% interest in MVM in July 2021. The acquisition provides
a2MC with a unique opportunity to insource certain volumes
from Synlait, to prioritise innovation of an owned facility, achieve
additional China label registrations over time and capture
vertical manufacturing margins. FY23 was the Company’s firstfull year with its 75% interest in MVM. In FY23, the Company
has fully internalised whole milk and skim milk powder products
through MVM.

Fonterra
In 2018, the Company announced arrangements with Fonterra
Co-operative Group Limited that include an exclusive licensing
agreement for the production, distribution, sale, and marketing of
a2 Milk™ branded fresh milk in the New Zealand market.

ANNUAL REPORT 2023

47

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

PROGRESS TOWARDS OUR GOALS CONTINUED

Environmental Social & Governance Reporting
With the adoption of the ISSB standards through both New Zealand’s External Reporting Board (XRB) and theAustralian Treasury's climate-related disclosure requirements, the Company acknowledges the importance ofEnvironmental, Social and Governance (ESG) reporting.
The Company reports against the TCFD framework and reports
with reference to ‘Integrated Reporting’ principles. In addition
to this, the Company has considered the GRI universal standards
and undertook an ISSB readiness assessment in FY23. Based on
this work, the Company believes it is prepared to align to thestandards when released at the end of the financial year. An
index for each of the frameworks the Company has aligned tois available on its website in the ESG reporting library at www.
thea2milkcompany.com/ESG-reporting.

New Zealand’s External Reporting Board

Taskforce on Nature-related Financial Disclosures

In June 2023, the Australian Government released a consultation
paper for the proposed climate-related disclosure requirements.
The standards are an interpretation of the ISSB standards thatwere finalised in June 2023. Given the work done to adhere to
the ISSB standards, the Company is prepared to report against
Treasury's climate-related disclosures when required in FY25.

In March 2023, the Taskforce on Nature-related Financial
Disclosures (TNFD) released its fourth and final beta frameworkwith plans to publish final recommendations in September 2023.
Given the importance of nature to its business model andactivities, the Company conducted two nature-based risk andopportunity assessments on areas of significant geographicalfootprint in FY23. With the TNFD framework to be released
in FY24, the Company is preparing to report in line with therequirements and recommendations of the framework andexpects to increase its transparency and accountability in relation
to nature related risks and opportunities moving forward.

Task Force on Climate-related Financial Disclosures
The Company undertook its second climate scenario analysis in
FY22. Despite the increased reporting done by the Company
throughout the year, it decided to not conduct a third analysis
as there were no material changes to the business during the
FY23 period. The Company has remained focused on its strategic
responses to the risks identified in FY22, with the release of its net
zero roadmap and its focus on consumer demands. The Company
will conduct a refreshed analysis in FY24 to comply with theupcoming ISSB and XRB standards and ensure it is aligned withthe latest sustainability requirements.

In December 2022, New Zealand’s External Reporting Board (XRB)
announced the publication of the climate-related disclosures. The
XRB Climate Standards considers both the TCFD framework andthe ISSB standards. Given the work done to adhere to the ISSB
standards, the Company is prepared to report against XRB whenrequired in FY24.

Australian Treasury

International Sustainability Standards Board
In June 2023, the International Sustainability Standards Board(ISSB) released the first universal ESG related standards, IFRS
1 (general sustainability standards) and IFRS 2 (climate related
standards), which aim to promote transparency and consistency
in sustainability reporting. To further strengthen these standards,
the ISSB incorporated several other sustainability frameworks,
including the Taskforce on Climate-related Financial Disclosures(TCFD), Value Reporting Framework (VRF) (including Integrated
Reporting), Sustainability Accounting Standards Boards (SASB)
and reference to the Global Reporting Initiative (GRI).

Sustainability Accounting Standards Board (SASB)SASB aims to identify the sustainability-related risks andopportunities that are material to understanding how anorganisation creates value. As a part of the ISSB readinessassessment, the Company considered the SASB, Food andBeverage – Meat, Poultry and Dairy standards when disclosing
ESG metrics.

Global Reporting Initiative (GRI)
In 2023, the Company aligned to the GRI universal standards.
The GRI is an independent international standard that aims tostandardise comparable, and consistent ESG information.

48

THE a2 MILK COMPANY

Carbon Disclosure Project

Australian Packaging Covenant Organisation

The Company completed its fourth submission of the Carbon
Disclosure Project (CDP) Climate Change questionnaire. The
questionnaire measures and outlines the risks and opportunities thebusiness faces with regards to climate change. The questionnaire
is scored by CDP and then released for public review following
the rating. This provides transparency to shareholders on
climate change impacts and how the Company is navigatingthese challenges. The rating also provides shareholders with acomparison to other corporates as it relates to its approach toclimate change. The Company submitted the next iteration of
the survey in July 2023, and is considering whether this will be its
final submission given the expanded climate reporting that will be
required in FY24 and FY25.

In FY23, the Company submitted its second Australian Packaging
Covenant Organisation (APCO) Annual Report (Page 39 of thisAnnual Report) and received a 'leading' rating.

Anti-Modern Slavery
In FY23, the Company released its third Modern Slavery Statement
under the Modern Slavery Act (page 29 of this Annual Report).

Reconciliation Action Plan
The Company formally commenced its reconciliation journey bycommitting to the Reconciliation Action Plan (RAP) framework
established by Reconciliation Australia. In April 2023, theCompany received formal endorsement for its first ‘Reflect’ RAP.

Indicative external reporting pathway

FY23

FY24

FY25

FY26+

XRB New Zealand Climate
Standards 1 & 3

XRB reporting

Treasury/ISSB reporting

IFRS S1 & S2

© Align to TCFD
© Align to SASB
© Align to GRI© External gap assessment
against XRB and ISSB
© Obtain limited assurance
over selected ESG
disclosures© Align to XRB© Continue limited
assurance procedures
over selected ESG
disclosures© Continue to build
upon nature risk
and opportunity
assessments in
preparation for TNFD
alignment© Align to AustralianTreasury's climate-related
disclosure requirements and
ISSB S1/S2© Obtain reasonable level ofassurance over Scope 1 and2 emissions© Continue limited assurance
procedures over selected
ESG and climate disclosures© Continue aligning to TNFD

© Align to XRB, ISSB andAustralian Treasury's
climate-related disclosure
requirements© Align to TNFD
© Obtain reasonable level ofassurance over Scope 1 and2 emissions© Continue limited
assurance procedures
over selected ESG metrics,
climate disclosures andtransition plans

ANNUAL REPORT 2023

49

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

Risks and opportunities
The Company recognises that the managementof risks and opportunities is an inherent part ofactively growing and developing the business.
Effective risk management anticipates risk, develops strategies
to manage risk and enables the Company to capitalise onopportunities, which is critical to sustainable, long-termvalue creation.
The a2 Milk Company Risk Management Policy outlines the
programme the Company has implemented to deliver appropriate
risk management within its processes, systems, culture anddecision making. A copy of the Risk Management Policy isavailable at www.thea2milkcompany.com/corporate-governance.

Governance of risk
The Board is responsible for the overall system of internal control
and has delegated responsibility for ensuring that the Company
maintains effective risk management and internal control systems
and processes to the Audit and Risk Management Committee. The
Audit and Risk Management Committee reviews the risk profile
including material business risks and provides regular reports to
the Board on the operation of the internal control system.
The Company’s management is responsible for designing andimplementing risk management and internal control systems
which identify material risks for the Company and aim to provide
the Company with warnings of risks before they escalate.
Management implements the action plans developed to addressmaterial business risks across the Company.
Management regularly monitors and evaluates the effectivenessof the action plans. In addition, management promotes andmonitors the culture of risk management within the Company andcompliance with the internal risk control systems and processes.

Management reports regularly to the Board regarding the statusof the risk management programme and reviews its effectivenesswith the Board.
The Committee and management may also refer particularrisk management issues to the Board for final considerationand direction.

Approach to risk management
The Company’s approach to risk management is anchored to ISO
31000 principles to ensure that robust foundations support our
processes and procedures and, in doing so, this allows the Board
to fulfil its governance responsibilities by making a balanced
assessment of the risk management process. Risks are identified,assessed and monitored through regular workshops with senior
management and the Audit and Risk Management Committee.
Mitigating actions and controls are designed to limit the likelihoodof key risks occurring, as well as the associated impact if theserisks occur.
The Company’s risk management approach evolves continually
as we identify, assess, mitigate, and monitor both financial andnon-financial risks that may affect our ability to achieve ourstrategic goals.
The Company has identified nine sources of risk and opportunity
relevant to its business activities. The pages that follow provide
an overview of each source of risk, including key economic,
environmental and social risks with the potential to materially
impact the Company’s ability to achieve its objectives. They also
summarise how the Company is responding to those risks, as wellas associated opportunities.

The nine sources of risk
The sale of nutritional
food products

Doing business ininternational markets

Major international
events

PAGE 51

PAGE 52

PAGE 53

Competitive
intensity

Climate andnatureStrategic
partnerships

PAGE 54

PAGE 55

PAGE 56

Evolving technology
and cyber security

Talent andcultureSocial licenceto operate

PAGE 57

PAGE 58

PAGE 59

50

THE a2 MILK COMPANY

The sale of nutritional food products
The a2 Milk Company supplies food products for human consumption, including complex
nutritional products for consumption by infants and children. As a result, the Company isinherently exposed to potential product quality, food safety and/or food integrity events.

KEY RISKSKEY RESPONSES

Genuine, perceived, or alleged contamination,or unsafe products© Priority focus on food safety and quality management© Food safety and quality systems audited by accredited third-party
verification agencies© High-quality third-party manufacturing partners© Rigorous positive release protocols (comprehensive testing of productquality and integrity prior to the release of finished product)© Traceability systems© Product innovation and technology to enhance product security© Testing of certain distributed products in selected markets© Dedicated customer careline covering all active markets

KEY OPPORTUNITIESAn increasingly health-conscious society combined with the size and enduring nature of the nutritional food category provides
significant opportunity to:© Leverage our pioneer status to promote the benefits of products made with a2 Milk™.
© Assert the Company’s competitive advantage in beta-casein testing and technology (our True a2™ ecosystem – page 44).
© Continually advance an uncompromising Quality Assurance programme.
© Maximise the potential of our existing product portfolio in key markets.
© Explore opportunities to innovate and expand our existing product portfolio, and enter adjacent product categories
to drive growth.

ANNUAL REPORT 2023

51

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

RISKS AND OPPORTUNITIES CONTINUED

Doing business in international markets
With the Company’s expanding geographical footprint, it is exposed to various risks andopportunities associated with conducting business in international markets.

KEY RISKSKEY RESPONSES

Changing macro trends (including demographic,
economic and social trends), which can impact thesize of addressable markets and/or the complexityof operating in those markets (e.g. declining Chinabirth rates)© Continued strong investment in brand to grow share© Agile approach to the execution of sales and marketing programmes,
adjusting where appropriate to reflect shifts in consumer and channel
dynamics© Leverage multi-label, multi-channel portfolio to broaden distribution

Geopolitical tension and regulatory environments
influencing channels to market, market access,product registrations, trade tariffs, taxes,
and quotas© Strong understanding of local standards, regulations and guidelines,
supported by expert in-market advisory© Strong strategic and collaborative partnerships with Chinese State-owned
enterprises1© A multi-product, multi-channel route to market strategy for the sale ofinfant nutrition into China

Foreign currency exchange rate volatility© Treasury management activities, providing oversight and monitoring of
foreign currency exposures with some cash flow hedging

Multilayered, complex, and opaque route tomarket channels© Actions taken to simplify and delayer our English label infant milk
formula distribution network, supported by more transparent partner
relationships and greater control

Renewal of the SAMR product registration2 for
China label infant nutrition© Close partnership with infant nutrition manufacturer, Synlait, which holds
GACC3 and SAMR registrations allowing canned formula to be exported
to and sold into the China market© Supported Synlait to successfully complete SAMR registration© Operational plans in place to navigate orderly transition to newly
registered China label productLong-term approval of USA IMF© Close collaboration with Synlait, to complete and submit the New Infant
Formula Notification for the sale of USA IMF product beyond the periodof enforcement discretion© Use of third-party local experts for FDA guidance

KEY OPPORTUNITIES
Doing business in international markets provides the opportunities for us to fulfil our strategic goal to ‘bring the unique benefitsof pure and natural a2 Milk™ to as many consumers as possible’. These include:© Significant further growth potential of infant nutrition and other products in China, the largest and most attractive market
for infant nutrition globally.
© Exposure and potential entry to attractive new markets.
© Ability to leverage the unique benefits of a2 Milk™ to engage with consumers in international markets.
© Operational resilience through developing and leveraging enduring strategic relationships.
© Experience sharing of consumer and product insights across markets.

1	Refer to shareholders section for detail on partnerships
2 China’s State Administration of Market Regulation (SAMR) requires registration to be held in the name of the manufacturer as opposed to the brand owner. The
current registration for a2MC China label products was granted to Synlait in June 2023 and expires in September 2027
3 General Administration of Customs of the People's Republic of China

52

THE a2 MILK COMPANY

Major international events
The COVID-19 pandemic and international events have caused unprecedented social, economic
and supply chain disruptions globally. Additionally, potential outbreaks of animal diseases are arisk for the business.

KEY RISKSKEY RESPONSES

Route to market disruption and transport costvolatility© Continued close cooperation with Synlait to maintain continuity of infantmilk nutrition supply, and third-party suppliers in Australia and the USA
to maintain continuity of liquid milk supply© Increased warehousing locations in China to mitigate against disruptions
caused by lockdowns associated with COVID-19© Enhanced inventory surveillance and reporting to maintain stock control
and availability through the supply chain© Hold safety stock levels to withstand short market disruptions

Health and wellbeing of our people© Adoption of robust infection control protocols in line with all relevant
government requirements, particularly across the Company’s
manufacturing facilities

Inflationary pressures creating volatility inoperating costs and availability of ingredients andraw materials© Use of long-term milk supply agreements in certain markets© Forward procurement of key ingredients to stabilise price and ensure
availability© Dual sourcing of supply for certain ingredients© Strong premium brand providing platform for cost recovery to varying
extent through wholesale price adjustments

Potential animal disease incursions impacting theability to supply export markets© Assist farmers with farm biosecurity plans and preparedness© Development of Business Continuity and Crisis Management frameworks
and procedures including simulations to mimic real life eventsKEY OPPORTUNITIESOur response to global events provides opportunities to enhance our profile in existing markets, and provide support todisrupted markets.
© Consumer share gain opportunities through ensuring product availability in a supply-constrained environment.
© Our Company structure and culture provides agility to rapidly respond to global events.
© New market/product opportunities.

ANNUAL REPORT 2023

53

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

RISKS AND OPPORTUNITIES CONTINUED

Competitive intensity
The a2 Milk Company has experienced significant growth over recent years, driven predominantly
by the success of its infant nutrition businesses in Australia and China and liquid milk businesses
in Australia and the USA. This success has inspired others to compete with a2MC in the A2 betacasein protein segment.

KEY RISKSKEY RESPONSES

Market share erosion in core markets due todomestic brands’ potential to resonate andconnect more effectively with local consumers thaninternational brands© Significant and ongoing investment in brand building activities globally© Use of consumer and health care professional education to ensure clear
understanding of the unique A2 protein proposition and benefits© Significant and ongoing investment in science, nutrition and innovation
globally to ensure the Company delivers unique consumer value
propositions in all its markets underpinned by its proprietary know-how
and quality processes© Regular monitoring of market share data and proprietary research into
consumer/shopper insights, preferences, and expectations© Continued investment in intellectual property to expand the Company’s
trade mark and patent portfolio

Infringements of our intellectual property rights
resulting from third-party conduct or claims against
such IP rights© Monitoring infringement of the Company’s IP and taking action toprotect it

Counterfeit products© Processes and technology to identify and manage potential counterfeit
products including the use of external agencies and in-market
authentication testing© Development of the True a2™ ecosystem, which includes independent
product audits and QR code verification systems to ensure products areof the highest quality and safety (see True a2™ page 44)

KEY OPPORTUNITIES
While competitive intensity can present market share erosion risks, it also expands consumer awareness and engagement withthe benefits of a2 Milk™, encourages opportunities in relation to product innovation, and allows a2MC to further leverage its‘pioneer’ and premium brand status. Opportunities exist to:© Emphasise our proprietary know-how and quality processes to deliver A2 protein products that are of unrivalled quality.
© Invest in science, nutrition and innovation to continue to pioneer the future of dairy and explore new opportunities.
© Drive awareness and education of our unique A2 protein proposition and benefits to increase our consumer base.

54

THE a2 MILK COMPANY

Climate and nature
Being heavily dependent on agricultural inputs, a2MC is exposed to short, medium and long-termclimate and environmental risks including physical risks resulting from acute and chronic changes
in climate, and transition risks resulting from regulatory, or market pressures associated with
on-farm emissions (see Task Force on Climate-related Financial Disclosures statement and index,
within sustainability reporting library).

KEY RISKSKEY RESPONSES

Climate change effect on biodiversity, soil,
ecosystems, water access and uncertainty in carbon
pricing, quality and availability of raw materials andingredients© Established baseline and set targets for GHG emissions© Establishing baselines and setting targets for water consumption,
waste-to-landfill and product packaging (see pages 33 to 39)© Sourcing milk from diversified milk pools within New Zealand, Australia
and the USA and incorporating climate impacts into future sourcing
strategies© Investing in new technologies and emissions reduction initiatives, suchas upgrading the coal-fired boiler at MVM to high-pressure electrodeusing renewable energy© Global framework for farm environmental plans, addressing the mostmaterial aspects of environmental management in the dairy industry© Farmer grant programmes to support farmer-led sustainable dairy
farming projects

Risk of natural disasters (e.g. flooding, drought,
earthquake), particularly in Dunsandel given the
China label product registration© Diversification of processing locations with capability at both Synlait
and MVM© Plan to obtain additional China label registrations© Insurance coverage

KEY OPPORTUNITIESAcknowledging climate and nature risks provides significant opportunity for the Company to play a leading role in driving
industry change. Building trust with increasingly climate aware consumers and ensuring climate scenarios and modelling are
considered in medium-term and long-term strategic planning to develop operational resilience. Opportunities exist to:© Develop operational resilience by incorporating climate and nature scenario modelling into long-term strategic planning.
© Strengthen brand and social positioning via a leadership position in GHG emissions reduction, recyclable packaging andfarming practices.
© Realise increased productivity and efficiency via new technologies and practices that lower emissions and environmental
impact.
© Enhance our climate risk modelling and Task Force on Climate-related Financial Disclosures (TCFD) reporting and early
adoption of the voluntary Taskforce on Nature-related Financial Disclosures (TNFD) framework.

ANNUAL REPORT 2023

55

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

RISKS AND OPPORTUNITIES CONTINUED

Strategic partnerships
The Company’s success has been underpinned by relationships with key strategic partners,
including critical supply and distribution partners. As a result, the business is inherently exposedto the operations of key partners changing in a material way, or as the result of one or morepartners reprioritising their support for a2MC.

KEY RISKSKEY RESPONSES

Disruption to key partner operations impacting
supply and/or access to critical markets© A broad range of strategic partner relationships have been developed
over time© Long-term partnership with dairy nutritionals manufacturer, Synlait,
complemented by the Company’s equity interest in that business (andin which Bright Dairy, a multinational food and beverage company
headquartered in China, has a 39.0% interest)© Supplier diversification through driving insourcing and innovation at
MVM© Strong partnership with China State Farm Agribusiness, a2MC’s
exclusive import agent and master distributor for its China label
products© Strengthened relationship with key partners in China via joint
investment in MVM with China Animal Husbandry Group (CAHG)1

Key partners reprioritising their support for a2MC or
failing to act ethically or in line with a2MC’s values© Multiple milk processors contracted in Australia and the USA, mitigating
reliance on a single processor in these regions© A controlling 75% interest in MVM supports growth of the Company’s
nutritionals business and further strengthens our relationship with
China National Agriculture Development Group Co., Ltd. (parent
company of CAHG)1© Actions taken to simplify and de-layer our English label infant milk
formula distribution network, supported by more transparent partner
relationships

Ability to ensure timely supply of finished products
to customers© Ongoing access to milk pools that exceed the Company’s current usage
requirements© Access to manufacturing capacity that exceeds current usage
requirements

KEY OPPORTUNITIESOur key partnerships provide significant opportunities including:© Access to high quality manufacturing capacity to support growth ambitions.
© Access to international markets (including opportunities to expand product registrations).
© Opportunities to diversify supply chain partners over time to build operational resilience.

1 Refer to shareholders section for detail on partnerships.

56

THE a2 MILK COMPANY

Evolving technology and cyber security
Technology is used by a2MC to build and promote brand loyalty, process transactions, manage
stock, manage product purchases and deliveries and manage operational production amongst
other functions. Uninterrupted availability of the technology solutions is a crucial element of thevalue creation chain.

KEY RISKSKEY RESPONSES

Cyber-attacks (including ransomware) and unauthorised
disclosure of, or loss of, confidential
data/information© Continue to improve cyber security systems and protections,
including engagement of specialised third parties to assist with
24/7 monitoring, classification and restriction of access to sensitive
information, conducting regionally-specific cyber security audits,
implementing more sophisticated cyber tracking and monitoring tools

Reliability/stability of critical applications© Continued transitioning core functions to Tier 1 cloud-based
enterprise resource planning (ERP) software© Implemented best of breed cloud-based solutions for functions which
are outside the scope of ERP and continue to reduce the number oflegacy applications in use across the business

KEY OPPORTUNITIESAdvances in technology also present significant opportunities, including:© Digital platforms that support consumer engagement and marketing initiatives.
© Real-time data combined with the use of Artificial Intelligence (AI) to drive insights and informed decision making.
© The use of emerging product technology including supply chain traceability systems.
© Increased automation of manufacturing, sales and distribution processes over time.

ANNUAL REPORT 2023

57

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

RISKS AND OPPORTUNITIES CONTINUED

Talent and culture
The Company relies on the talent and wellbeing of its people and the effectiveness of its culture
for success. The loss of business-critical skills or the inability to identify, attract and retain
qualified people could have a direct impact on managing business operations successfully.

KEY RISKSKEY RESPONSES

Failure to adequately protect the physical andpsychological wellbeing of our workforce resulting
in harm to health, safety and wellbeing© Investment in dedicated programmes and resources that support ourpeople; including ‘the way we work’ policy, health expos, partnership with
Headspace, integrative employee assistance programme and ‘stop for safety’
initiatives© Implementation of dedicated site safety managers at both manufacturing
sites© Actively promote an inclusive and diverse workplace through initiatives thatreiterate our culture of ‘bringing your authentic self’ to work
© Continue to invest in the development of constructive and humanistic
leaders through our 'Thrive' leadership development programme

Critical corporate knowledge and specialised skills
lost from the business, due to regrettable attrition© Alignment of remuneration to market benchmarks, Company objectives andrisk tolerances© Regular engagement surveys to drive targeted people initiatives© Regular talent discussions at Executive Leadership Team (ELT) level© Continue to evolve the operating model to reinforce talent and ‘benchstrength’ at all levels and functions

Impact to team productivity due to lack of
capability and capacity© Investment in formal and on-the-job learning and development opportunities
to support individual development plans© Evolve our operating model to support and promote global mobility, crossfunctional skills transfer and promoting from within

KEY OPPORTUNITIESProviding a safe, diverse, inclusive and engaging working environment is foundational to attracting, developing and retaining
talent, which in turn is critical to sustainable growth. Opportunities exist to:© Amplify the unique attributes of working at a2MC and aim to be the employer of choice in the sector.
© Nurture the inherent energy, passion and enthusiasm that working for a trusted and unique brand attracts.
© Promote the employee experience, foster a learning environment, and celebrate diversity and inclusion.
© Cultivate our purpose-driven culture.

58

THE a2 MILK COMPANY

Social licence to operate
Acting and operating in an ethical manner, consistent with the expectations of our shareholders,customers, consumers, suppliers, regulators, governments, communities and otherstakeholders, protects our reputation and economic sustainability. A real or perceived abuse of
our social licence to operate could result in significant brand damage, financial loss, and the lossof strategic partnerships.

KEY RISKSKEY RESPONSES

Non-compliant or sub-standard animal welfare practices © The Company’s animal welfare programme aligns to globally recognised
frameworks for Animal Health and is evolving from the Five Freedoms
Model to the Five Domains Framework of animal welfare (refer to page 37)
Responsible marketing (e.g. promotion of breast milk
substitutes)© Signatory to the Marketing in Australia of Infant Formula: Manufacturers
and Importers Agreement 1992 (MAIF Agreement) (refer to page 44)© Cross-functional approval process implemented (including regulatory andlegal review) prior to publication of marketing material

Modern slavery in the supply chain (refer to page 29)© Modern slavery risk management programme, with annual Modern Slavery
Statement submissions© Corporate values and a suite of corporate codes and policies developed andembedded (including a Code of Conduct and a Responsible Sourcing Policy)

Potential bribery and corruption allegations© Corporate values and a suite of corporate codes and policies developed andembedded (including an Anti-Bribery and Corruption Policy and Gifts andHospitality Policy)

Water usage, waste water and water pollution© Established initial targets for water in New Zealand with plans to expand
water targets through nature risk and opportunity assessments© Water use monitoring systems in place at MVM and Smeaton Grange milk
processing site
© Undertaking water usage reduction projects and utilisation of a wastewater treatment system on-site at Smeaton Grange, with liquid waste
products returned to farms and used as fertiliser© Farmer grant programmes to support farmer-led sustainable dairy farming
projects

KEY OPPORTUNITIESOur purpose to pioneer the future of dairy for good refers to a significant leadership opportunity to do business the right way
and exceed stakeholder expectations in doing so. This includes:© Aspire to lead the market in making a positive contribution to society. For example to set and monitor industry-leading
standards for animal welfare on a2MC supplier farms and to commit to engage and invest in the communities in which theCompany operates through proactive programmes as well as reactive support in times of need.
© Take a leadership position in protecting our planet.

ANNUAL REPORT 2023

59

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

Corporate governance
Governance60

Directors

64

Executive Leadership Team

66

Remuneration

68

Governance
The Company is committed to maintaining the highest standardsof corporate governance. The Company’s corporate governanceframework has been established to ensure that directors, officers,
and employees fulfil their functions responsibly, whilst protecting
and enhancing the interests of shareholders.

Corporate Governance Statement

Good corporate governance adds to the performance of
the Company, creates shareholder value and engenders theconfidence of the investment market.

The Board

The Company’s corporate governance framework has beendeveloped with regard to:

The Board is responsible for the overall governance and operationsof the Company, guiding the Company’s strategic direction,
monitoring risk, and overseeing the activities of management.
All issues of substance affecting the Company are considered by
the Board, with advice from external advisors as required.

© the NZX Corporate Governance Code dated 17 June 2022
(NZX Corporate Governance Code)© the ASX Corporate Governance Council’s Corporate
Governance Principles and Recommendations,
4th Edition (ASX Principles)
For FY23 the Company’s corporate governance frameworkcomplied with the recommendations in the NZX Corporate
Governance Code and the ASX Principles.
The Company notes the amendments to the NZX Corporate
Governance Code, which took effect from 1 April 2023 which
the Company will report against in its FY24 Annual Report andCorporate Governance Statement.

The Company’s Corporate Governance Statement, which is current
as at 30 June 2023 and approved by the Board, can be found at
www.thea2milkcompany.com/corporate-governance.

Role of the Board and delegation of authority

The role and responsibilities of the Board are set out in the
Board Charter, available on the Company’s website at
www.thea2milkcompany.com/corporate-governance. These
include matters relating to the Company’s strategic direction,
financial performance, executive management, audit and risk
management, business planning, corporate governance anddisclosure, performance evaluation, workplace health and safety,
ethical conduct, and determining the Company’s sustainability, risk
management and strategy implementation, including to respondto the Company’s environmental and social sustainability risks andopportunities.
The Board delegates certain functions to its three Committees(Audit and Risk Management Committee, People andRemuneration Committee, and Nomination Committee). The
diagram opposite illustrates the Company’s corporate governanceframework.

60

THE a2 MILK COMPANY

Governance framework
Accountability
and reporting

Board ofDirectors

Independent
assurance (i)Delegation andoversight

Board
committees(ARMC, PRC,
NOM)

Accountability
and reporting

Delegation andoversight (iii)

Company
Secretary (ii)CEO (iv)

Delegation andoversight

Accountability
and reporting(i)

Executive
Leadership
Team (v)Internal audit/external audit/legal and otherprofessional advice.
(ii) Accountability and reporting of corporate
governance and Board related matters.
(iii) Board delegates all matters except thosereserved for the Board or its Committees.
(iv) Responsible for day to day operations; leads
the Executive Leadership Team.
(v) Implements strategy and business plans;manages performance and behaviours of teams

Audit and Risk Management Committee (ARMC)

Nomination Committee (NOM)

The principal purpose of this committee is to assist the Board in
fulfilling its corporate governance and oversight responsibilities
in relation to the Group’s risk management and internal control
systems, accounting policies and practices, sustainability risk
management and strategy implementation, internal and external
audit functions, and corporate reporting, including sustainability
reporting.

This committee assists the Board by considering nominations to
the Board to provide an appropriate mix of skills, experience anddiversity on the Board.

People and Remuneration Committee (PRC)

These Board committees are governed by charters detailingtheir specific functions and responsibilities. The charterfor each committee is reviewed by the Board annually.
Copies of the committee charters are available atwww.thea2milkcompany.com/corporate-governance.

This committee assists the Board in overseeing the design andimplementation of appropriate people and remuneration policies
and practices for the Company, to ensure the Company candeliver on its business objectives, remuneration is fair and current,
and the Company is compliant with relevant laws, regulations andapplicable listing rules.

ANNUAL REPORT 2023

61

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

GOVERNANCE CONTINUED

Board size, skills and structure
During the reporting period, the Board comprised between five and seven independent non-executive directors (with David Wang
being appointed to the Board on 1 September 2022 and Kate Mitchell being appointed on 1 June 2023) and one executive director,
the Managing Director and CEO, David Bortolussi. Julia Hoare retired from the Board with effect from 30 June 2023. The Company’s
constitution provides for a minimum of four directors and a maximum of eight, of which at least two must be ordinarily resident in
New Zealand to comply with the NZX Listing Rules.
The Board comprises directors with a diverse range of skills, experience and backgrounds to support the effective governance and robust
decision-making of the Group. A summary of the key skills and experience of the current directors against those identified in the skills
matrix is set out below:
NO. OF DIRECTORS(TOTAL OF 7)
LEVEL OF CAPABILITYCAPABILITYHIGH

MEDIUM

Consumer products and innovation – experience as a senior executive in, or as a professional advisor to,
consumer products businesses, including sales and marketing, product innovation and supply chain

4

1

Digital, data and technology – experience and expertise in e-commerce as well as identifying, assessing,
implementing and leveraging digital and other technology, understanding the application and use of data
and analytics and responding to digital disruption

2

1

Financial acumen – understanding of financial statements and reporting, key drivers of financial
performance, corporate finance and internal controls

22

Food safety and quality – technical or managerial experience relating to food, food product development
and implementation and management of safe practices for the sourcing, production, transport anddistribution of perishable foods

2

1

Governance – experience in and commitment to the highest standards of corporate governance, including
as a non-executive director of a listed company, large or complex organisation or government body22International markets – experience as a senior executive in, or as a professional advisor to, international
businesses and exposure to global markets and a range of different political, regulatory and businessenvironments

3

4

Leadership – experience in a senior management position in a listed company, large or complex organisationor government body, including experience in leading strategy development and execution

43

People and culture – experience in overseeing workplace culture, people management, development andsuccession planning, setting remuneration frameworks and promoting diversity and inclusion

2

5

Risk management – experience in identification, monitoring and management of material financial and nonfinancial risks and understanding, implementation and oversight of risk management frameworks and controls

23Strategy and M&A – development of corporate and business unit strategy and/or mergers, acquisitions
and alliance structuring and execution

4

3

Sustainability – understanding and experience in sustainable practices to manage the impact of business
operations on the environment and community and the impact of climate change on business operations

1

3

The Board skills matrix identifies the predominant skills of each director. The Board has specifically limited each director to having amaximum of four areas identified as ‘high capability’ and four areas identified as ‘medium capability’.

Board Committees
The Board’s three standing Committees facilitate and assist the Board in fulfilling its responsibilities. Other committees may beestablished from time to time with specific responsibilities as delegated by the Board. The composition of the committees as at,and throughout the financial year ended 30 June 2023 was as follows:

62

THE a2 MILK COMPANYCOMMITTEEMEMBERSINDEPENDENTNON-EXECUTIVE

Audit and Risk Management Committee

Julia Hoare (Chair)1

Sandra Yu

✓
✓
✓
✓
✓

✓
✓
✓
✓
✓

People and Remuneration Committee

Warwick Every-Burns (Chair)
Pip Greenwood
David Wang3
Sandra Yu

✓
✓
✓
✓

✓
✓
✓
✓

Nomination Committee

Pip Greenwood (Chair)

✓
✓
✓

✓
✓
✓

Warwick Every-Burns
Kate Mitchell2
David Wang3David Hearn
Julia Hoare1
1 Julia Hoare: retired 30 June 2023
2 Kate Mitchell: appointed member 1 June 2023 and Chair 1 July 2023
3 David Wang: appointed 1 September 2022

Attendance at Board and Committee meetings
Director attendance at Board and Committee meetings during FY23 is set out below.

MEETINGSOF THE BOARD4HELD

ATTENDED

David Hearn (Chair)

77David Bortolussi(Managing Director & CEO)7

7

Warwick Every-Burns

7

7

Pip Greenwood

7

7

AUDIT AND RISKMANAGEMENT COMMITTEE5HELD

2ATTENDED

2PEOPLE AND
REMUNERATIONCOMMITTEE6HELDATTENDED

2

2

2

2

Julia Hoare (Deputy Chair)

7

7

2

2

Kate Mitchell2

1

1

1

1

David Wang3

6

6

2

2

2

2

Sandra Yu

7

7

2

2

2

2

1

NOMINATIONCOMMITTEEHELDATTENDED

8

8

8

8

8

8

Held: meetings held during the period for which the person was a director or Committee member
1 Julia Hoare: retired 30 June 2023
2 Kate Mitchell: appointed 1 June 2023
3 David Wang: appointed 1 September 2022
4 In addition to the formal Board meetings, the Board also had 3 workshops to prepare for formal meetings and discuss any issues as they arose
5 In addition to the formal Audit and Risk Management Committee meetings, the Committee also had 3 workshops to prepare for formal meetings and discuss any
issues as they arose
6 In addition to the formal People and Remuneration Committee meetings, the Committee had 1 workshop to prepare for formal meetings and discuss any issues as
they arose

Corporate governance policies
The following policies, each of which has been prepared having regard to the NZX Corporate Governance Code and the ASX Principles
are available on the Company’s website at www.thea2milkcompany.com/corporate-governance:© Code of Ethics© Continuous Disclosure Policy© Diversity and Inclusion Policy© Risk Management Policy. Refer to the discussionof this policy commencing on page 50© Securities Trading Policy© Shareholder Communication Policy© Global Whistleblower Policy© Global Anti-Bribery and Anti-Corruption Policy; and© Responsible Sourcing Policy

The Board regularly reviews the performance and effectiveness of the Company’s corporate governance policies and procedures and,if appropriate, amends those policies and procedures or adopts new policies or procedures, to uphold the integrity of the Company’s
corporate governance framework.
ANNUAL REPORT 2023

63

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

Directors
David Hearn
Chair & Independent,
Non-executive Director
Master of Arts

David has been a director of the Company since 5 February 2014, and Chair
since 30 March 2015. He is also a member of the Nomination Committee.
David has deep experience and skills in executive management, sales andmarketing and strategy development in fast moving consumer goods (FMCG)
in international markets. He has held senior executive roles including Chief
Executive Officer or Managing Director roles for FMCG companies including
Goodman Fielder Limited, UB Snack Foods Europe/Asia, PepsiCo foods
Europe, Del Monte UK, Smith’s Crisps and for the marketing services group,
Cordiant Communications Group.
In addition to his Company directorship, David is also Chairman of SafeStore
Holdings plc (a UK FTSE listed company) and Lovat Partners Limited. David
resides in the United Kingdom.

David Bortolussi
Managing Director and CEO
Bachelor of Commerce(University of Melbourne),
FCA, F FIN, MAICDDavid joined the Company in February 2021 from his most recent role asGroup President – International Innerwear, HanesBrands. He joined PacificBrands in 2009 initially as Chief Financial & Operating Officer taking over as
CEO of the public company in 2014. In 2016, HanesBrands acquired PacificBrands and expanded David’s role to cover Australasia and subsequently
its international innerwear operations outside of the Americas. Prior tothis, David spent five years at Foster’s Group, where he held the role ofChief Strategy Officer responsible for corporate strategy, M&A, businessdevelopment and performance improvement. Prior to Foster’s Group,David held senior consulting roles at McKinsey & Company and PwC.
David’s career has largely been focused on the consumer and retail sector
in Australia and New Zealand complemented by significant international
experience in various markets and categories in China, SE Asia, the EU andthe USA. David resides in Australia.

Warwick Every-Burns
Independent,
Non-executive Director
Advanced Management
Program (Harvard)

Pip Greenwood
Independent,
Non-executive Director
Bachelor of Laws (LL.B.),
University of Canterbury(New Zealand)

Warwick has been a director of the Company since 23 August 2016. He is also
Chair of the People and Remuneration Committee and a member of the Audit
and Risk Management Committee.
Warwick has been a career Consumer Packaged Goods (CPG) executiveof global scale. His executive roles have included a career with The Clorox
Company of the USA as Senior Vice President, International, based in the USA
and prior to that as VP Asia Pacific. His earlier roles included Managing Directorof NationalPak Limited (the Glad Products Company ultimately acquired by
Clorox) and a long career with Unilever plc where he was based in Australia.
Warwick was a Non-Executive Director of the ASX listed Treasury Wine Estates
Limited from 2011 until 2022. Warwick resides in Australia.

Pip has been a director of the Company since 1 July 2019. She is also Chair of theNomination Committee and a member of the People and Remuneration Committee.
Pip is currently Chair elect and will assume the role of the Chair of the Board
following the conclusion of the Company’s 2023 Annual Meeting of shareholders.
Currently Pip is also the Chair of Westpac New Zealand and a director of Fisher &Paykel Healthcare. She was previously a director of Spark New Zealand and Vulcan
Steel. Prior to becoming a full time director, Pip was a senior partner at law firm
Russell McVeagh, where she spent over 10 years on the firm’s board including
acting as the firm’s board Chair and interim CEO.
Pip brings extensive commercial and board experience to The a2 Milk Company
Board. A leader in the field of corporate law and in the New Zealand business
community, she is the recipient of numerous industry awards including being
named New Zealand ‘Dealmaker of the Year’ at the Australasian Law Awards 2018,
an accolade she has won five times; and she has twice been recognised as a finalistat the Women of Influence Awards. Pip resides in New Zealand.

64

THE a2 MILK COMPANY

Kate Mitchell
Independent,
Non-executive Director
Bachelor of Arts Honours(Modern Languages),
Oxford University, UK

Kate has been a director of the Company since 1 June 2023. She is also
Chair of the Audit and Risk Management Committee.
Kate has significant governance experience as a director of both private andpublic companies. She also has extensive experience in developing solutions
for clients, particularly in the areas of financial risk management, structured
financing and investments.
Kate is currently Chair of The New Zealand Merino Company and Link
Engine Management and a director of Heartland Group Holdings,
FarmRight, and Christchurch International Airport, for which she also serves
as Chair of the Risk, Audit & Finance Committee.
Prior to moving to New Zealand in 2014, Kate’s executive career spannedover 20 years in investment banking in London, which included seniorleadership roles across several divisions within global investment banks
including Deutsche Bank, Goldman Sachs and Merrill Lynch. Kate resides
in New Zealand.

David Wang
Independent,
Non-executive Director
Master Business Administration,
Carnegie Mellon University- Tepper School of Business;
Bachelor of Bio-technology,
Wuhan University

David has been a Director since 1 September 2022. David sits on both the
Audit and Risk Management and the People and Remuneration committees.
David brings extensive expertise across the Asia-Pacific region in
manufacturing and supply chain with over 30 years’ experience in industrial
and consumer goods businesses including 15 years in senior executive
leadership roles in China and international. Currently, David works in
Buhler AG and has been the President of Asia Pacific, Greater China region
for Buhler, a global leader in the provision of industrial solutions, which
specialises in integrated plant equipment system and related services forfood processing and advanced materials manufacturing.
In his career, David has held various senior executive roles including at
Blackstone AVINTIV Inc and Dover Corporation where his responsibilities
covered manufacturing, research and development, technology, sales andmarketing throughout Asia. David also worked with PepsiCo for almost
10 years in operations and supply chain.
David was featured in CEO Magazine (November 2020), and also wasselected as one of CEO Magazine’s 2021 ‘Successful Entrepreneurs, Industry
Disruptors & Game Changers’. David resides in China.

Sandra Yu
Independent,
Non-executive Director
Master - Marketing,International Business
Management (National
Taiwan University)
Advanced Management Program(Harvard Business School)

Sandra Yu has been a Director of the Company since 1 March 2022.
Sandra sits on both the Audit and Risk Management and the People andRemuneration committees.
Sandra is a highly regarded company director and an experienced global
executive in consumer goods industries, and importantly in the infantmilk formula (IMF) market in China, with a proven track record of driving
business and brand transformation, leveraging opportunities for growth,and building organisational capabilities across China as well as the USA andother parts of Asia.
As the former head of Mead Johnson Nutrition’s Greater China business,
Sandra was a member of the Mead Johnson Nutrition’s Global leadershipteam. Prior to that, Sandra held various other senior executive roles at
Mead Johnson Nutrition, including as the Global Marketing Vice President,
responsible for transition to new digital media and e-commerce channels
globally.
Sandra was also appointed as the non-executive chairwoman to lead RB
China advisory board after the merger between Reckitt Benckiser and MeadJohnson Nutrition in 2017. Prior to joining Mead Johnson, Sandra held
executive positions at Unilever, where she worked across Asia for thirteen
years. Sandra resides in Greater China.

ANNUAL REPORT 2023

65

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

Executive Leadership TeamDavid Bortolussi

Chopin Zhang

Managing Director and CEO

Chief Supply Chain Officer

Bachelor of Commerce (University of Melbourne), FCA, F FIN,
Member of the Australian Institute of Company Directors (MAICD)

Master, Business Administration(Maastricht School of Management)

Refer to page 64.

Chopin joined the Group in November 2022 and has over 35 years’
experience in supply chain management with significant experiencein China and New Zealand, including planning, procurement,
manufacturing, quality, cross-border trade, distribution, regulatory
affairs, and government relations. Chopin has extensive experiencein the China IMF market, having held senior executive and supply
chain leadership roles with Yashili and Danone.

David Muscat
Chief Financial Officer
Bachelor of Commerce - Accounting and Finance(Monash University), CA
David joined the Group in October 2022. As CFO, David is
responsible for finance, investor relations, risk and IT acrossthe Group. David is an experienced finance and people leader
with a history of working in a dual-listed company (NZX/ASX) andworking directly with the Board of Directors and the Audit and Risk
Management Committee.
Prior to joining the Group, David was the CFO of DIM Brands
International (formerly Hanes Europe Innerwear), and prior to thiswas the CFO of Hanes Australasia. David was the CFO of ASX andNZX listed Pacific Brands prior to its takeover by Hanesbrands Inc. in2016. David commenced his career at Deloitte and has since gained
significant experience in consumer goods and retail sectors in various
international markets, including China.

Jaron McVicar
Chief Legal and Sustainability Officer & Company Secretary
Bachelor of Laws (University of Otago)
Jaron joined the Group in November 2016 and is responsible for theGroup’s legal function and our important sustainability programme.
In his role as Company Secretary, Jaron works closely with the Boardon corporate governance and Board related matters.
Prior to joining the Group, Jaron worked in private practice for15 years as a corporate and commercial lawyer in New Zealand andthe UK.
Jaron is a qualified solicitor in New Zealand and England and Wales.

During his career, Chopin has held additional supply chain seniorleadership roles across Greater China, Asia Pacific and the USA withleading consumer goods companies including Starbucks, Nike andJohnson & Johnson.
Chopin’s expertise in the China IMF industry and experience across
New Zealand and China are highly relevant to his leadership of thetransformation of the Company’s supply chain to enable further
market access, innovation and growth.

Edith Bailey
Chief Marketing Officer(Bachelor of Business - Marketing & Management(University of Technology, Sydney), Graduate of theAustralian Institute of Company Directors (GAICD)
Edith joined the Company in December 2021 and is responsible
for managing the strategic and creative direction of the a2™
brand, overseeing the science and nutrition functions, developing
integrated marketing programmes and leading product innovation.
Edith was previously Consumer Marketing Director, ANZ, with
Danone Nutricia’s Specialised Nutrition division, having spent
14 years with the organisation in several senior marketing, channel
and category development positions. Edith has significant experiencein the infant nutrition category across China, New Zealand, Australia
and South East Asia.
Before her time at Danone, Edith held senior marketing roles with
PepsiCo, Campbell Arnotts and S.C. Johnson & Son.

Executive Leadership Team (L-R): Chopin Zhang, Edith Bailey, Jaron McVicar, Amanda Hart, David Bortolussi, Yohan Senaratne, Xiao Li,
Eleanor Khor, David Muscat, Kevin Bush.
66

THE a2 MILK COMPANY

Amanda Hart

Eleanor Khor

Chief People and Culture Officer

Managing Director – ANZ and Strategy

Bachelor of Business Administration (University of South Australia),
Member of the Australian Institute of Company Directors (MAICD)

Bachelor of Commerce/Bachelor of Laws (Hons)(University of Melbourne)

Amanda joined the Company in September 2021 and has extensive
experience in people and culture roles within consumer products,
telecommunications and media industries.

Eleanor joined the Company in August 2018, bringing a diverse
range of experience, including her time as a corporate and M&A
lawyer at Allen Linklaters, a management consultant at Bain & Co,
and working in private equity with a focus on consumer goods
businesses.

She is responsible for leading and executing integrated programmes
and initiatives focused on constructive leadership development,
capability building, employee engagement, health and safety,
diversity and inclusion, and cultural change.
Prior to joining the Group, Amanda was previously Head of Human
Resources (Australia and New Zealand) with Dyson Appliances andhas experience in people and culture leadership roles both in the UK
and USA and leading teams across APAC markets.

Xiao Li
Chief Executive – Greater China
Bachelor of Arts in Business Admin, English(Heilongjiang University), Master, EMBA
(China Europe International Business School)
Xiao joined the Group in April 2019 and is responsible for
maximising the significant opportunities that the Greater China
market presents for the Company, executing against our strategy
and putting the right capabilities in place to deliver on these future
growth opportunities.
Xiao has substantial experience building successful businesses
in China across a diverse range of multinational and local fast
growth consumer driven companies including Shell Company,
Mars, Unilever, Nike, GM of Pousheng (HK listed sport retail), CEOof Burger King China and in his previous position as President of
Wanda Kids Group and SVP of Wanda Group.

Yohan Senaratne
Managing Director – International
Master (Business Administration) (Kellogg School of Management,
Northwestern University), Bachelor Commerce, Bachelor Business
Systems (Monash University), Member of the Australian Instituteof Company Directors (MAICD)
Yohan is responsible for leading the Company’s cross-borderexport business, primarily focused on English label IMF products
manufactured in New Zealand and sold into China, including
liquid milk and other nutritional products. Yohan is responsible formanaging products sold through all channels, principally via the
daigou/reseller/O2O and cross-border e-commerce (CBEC) channels.
The International team is also responsible for developing theCompany’s business in emerging markets.

In May 2023, Eleanor’s role was expanded to Managing Director –ANZ and Strategy, taking on the leadership of the Australia and New
Zealand business in addition to the Strategy function.
As leader of the ANZ business, Eleanor is responsible for continuing
to grow the Company’s business in Australia and New Zealand torealise the full potential of the a2 Milk™ brand, with a strong focus
on driving growth through innovation.
Within the strategy function, Eleanor is responsible for developing
corporate and business strategy and the execution of key growth,
performance improvement and potential M&A, joint venture andalliance initiatives.
Since joining a2MC, Eleanor has spent significant time working
across China and the Asia Pacific regions.

Kevin BushManaging Director – USA
B. Comm Marketing (Monash University),
Graduate Certificate Data Analytics (UNSW), Member ofthe Australian Institute of Company Directors (MAICD)Kevin was appointed to the role of Managing Director – USA in
May 2023. Kevin is responsible for leading the Company’s North
American business and continuing to grow the brand and delivering
its path to profitability.
Prior to this, Kevin was Executive General Manager – ANZ from July
2021. In this role, Kevin was responsible for leading the Company’sbusiness in Australia and New Zealand and the successful launch of
a2 Milk® Lactose Free.
Kevin previously held the role of Sales Director – ANZ from July
2016 and was pivotal in growing the a2 Milk® liquid milk brand anddriving increased market share. He has also overseen the successful
establishment of the a2 Platinum® IMF brand in the South Koreanmarket and various other business development initiatives across theGroup.
Kevin is a highly experienced sales and marketing professional withextensive FMCG experience across Australian and UK markets andhas held senior positions with leading consumer goods companies
including Mars, Nestle and McCain Foods.

Yohan brings capability in strategy, marketing, sales ande-commerce, and experience in infant milk nutrition and adjacentcategories in China.
Yohan joined the Company in 2021 from his most recent role as
Sales and Marketing Director at Bellamy’s Organic. Yohan has also
held multiple positions at Mondelez International, including Headof e-commerce for Australia, New Zealand and Japan. Prior to this,Yohan worked at ANZ Bank, focusing on retail banking digitaltransformation and with strategy consultancy LEK.

ANNUAL REPORT 2023

67

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

Remuneration
Our remuneration framework is designed to appropriately align with our strategy andachievement of our short-term and long-term ambitions. The key principles of ourremuneration framework are outlined below.

Market competitive
Provide competitive rewards
to attract, motivate andretain talented employees
and executives relevant to themarkets in which we operate.

Business strategy

Behaviours

Shareholder alignment

Drive delivery of theCompany’s strategy byrewarding performance andhaving a mix of short-termand long-term remuneration
elements.

Be consistent with, andsupportive of, the Company’s
ethical framework andcommitment to good
corporate governance.

Link rewards to the creationof sustainable value forshareholders, whilst avoiding
inappropriate risk.

Remuneration governance
The People and Remuneration Committee (the Committee) advises
the Board on the policies and practices of the Company regarding
the remuneration of non-executive directors, the Executive
Leadership Team (ELT) (all of whom report directly to the CEO) andother senior leaders of the Group, and reviews all components of
the Group’s remuneration practices relevant to its employees. The
Committee Charter sets out the objectives, responsibilities andauthority of the Committee in relation to remuneration matters.
The Board’s policy for remunerating the CEO, ELT and othersenior leaders is to provide market-based remuneration packages
comprising a blend of fixed and variable at-risk incentive-based
remuneration, with clear links between individual and Company
performance and individual reward. The Committee reviews the
remuneration of the CEO, ELT and, as an aggregate, all other
employees at least annually.
The Committee seeks external professional advice from time
to time on remuneration matters. During FY23, external
consultants were engaged to provide market practice information
and benchmarking data. During the year, no remuneration
recommendations were made by external consultants.

Remuneration policies and practices
All employees have a fixed remuneration package. Selected
employees also have variable remuneration in the form of a shortterm incentive (STI) as part of their remuneration package. The ELT
and selected senior leaders also have a long-term incentive (LTI) as
part of their remuneration package.
In FY23, eligible employees not participating in the LTI plan wereentitled to participate in the Company’s Gift Plan, under which
they receive ordinary shares in the Company worth up to A$1,000,
at no cost to the employee. This plan is designed to provide
participating employees an ownership interest in the Company.

Remuneration packages for senior leaders are structured with asignificant portion of variable reward at risk that can be earned
by the achievement of performance outcomes. An appropriate
remuneration mix is determined for each position, taking into
consideration the employee’s role and level of responsibility.
In FY23, the Committee reviewed the CEO’s remuneration
framework. As a result of the review, in the FY23 year theCompany’s STI plan structure for the CEO will include a
percentage of deferral as cash. In the interests of transparency
and good governance, the Board will also voluntarily put the
CEO’s FY24 LTI grant to shareholders as a non-binding vote at
the 2023 Annual Meeting of shareholders.

Managing ELT performance
Robust processes are in place for supporting and evaluating
the performance of the CEO, ELT and other senior leaders.
The Board and CEO determine and agree annual targets andobjectives for the Company based on the Company’s strategicplan, supported by comprehensive and collaborative operational
planning and financial budgeting processes. The CEO isaccountable to the Board for the delivery of the agreed targets
and objectives.
The targets and objectives agreed between the Board and the
CEO are discussed with, and cascaded to, each member of the
ELT and captured in individual performance plans. The CEO
uses the performance plans to facilitate individual conversations
with each member of the ELT. The performance discussions are
documented and form the basis of the annual performance review
that each ELT member undertakes with the CEO at the end of theperformance period.
The outcome of the ELT’s performance over the course of theyear is one factor considered when any changes to fixed annual
remuneration or any award of variable remuneration andincentives are determined.
During FY23, each member of the ELT who was an employee forthe duration of the reporting period had at least one performance
discussion documented.

68

THE a2 MILK COMPANY

ELT remuneration framework
The ELT remuneration framework is designed to deliver high performance with substantial components at-risk, with the aim of moreclosely aligning remuneration with the Company’s strategy, objectives and risk tolerances as set out below.
The design of the ELT remuneration framework is based on our reward principles and is comprised of three components:© Fixed Annual Remuneration (FAR) (base salary and statutory superannuation contribution where relevant)© Short-term Incentive (STI)© Long-term Incentive (LTI)

Variable remuneration
FAR

STI

LTI

Purpose

Provides market competitive
remuneration to attract andretain talent while reflectingrole scope, impact andaccountabilities

Incentivises annual achievementof short-term performancemeasures against the Company
balanced scorecard

Aligns reward with the creationof sustainable, longer-term
shareholder value

Link to strategy
and performance© Based on skills and experience
relevant to the role, individual
performance and current levelof remuneration relative toremuneration benchmarks© FAR is reviewed on an annual
basis with reference toindependent external surveys
and, where appropriate,
is adjusted based on
consideration of individual
performance and market
remuneration benchmarks© Performance is assessedagainst a balanced scorecard,
comprising financial
performance measures andnon-financial performancemeasures which alignwith the Company’s value
creation model (covering four
key areas: People, Planet,
Consumers and Shareholders)© Aligns selected executives’
remuneration with theCompany’s strategy andambition, designed to create
long-term shareholder value
through sustained growth inrevenue and earnings

Remuneration mix
The following table illustrates the relative percentages of FAR and at-risk STI and LTI for FY23.

CEO
ELT (excluding the CEO)FAR

STI (at target)

LTI (face value)

27%

32%1

41%

29% – 43%

26% – 33%

32% – 43%

1. 25% of the CEO’s Actual FY23 STI is deferred as cash.

Executive Minimum Shareholding Requirement (Executive MSR)
The Executive MSR Policy applies to all members of the ELT. From time-to-time, additional employees may be identified towhom the Executive MSR Policy will apply. The purpose of the Executive MSR Policy is to strengthen the alignment between theinterests of the ELT and the interests of shareholders and encourage a focus on building long-term shareholder value.
Each member of the ELT is required to acquire and hold a minimum shareholding equivalent to 100% of their FAR (before any
tax or social security deductions) by the end of five annual vesting periods for LTI grants.
All ELT members are currently expected to achieve the Executive MSR within the timeframe required by the policy.

ANNUAL REPORT 2023

69

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

REMUNERATION CONTINUEDFY23 Short-Term Incentive (STI) plan
STI values and performance targets are approved by the Committee and Board each financial year. Payments made under the STI plan
are in the form of cash. For FY23, the CEO’s STI will be 75% cash and 25% deferred as cash for one year.
The FY23 STI plan provides that the amount payable will be determined by reference to:

FAR
$

x

Individual
Performance
ModifierGroup
Performance
OutcomeOpportunity

Target STI
opportunity%x

FY23 Group
performance
scorecard result %x(detailed below)

Individual
performance
modifier %Outcome=

STI award$

The STI plan incorporates a comprehensive assessment of Group performance, encompassing both financial and non-financial measures.
The FY23 Group Performance Scorecard includes financial measures with a weighting of 60% and non-financial measures with aweighting of 40%, as set out in the table below. For each objective there are threshold, target and maximum metrics (as shown in thetable below) to assess the Group’s performance against. The outcomes are determined by the Board (excluding the CEO).

FY23 Group Performance Scorecard
FY23 strategic objectives

MetricOutcome

Weightingat target

Financial measures

60%
THRESHOLD

Shareholders

TARGETNet sales revenue

30%

Earnings before interest, tax,
depreciation and amortisation (EBITDA)30%

Non-financial measures

Consumers

MAXIMUM40%

PeopleSafety performance andemployee engagement score

5%

PlanetEmployee rating of a2MC sustainability
impact, and progress on packaging andScope 3 GHG emissions goals

5%

Brand health

China unprompted brand awareness,
Australian fresh milk loyalty and USA
household penetration (with mostweight placed on China outcomes)

5%Market share

China label IMF (MBS and DOL),
English label IMF (CBEC, Daigou, O2O),
Australian fresh milk and USA premiumliquid milk (with most weight placed on
China outcomes)

5%Innovation

China label new GB formulation
registration, progress on innovation
pipeline and sales from new products(China, ANZ, USA)

10%

Supply chain

Market access, CL and EL inventory
management, MVM insourcing, quality
outcomes and supply chain efficiency

10%

Scorecard outcome (% of target)

95%

The FY23 STI plan provided threshold to maximum potential metrics for the Group Performance Scorecard with outcomes ranging from
0% to 130%, with the target at 100%. The outcome of the FY23 Group Performance Scorecard determined by the Board for all ELT
members (including the CEO) was 95%, reflecting that an outcome of 55% (of 60%) was achieved against financial measures and an
outcome of 40% (of 40%) was achieved against non-financial measures. This reflects the outcomes determined by the Board in relation
to the individual Group Performance Scorecard measures set out in the table above.

70

THE a2 MILK COMPANYFY23 Long-Term Incentive (LTI) plan
The table below outlines key features of the FY23 LTI for the CEO and ELT.
FeaturesApproachPurpose© The LTI plan is designed to reward performance in support of the achievement of the Company’s
growth strategy: targeting profitable, long-term revenue and EPS growth, which requires appropriate
investment

Participants© Participation in the LTI plan is by invitation only, at the sole and absolute discretion of the Board© In FY23, the CEO, ELT and selected senior leaders participatedOpportunity© The maximum face value of the LTI that can be granted for the CEO is 150% of FAR, and for the ELT,
ranges from 75% to 150% of FAR. The minimum potential outcome value is zero

Performance/vesting
period© Three years from 1 July 2022 to 30 June 2025
© There is no retesting of performance if performance conditions are not met at the end of theperformance period

Instrument© Performance rights – each performance right entitles the participant to receive one fully paid share in
the Company (or cash equivalent, at the election of the Company), subject to meeting performancemeasures© It is currently intended that, where possible in accordance with relevant laws, the Company will
satisfy its obligation to allocate ordinary shares upon the vesting of performance rights by instructing
the trustee of the a2MC Group Employee Share Trust to transfer existing shares held in the trust toeach participant, where such existing shares were previously purchased by the trustee on-market

Allocation approach© The Company uses a maximum face value allocation approach. The number of rights granted were
calculated as follows:

Grant opportunity

FAR
$

x

Maximum LTI
opportunity %Number ofrightsShare price
Share price1/(no discountapplied)=Number of
performancerights granted

1. The share price used was the volume weighted average share price of ordinary shares in the Company in accordance with
the ASX listing rules based on the ten trading days up to and including 19 September 2022.

Dividend payments© No dividends or dividend equivalent payments are provided on performance rights

Board discretion© The Board may forfeit performance rights for fraud, dishonesty or wilful breach of duties

ANNUAL REPORT 2023

71

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

REMUNERATION CONTINUED

Performance conditions

The performance rights vest subject to achievement of both:© EPS CAGR (compound annual growth in diluted earnings per ordinary share); and© Revenue CAGR (compound annual growth in revenue), performance hurdles over the performance
period.

Vesting Framework
For any vesting to occur, both of the following must be achieved:© EPS CAGR of at least 10%; and© Revenue CAGR of at least 6%,
in each case, from 1 July 2022 to 30 June 2025.
If these performance hurdles are achieved, the proportion of performance rights that may vest will be
determined on a straight-line basis per the table below:
Revenue - CAGR

Vesting % (if EPS CAGR of at least 10%)Less than 6%

Nil

6%

50%

Between 6% and 8%

Pro-rata vesting on a straight-line basis between 50% and 85%

8%

85%

Between 8% and 10%

Pro-rata vesting on a straight-line basis between 85% and 100%10% and above

100%

Calculation approach
EPS CAGR and Revenue CAGR are derived from the annual report of the Company for the relevant
financial years and are subject to adjustment to remove the impact of material items as the Board may
determine, as further noted below.

Performance rights granted in FY23
During the year the Board authorised the grant of 2,472,270 performance rights to the CEO, ELT and senior leaders under the LTI plan inrespect of FY23.
Further details on the current LTI plan and previous plans can be found at Note F2 to the financial statements.
The Board also considered the impact of the on-market share buyback completed in March 2023 when setting the FY23 LTI grant EPSCAGR performance hurdle, which was determined to be immaterial.

Normalisation adjustments
Relevant STI and LTI metrics are adjusted to remove the impact of material items as the Board may determine in its absolute discretion
to normalise results (up or down) to more appropriately reflect underlying performance. Without limitation, adjustments may be madeto exclude the impact of unusual or one-off items, discontinued operations, acquisitions and disposals, and capital management. No
normalisation adjustments were made to STI and LTI metrics in FY23.

72

THE a2 MILK COMPANY

Remuneration of CEO – David Bortolussi
David commenced his appointment as Managing Director and CEO on 8 February 2021. Details of his remuneration arrangements are
set out below:

Term
There is no fixed term. David’s employment is ongoing until terminated by either David or the Company.

Fixed Annual Remuneration
A$1,867,666 per annum (inclusive of superannuation), to be reviewed annually.

STI
On an annual basis, David participates in the Company’s STI plan. For FY23, his STI incentive target is 120% of his FAR, subject to theachievement of the Group Performance Scorecard and individual performance objectives both determined by the Board (excludingDavid). In FY23, the Group Performance Scorecard outcome range is from 0% to 130% and David’s individual performance multiplier
range is from 0% to 130% which is consistent with the prior year.
In FY23, the Board revised the Company’s STI plan structure, for the CEO, to include a percentage of deferral for the CEO’s STI. In FY23,
payment of 25% of the amount awarded to the CEO is deferred as cash for one year. No remuneration adjustment was applied to theCEO’s total remuneration package to compensate for this change.
David’s STI payment in FY23 is determined in accordance with the following:

FAR
$

x

Target STI
opportunity
120%x

FY23 Group
Performance
Scorecard result %x

Individual
performance
modifier%=

STI award$

75% of David’s STI payment will be paid in cash shortly following the Board’s determination and the remaining 25% paid in cash after
one year.

LTI
Subject to Board discretion, on an annual basis David will be invited to be granted performance rights under the Company’s LTI plan. To
date, performance rights issued to David have been issued on the basis that they may only be satisfied on exercise with ordinary sharespurchased on-market.
As noted above, the Board will also be submitting the CEO’s LTI grant for the FY24 LTI plan to shareholders as a non-binding vote at theAnnual Meeting in 2023.

Allowance
An allowance of A$10,000 per month (net of tax) is paid to assist David with the cost of his accommodation in Sydney and travel
between Melbourne and Sydney.

Notice period
Generally, resignation by David requires six months’ notice and termination (other than for cause) by the Company requires twelve
months’ notice.

Leave
Five weeks per annum paid annual leave.

Other terms
The agreement also includes standard terms covering expense reimbursement, conflicts of interest, confidentiality, intellectual property
and moral rights, clawbacks and restraints upon termination (which address non-competition, as well as non-solicitation of employees,
customers and suppliers).

ANNUAL REPORT 2023

73

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

REMUNERATION CONTINUED

Remuneration received in FY23
The remuneration received by David Bortolussi in the financial year is outlined in the table below. We believe presenting this information
provides shareholders with greater clarity and transparency as to the CEO’s remuneration. This table differs from the statutory accrued
remuneration table (further below) which presents remuneration in accordance with accounting standards (i.e., on an accruals basis).
Remuneration received

2023
A$

2022
A$

FAR

1,867,666

1,795,082

STI paid

2,251,031

630,000

Allowance

226,416

226,416––

Other equity

1,042,795

916,731

Total remuneration received

5,387,908

3,568,229

2023
A$

2022
A$

FAR

1,867,666

1,795,082

Cash STI

2,129,140

2,251,031

Allowance

226,416

226,416

3,583,205

2,013,392

476,748

1,772,585

8,283,175

8,058,506

LTI

The remuneration accrued for David Bortolussi in the financial year was as follows:
Statutory remuneration accounting expense

LTI
Other equity
Total remuneration

As noted above, for FY23, David is entitled to receive an STI payment at target of 120% of his FAR modified for Group and individual
performance. The Board has determined that the Group Performance Scorecard outcome is 95% and David’s individual performance
multiplier is 100%. As a result, a payment in the amount of A$2,129,140 is to be made to David under the FY23 STI plan representing
95% of target, with 25% to be deferred and paid as cash after one year.

LTI – granted in FY23
In FY23, 501,180 performance rights vesting in August 2025 were granted to David under the Company’s LTI Plan.

Time-based rights – transition benefits
In FY21, David was granted 311,283 time-based rights as a transition benefit, when the share price was NZ$11.07, being partial
compensation for vested and unvested entitlements that he forfeited on resigning from his previous employment.
Of these time-based rights, 155,642 vested on 21 February 2022, when the share price was NZ$6.31; and the remaining 155,641 rights
vested on 1 February 2023, when the share price was NZ$7.52.
Other than to meet any tax obligations, no shares held by David can be sold until he holds sufficient shares to meet the Company’s
minimum shareholding requirement under the MSR Policy.

74

THE a2 MILK COMPANYNon-executive directors’ remuneration policy and structure
Non‑executive director fees are paid from an aggregate annual fee pool of $1,365,000, as approved by shareholders at the Annual
Meeting on 20 November 2018. Non‑executive directors do not receive variable pay.
The table below provides a summary of FY23 Board and Committee fees:

Board of Directors

Position

Fees per annum
$

Chair

265,0001

Deputy Chair

210,0002

Member

165,000

Chair

35,000Member16,500Chair

35,000Member16,500Chair

22,000Member

11,000

Audit & Risk Management Committee
People & Remuneration Committee
Nomination Committee

1 No additional fees are paid to the Board Chair for Committee roles.
2 Following the current Deputy Chair’s retirement on 30 June 2023, from 1 July 2023, there will no longer be a Deputy Chair.

Remuneration paid to non-executive directors of the Company for the year ended 30 June 2023 was as follows:
Committee fees
Board fees

Audit & Risk
Management

People &Remuneration

Nomination

Total fees

$

$

$

$

$

David Hearn (Chair)

265,000–––

265,000

Julia Hoare (Deputy Chair)

210,000

35,000–11,000

256,000

Pip Greenwood

165,000–

16,50022,000203,500

Warwick Every-Burns

165,000

16,50035,000–216,500

Sandra Yu

165,000

16,50016,500–198,000

David Wang1

137,500

13,75013,750–165,000

13,750

1,375

–

–

15,125

1,121,250

83,12581,75033,0001,319,125

Kate Mitchell
Total

2

1 David Wang was appointed as a non-executive director with effect from 1 September 2022.
2 Kate Mitchell was appointed as a non-executive director with effect from 1 June 2023.

No other benefits such as share options or special exertion payments were paid to directors.
No director of a subsidiary company was remunerated in their capacity as a director.

Director Minimum Shareholding Requirement
A Minimum Shareholding Requirement (Director MSR) Policy applies to all directors. The purpose of this MSR Policy is to strengthen
the alignment between the interests of directors and the interests of shareholders and encourage a focus on building long-term
shareholder value. Under this policy, directors are required to acquire and hold, for the duration of their tenure on the board, a minimum
shareholding equivalent in value (at the time of purchase) to 100% of their fixed annual director fees (including committee fees) before
any tax or social security deductions. Directors are expected to achieve the Director MSR within three years of becoming a director.

ANNUAL REPORT 2023

75

Chair’s letter

CEO’s year in review

Building a sustainable growth business

Financialstatements
Directors’ approval of thefinancial statements

77

Independent auditor’s report

78

Consolidated statementof comprehensive income

83

Consolidated statementof changes in equity

84

Consolidated statementof financial position

86

Consolidated statementof cash flows

87

Notes to the financial statements

88

76

THE a2 MILK COMPANY

Corporate governance

Financial statements

Company disclosures

Directors’ approval of the financial statements
for the year ended 30 June 2023
The directors of The a2 Milk Company Limited are pleased to present the consolidated
financial statements for The a2 Milk Company Limited (the Company) and its subsidiaries(together the Group) for the year ended 30 June 2023.
The directors are responsible for preparing and presenting financial statements inaccordance with New Zealand law and generally accepted accounting practice, which
present fairly the financial position of the Group as at 30 June 2023 and the results of its
operations and cash flows for the period ended on that date.
The directors consider the financial statements of the Group to have been prepared using
accounting policies which have been consistently applied and supported by reasonablejudgements and estimates and that all relevant financial reporting and accounting
standards have been followed.
The directors believe that proper accounting records have been kept which enable, withreasonable accuracy, the determination of the financial position of the Group and facilitate
compliance of the financial statements with the Financial Markets Conduct Act 2013.
The directors consider that they have taken adequate steps to safeguard the assets of theGroup, and to prevent and detect fraud and other irregularities. Internal control procedures
are also considered to be sufficient to provide a reasonable assurance as to the integrity
and reliability of the financial statements.
There are reasonable grounds to believe that the Company and the Group entities
identified in Note E1 will be able to meet any obligations or liabilities to which they are or
may become subject to by virtue of the Deed of Cross Guarantee between the Company
and those Group entities pursuant to ASIC Corporations (Wholly-owned Companies)
Instrument 2016/785.
Signed on behalf of the Board by:David Hearn
Chair

David Bortolussi
Managing Director and CEO

20 August 2023

ANNUAL REPORT 2023

77

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

Independent auditor’s reportfor the year ended 30 June 2023

Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001

Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au

Independent auditor’s report to the shareholders of The a2 Milk Company
LimitedReport on the audit of the financial statements
OpinionWe have audited the financial statements of The a2 Milk Company Limited (the “Company”) and its
subsidiaries (together the “Group”) on pages 83 to 134, which comprise the consolidated statementof financial position of the Group as at 30 June 2023, and the consolidated statement ofcomprehensive income, consolidated statement of changes in equity and consolidated statement ofcash flows for the year then ended of the Group, and the notes to the consolidated financial
statements including a summary of significant accounting policies.
In our opinion, the consolidated financial statements on pages 83 to 134 present fairly, in all material
respects, the consolidated financial position of the Group as at 30 June 2023 and its consolidated
financial performance and cash flows for the year then ended in accordance with New Zealand
Equivalents to International Financial Reporting Standards and International Financial ReportingStandards.
This report is made solely to the Company’s shareholders, as a body. Our audit has been undertaken
so that we might state to the Company’s shareholders those matters we are required to state to themin an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company and the Company’s shareholders,
as a body, for our audit work, for this report, or for the opinions we have formed.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand). Our
responsibilities under those standards are further described in the Auditor’s responsibilities for theaudit of the financial statements section of our report.
We are independent of the Group in accordance with Professional and Ethical Standard 1 International
Code of Ethics for Assurance Practitioners (including International Independence Standards) (New
Zealand) issued by the New Zealand Auditing and Assurance Standards Board, and we have fulfilled
our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Ernst & Young has provided market research services in relation to brand health tracking and has also
provided sustainability reporting advisory and assurance services to the Group. Partners andemployees of our firm may deal with the Group on normal terms within the ordinary course of trading
activities of the business of the Group. We have no other relationship with, or interest in, the Group.

Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements of the current year. These matters were addressedin the context of our audit of the consolidated financial statements as a whole, and in forming our
opinion thereon, but we do not provide a separate opinion on these matters. For each matter below,
our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of thefinancial statements section of the audit report, including in relation to these matters.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation

78

THE a2 MILK COMPANY

Accordingly, our audit included the performance of procedures designed to respond to ourassessment of the risks of material misstatement of the financial statements. The results of our audit
procedures, including the procedures performed to address the matters below, provide the basis forour audit opinion on the accompanying consolidated financial statements.

Customer rebates and promotional allowances
Why significant

How our audit addressed the key audit matter

Revenue and associated trade receivables arerecognised net of rebates and promotional
allowances owed to customers based on theirindividual contractual arrangements.

Our audit procedures included the following:

The recognition and measurement of rebates
and promotional allowances, including theestablishment of an appropriate accrual at year
end, involves judgment and estimation,
particularly relating to variable rebates and the
expected level of rebate claims by
the customers.
This was considered a key audit matter given thevalue of rebates and promotional allowances
provided to customers, together with the levelof judgment involved in estimating this variableconsideration at year end.
Disclosures regarding revenue and the related
rebates and promotional allowances areincluded in note B2 to the financial statements.

► Considered the appropriateness of theGroup’s revenue recognition accounting
policies as they relate to rebates andpromotional allowances.
► Understood the Group’s processes andcontrols over the recording of rebates
and promotional allowances.
► Selected a sample of customer
contracts, determined whether variable
rebates were calculated in accordancewith the agreed terms and inquired ofmanagement as to the existence of any
non-standard agreements or sidearrangements with customers.
► Selected a sample of variable rebatesrecorded and assessed whether thetiming and value of amounts recognised
were in accordance with NZ IFRS.
► Compared a sample of customer claims
for variable consideration and payments
made subsequent to year end torecorded accruals.
► Considered the year end ageing profile
of rebates and promotional allowances
and inquired as to the likelihood of agedbalances being settled.
► Considered the adequacy of theassociated disclosures in the financial
statements.

Information other than the financial statements and auditor’s report
The directors of the Company are responsible for the annual report, which includes information otherthan the consolidated financial statements and auditor’s report. Our opinion on the consolidated
financial statements does not cover the other information and we do not express any form ofassurance conclusion thereon.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation

ANNUAL REPORT 2023

79

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

INDEPENDENT AUDITOR’S REPORT CONTINUED

In connection with our audit of the consolidated financial statements, our responsibility is to read theother information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained during the audit, or otherwise
appears to be materially misstated.
If, based upon the work we have performed, we conclude that there is a material misstatement of thisother information, we are required to report that fact. We have nothing to report in this regard.

Directors’ responsibilities for the financial statements
The directors are responsible, on behalf of the entity, for the preparation and fair presentation of theconsolidated financial statements in accordance with New Zealand Equivalents to International
Financial Reporting Standards and International Financial Reporting Standards, and for such internal
control as the directors determine is necessary to enable the preparation of financial statements thatare free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible for assessing on
behalf of the entity the Group’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the Group or cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and toissue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with International Standards on Auditing(New Zealand) will always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of these consolidated
financial statements.
A further description of the auditor’s responsibilities for the audit of the financial statements is
located at the External Reporting Board’s website: https://www.xrb.govt.nz/standards-for-assurancepractitioners/auditors-responsibilities/audit-report-1/. We also provide the directors with a statementthat we have complied with relevant ethical requirements regarding independence, and tocommunicate with them all relationships and other matters that may reasonably be thought to bear on
our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
This description forms part of our auditor’s report.
The engagement partner on the audit resulting in this independent auditor’s report is Glenn Maris.

Ernst & Young
Sydney20 August 2023

A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation

80

THE a2 MILK COMPANY

Independent ESG Assurance Reportfor the year ended 30 June 2023
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001

Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au

Limited Assurance Report to the Management and Directors of The a2 Milk
Company Limited
Our Conclusion:
Ernst & Young (‘EY’, ‘we’) were engaged by The a2 Milk Company Limited (‘a2MC’) to undertake a limited assurance
engagement as defined by Australian Auditing Standards, hereafter referred to as a ‘review’, over the Subject Matter
defined below for the year ended 30 June 2023. Based on the procedures we have performed and the evidence wehave obtained, nothing has come to our attention that causes us to believe the Subject Matter has not been prepared,in all material respects, in accordance with the Criteria defined below.

What our review covered

Criteria applied by a2MC

We reviewed the following Subject Matter listed below anddisclosed within a2MC’s 2023 Annual Report (the‘Report’).

In preparing the sustainability performance data relating
to GHG emissions, a2MC applied the following Criteria:►
The Greenhouse Gas (GHG) Protocol, as well as the
National Greenhouse Accounts Factors for Australia,
the UK DEFRA GHG conversion factors and a range ofother country-specific and source-specific references
utilised for determining GHG emissions.

Sustainability Performance Data

Value

Climate – greenhouse gas (GHG) emissions
Total Scope 1 emissions in tonnes ofcarbon dioxide equivalent (tCO2-e)

24,343

Total Scope 2 emissions (tCO2-e) as
calculated using the location-based
method3,356

Total Scope 2 emissions (tCO2-e) as
calculated using the market-based
method153

Total Scope 3 emissions (tCO2-e)476,595

Environmental indicators – Manufacturing Facilities
Total water usage (‘000 litres)

Wastewater diverted to beneficial
land application (litres)

1.7
2,780,010

Waste produced (tonnes)
Waste diversion (%)
Energy consumption (kWh)

100
96.7%
16,700,000

Environmental indicators – Sustainable packaging
Recyclable packaging (%)

87.1%

People – Supporting a diverse and inclusive workplace
Gender diversity – Female (%)

51%

Community – Enriching communities
Cash and stock donations (NZ$)►

a2Mc’s own publicly disclosed criteria stated in theReport and informed by the GRI Standards.

In preparing the sustainability disclosures within theReport for the purposes of reporting with reference to the
GRI Standards, a2MC applied the following Criteria:►

The GRI Standards 2021.

Key responsibilities

290,908

Water efficiency (litres/litre of milk)

In preparing the remaining sustainability performancedata, a2MC applied the following Criteria:$2.84m

EY’s responsibility and independence
Our responsibility is to express a conclusion on the
Subject Matter based on our review.
We have complied with the independence and relevant
ethical requirements, which are founded on fundamental
principles of integrity, objectivity, professional
competence and due care, confidentiality andprofessional behaviour.
The firm applies Auditing Standard ASQM 1 Quality
Management for Firms that Perform Audits or Reviews ofFinancial Reports and Other Financial Information, orOther Assurance or Related Services Engagements, which
requires the firm to design, implement and operate asystem of quality management including policies orprocedures regarding compliance with ethicalrequirements, professional standards and applicable legal
and regulatory requirements.

We also reviewed a2MC’s reporting with reference to the
Global Reporting Initiative (‘GRI’) Standards (2021).

A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation

ANNUAL REPORT 2023

81

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

INDEPENDENT ESG ASSURANCE REPORT CONTINUED

a2MC’s responsibility

Inherent limitations

a2MC’s management is responsible for selecting theCriteria, and for presenting the Subject Matter inaccordance with that Criteria, in all material respects.
This responsibility includes establishing and maintaining
internal controls, maintaining adequate records andmaking estimates that are relevant to the preparation of
the subject matter, such that it is free from material
misstatement, whether due to fraud or error.

Procedures performed in a review engagement vary innature and timing from, and are less in extent than for areasonable assurance engagement. Consequently, thelevel of assurance obtained in a review engagement issubstantially lower than the assurance that would havebeen obtained had a reasonable assurance engagement
been performed. Our procedures were designed to obtaina limited level of assurance on which to base ourconclusion and do not provide all the evidence that would
be required to provide a reasonable level of assurance.

Our approach to conducting the review
We conducted this review in accordance with theAustralian Auditing and Assurance Standards Board’s
Australian Standard on Assurance Engagements Other
Than Audits or Reviews of Historical Financial Information(‘ASAE 3000’), Assurance Engagements on Greenhouse
Gas Statements (‘ASAE3410’) and the terms of reference
for this engagement as agreed with a2MC on 6th June
2023. That standard requires that we plan and perform
our engagement to express a conclusion on whether
anything has come to our attention that causes us tobelieve that the Subject Matter is not prepared, in allmaterial respects, in accordance with the Criteria, and toissue a report.

Summary of review procedures performed
A review consists of making enquiries, primarily of
persons responsible for preparing the Subject Matter andrelated information and applying analytical and otherreview procedures.
The nature, timing, and extent of the procedures selected
depend on our judgement, including an assessment of therisk of material misstatement, whether due to fraud or
error. The procedures we performed included, but were
not limited to:►

Conducted interviews with key personnel tounderstand the business and reporting process►

Conducted interviews with key personnel tounderstand the process for collecting, collating andreporting the Subject Matter during the reporting
period►Checked that the calculation criteria have beencorrectly applied in accordance with themethodologies outlined in the Criteria►

Undertook analytical review procedures to support
the reasonableness of the data►

Identified and tested assumptions supporting
calculations►

Tested, on a sample basis, underlying source
information to check the accuracy of the data►

Checked the aggregation of selected disclosures andtranscription to the Report►

Checked the appropriateness of the presentation
relating to the Subject Matter in the Report.

While we considered the effectiveness of management’s
internal controls when determining the nature and extent
of our procedures, our assurance engagement was notdesigned to provide assurance on internal controls. Our
procedures did not include testing controls or performing
procedures relating to assessing aggregation or
calculation of data within IT systems.
The GHG quantification process is subject to scientificuncertainty, which arises because of incomplete scientificknowledge about the measurement of GHGs. Additionally,
GHG procedures are subject to estimation andmeasurement uncertainty resulting from themeasurement and calculation processes used to quantify
emissions within the bounds of existing scientificknowledge.

Other matters
We have not performed assurance procedures in respectof any information relating to prior reporting periods,
including those presented in the Subject Matter. Our
report does not extend to any disclosures or assertions
made by a2MC relating to future performance plans
and/or strategies disclosed in the Report.

Use of our Assurance Report
We disclaim any assumption of responsibility for any
reliance on this assurance report to any persons otherthan Management and the Directors of a2MC, or for any
purpose other than that for which it was prepared.

Nicky Landsbergen

Ernst & Young
Sydney, Australia
20 August 2023

We believe that the evidence obtained is sufficient andappropriate to provide a basis for our review conclusion.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation82

THE a2 MILK COMPANY

Consolidated statement of comprehensive income
for the year ended 30 June 2023

Sales

Note

2023
$’000

2022
$’000

B1

1,591,088

1,443,740

Cost of sales(851,925)(780,222)

Gross margin739,163663,518

Other revenue

1,782

2,489

Distribution expenses

B1(50,832)(48,854)

Marketing expenses(260,229)(230,019)

Administrative and other expenses(228,663)(209,725)

Operating profit

201,221

177,409

Interest income
Finance costs

B4

Net finance income
Profit before tax
Income tax expense

B6

Profit for the year

26,733

6,569(5,092)(2,591)

21,641

3,978222,862

181,387(78,021)(66,646)

144,841

114,741

155,638

122,624

Profit/(loss) for the year attributable to:
Owners of the Company
Non-controlling interests(10,797)(7,883)

144,841

114,741

Foreign currency translation (loss)/profit(6,448)

11,073

Cash flow hedges fair value profit/(loss)

12,368(14,113)(63,295)(22,543)(57,375)(25,583)(58,270)(24,471)

Other comprehensive income
Items that may be reclassified to profit or loss:

Items not to be reclassified to profit or loss:
Listed investment fair value loss

C7

Total other comprehensive loss
Total other comprehensive (loss)/income attributable to:
Owners of the Company
Non-controlling interests895(1,112)(57,375)(25,583)

87,46689,158

Owners of the Company

97,36898,153

Non-controlling interests(9,902)(8,995)87,46689,158

Total comprehensive income
Total comprehensive income/(loss) attributable to:Earnings per share
Basic (cents per share)

B5

21.23

16.49

Diluted (cents per share)

B5

21.13

16.49

The accompanying notes form part of these financial statements.

ANNUAL REPORT 2023

83

Chair’s letter

CEO’s year in review

Building a sustainable growth business

Financial statements

Corporate governance

Company disclosures

Consolidated statement of changes in equity
for the year ended 30 June 2023

Balance 1 July 2022(332) (153,521)

Profit after tax forthe period

46,311(15,798)(13,001) (136,341) 1,167,561

149,157 1,180,377

Total equity$’000

Non-controllinginterests
$’000

Total
$’000

Share capital$’000

Retained earnings$’000

Total reserves$’000

Hedging reserve$’000

Treasury shares
reserve$’000

Fair value revaluation
reserve$’000
Employee equity
settled payments
reserve$’000

Year ended
30 June 2023

Foreign currencytranslation reserve$’000

Attributable to owners of the Company

13,583 1,193,960

–

–

–

–

–

–

155,638–

155,638

Foreign currencytranslation differences- foreign operations(6,065)

–

–

–

–

(6,065)––(6,065)–(6,065)

Changes in cash flow
hedges taken to equity

–

–

–

–

(2,559)(2,559)––(2,559)(167)(2,726)

Cash flow hedges
reclassified to profit
or loss

–

–

–

–

17,44917,449––17,4491,062

18,511

Listed investment fair value movement(10,797) 144,841–(63,295)–––(63,295)––(63,295)–(63,295)

(383)

–

–

–

(3,417)(3,800)––(3,800)–(3,800)(6,448)(63,295)––

11,473(58,270) 155,638–

97,368(9,902)

87,466

Share buyback

–

–

–

–

–

–

– (149,057) (149,057)– (149,057)

Treasury sharestransferred––(2,196)

2,196

–

–

–

–

–

–

–

Share-based payments––

17,132––

17,132––

17,132–

17,132––

14,936

2,196–

17,132– (149,057) (131,925)–(131,925)(6,780) (216,816)

61,247(13,602)

Income tax
Total comprehensive
income for the period
Transactions with owners
in their capacity as
owners:Total transactions
with owners
Balance 30 June 2023

The accompanying notes form part of these financial statements.

84

THE a2 MILK COMPANY(1,528) (177,479) 1,323,199

100 1,145,820

3,681 1,149,501

Consolidated statement of changes in equity
for the year ended 30 June 2023

Profit after tax forthe period(110,098) 1,044,937

149,121 1,083,960

Total equity$’000

Non-controllinginterests
$’000

Total
$’000

–

Share capital$’000(3,773)Retained earnings$’000

36,058

Total reserves$’000

Hedging reserve$’000(11,405) (130,978)

Treasury shares
reserve$’000

Balance 1 July 2021

Fair value revaluation
reserve$’000
Employee equity
settled payments
reserve$’000

Year ended
30 June 2022

Foreign currencytranslation reserve$’000

Attributable to owners of the Company– 1,083,960

–

–

–

–

–

–

122,624–

122,624(7,883)

114,741

Foreign currencytranslation differences- foreign operations

10,454––––

10,454––

10,454–

10,454

Changes in cash flow
hedges taken to equity

–

–

–

–

(21,632)(21,632)––(21,632)(1,727)(23,359)

Cash flow hedges
reclassified to
profit or loss

–

–

–

–

4,872

4,872

–

–

4,872

615

5,487

Listed investment fair value movement–(22,543)–––(22,543)––(22,543)–(22,543)

619

–

–

–

3,759

4,378

–

–

4,378

–

4,378

11,073(22,543)––(13,001)(24,471) 122,624–

98,153(8,995)

89,158Issue of ordinary shares

–

–

–

–

–

–

–

45

45

–

45

Income tax
Total comprehensive
income for the period
Transactions with owners
in their capacity as
owners:Share issue costs

–

–

–

–

–

–

–

(9)

(9)

–

(9)

Employee withholding
tax payments

–

–

(250)

–

–

(250)

–

–

(250)

–

(250)

Treasury sharespurchased–––(13,306)–(13,306)––(13,306)–(13,306)

Treasury sharestransferred––(1,281)

1,281

–

–

–

–

–

–

–

Share-based payments––

11,701––

11,701––

11,701–

11,701

Acquisition of subsidiary(Note E2)

–

–

–

–

–

–

–

–

–

22,57822,578

Income tax

–

–

83

–

–

83

–

–

83

–

83

Total transactions
with owners––

10,253(12,025)–(1,772)–36(1,736)

22,57820,842(332) (153,521)

46,311(15,798)

Balance 30 June 2022

(13,001) (136,341) 1,167,561

149,157 1,180,377

13,583 1,193,960

The accompanying notes form part of these financial statements.

ANNUAL REPORT 2023

85

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

Consolidated statement of financial position
as at 30 June 2023

Note

2023
$’000

2022
$’000

Cash and term deposits

D3

802,234

887,308

Trade and other receivables

C1

79,216

83,51045,68254,537

Inventories

C2

193,440

140,044

Other financial assets

C7

1,536

–

AssetsCurrent assets

Prepayments

Income tax receivable

–

5,841

Total current assets

1,122,108

1,171,240

Non-current assets
Property, plant and equipment

C4245,216

240,547

Right-of-use assets

D5

17,34916,030Investment property

C517,927

15,663

Intangible assets

C6

108,419

109,322

Other financial assets

C7

72,078135,260–

2,059

Prepayments
Deferred tax assets

28,61725,731

Total non-current assets

B6

489,606

544,612

Total assets

1,611,714

1,715,852

Liabilities
Current liabilities
Trade and other payables

C3

313,212379,253

Lease liabilities

D5

4,181

3,128

Loans and borrowings

D6

15,00040,79443,314–

3,501

16,999379,208

440,174

Income tax payable
Other financial liabilities

C8

Total current liabilities
Non-current liabilities
Trade and other payables

C3

423

416

Lease liabilities

D5

15,30914,224Loans and borrowings

D6

67,03866,206

Other financial liabilities

C8

235

872

83,00581,718

Total non-current liabilities
Total liabilities

462,213521,892

Net assets

1,149,501

1,193,960

100

149,157

1,323,199

1,167,561

EquityShare capital

D7

Retained earnings
Reserves
Total equity attributable to owners of the Company
Non-controlling interests
Total equity
The accompanying notes form part of these financial statements.
86

THE a2 MILK COMPANY

D8(177,479)(136,341)

1,145,820

1,180,377

3,681

13,583

1,149,501

1,193,960

Consolidated statement of cash flows
for the year ended 30 June 2023

2023
$’000

2022
$’000

Receipts from customers

1,619,580

1,431,254

Payments to suppliers and employees(1,492,140)(1,207,386)

NoteCash flows from operating activities

Interest received

22,4204,341Interest paid

(3,663)(1,383)

Taxes paid
Net cash inflow from operating activities

D4(34,914)(23,026)

111,283

203,800

Cash flows from investing activities
Payments for property, plant and equipment(10,069)(4,939)Payments for investment property

C5(3,535)(1,071)

Payments for intangible assets

C6

(338)

(229)

Acquisition of subsidiaryE2–(213,746)

Payments for term deposits(450,000)(450,000)

Receipts from term deposits

450,000–

Net cash outflow from investing activities(13,942)(669,985)

Cash flows from financing activities
Payments for share buyback

D7(149,057)–

Payments of lease principal

D5(3,578)(4,089)Purchase of treasury sharesD8–(13,306)

Proceeds from issue of equity shares

D7

–

36

Net (repayments of)/proceeds from borrowings(25,794)

27,000Net cash (outflow)/inflow from financing activities(178,429)

9,641

Net decrease in cash and short-term deposits(81,088)(456,544)

Cash and short-term deposits at the beginning of the year

437,308

875,150(3,986)

18,702352,234

437,308

Effect of exchange rate changes on cash
Cash and short-term deposits at the end of the year

D3

The accompanying notes form part of these financial statements.

ANNUAL REPORT 2023

87

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

Notes to the financial statements
Contents

Page

A

Basis of preparation

89

B

Group performance90

B1

Operating segments

90

B2

Revenue

93

B3

Expenses

94

B4

Finance costs

94

B5

Earnings per share (EPS)95

B6

Income taxes

95

C

Operating assets and liabilities

99

C1

Trade and other receivables

99

C2

Inventories

99

C3

Trade and other payables

100

C4

Property, plant and equipment

101

C5

Investment property

103

C6

Intangible assets

105

C7

Other financial assets

108

C8

Other financial liabilities

109

D

Financial risk and capital management

110

D1

Financial risk management

110

D2

Capital management

117

D3

Cash and term deposits

117

D4

Cash flow information

118

D5

Leases119

D6

Loans and borrowings

122

D7

Share capital

123

D8

Nature and purpose of reserves

124

D9

Capital expenditure commitments

125

D10

Contingent liabilities

125

E

Group structure

126

E1

Consolidated entities

126

E2

Business combinations

127

E3

Deed of cross guarantee

128

F

Other disclosures

130

F1

Related party transactions

130

F2

Share-based payments

131

F3

Auditor’s remuneration

134

F4

Subsequent events

134

88

THE a2 MILK COMPANY

Basis of preparation
for the year ended 30 June 2023

A. Basis of preparation
The a2 Milk Company Limited (the Company) is a for-profit entity
incorporated and domiciled in New Zealand. The consolidated
financial statements of the Company for the year ended
30 June 2023 comprise the Company and its subsidiaries (together
referred to as the Group).
The Company is registered in New Zealand under theCompanies Act 1993, and is a FMC reporting entity under the
Financial Markets Conduct Act 2013. The Company is also
registered as a foreign company in Australia under the
Corporations Act 2001 (Cth, Australia). The shares of The a2 Milk
Company Limited are publicly traded on New Zealand’s Exchange(NZX), the Australian Securities Exchange (ASX) and Cboe Australia(CXA). The Group’s reporting currency is the New Zealand dollar.
The principal activity of the Company is the sale of branded
products in targeted markets made with milk naturally
containing the A2-type protein.
The consolidated financial statements were authorised for
issue by the directors on 20 August 2023.
The consolidated financial statements:– Have been prepared in accordance with Generally Accepted
Accounting Practice in New Zealand;– Comply with the New Zealand Equivalents to International
Financial Reporting Standards (NZ IFRS);– Comply with International Financial Reporting Standards (IFRS)
adopted by the International Accounting Standards Board (IASB);– Are presented in New Zealand dollars, which is the Company’sfunctional currency, with all values rounded off to the nearest
thousand dollars, unless otherwise stated; and– Have been prepared in accordance with the historical costconvention and, except for listed investments and foreign
currency forward contracts, do not take into account changing
money values or fair values of assets.
Certain comparative amounts have been reclassified to conformwith the current period’s presentation.
Significant accounting policies have been:– Included in the relevant note to which each policy relates,
other than the accounting policy for foreign currency,
set out below; and– Consistently applied to all periods presented in these
consolidated financial statements.

Accounting policy: Foreign currency
Transactions
Foreign currency transactions are initially translated to therespective functional currencies of Group companies at the rateof exchange at the date of the transaction. Monetary assets andliabilities denominated in foreign currencies are translated to thefunctional currency at the exchange rate ruling at the reporting
date. Foreign exchange differences are generally recognised in
profit or loss in the Consolidated statement of comprehensive
income.

Foreign operations translation to reporting currency
The assets and liabilities including goodwill and fair value
adjustments arising on consolidation of foreign operations aretranslated into New Zealand currency at rates of exchange current
at the reporting date, while revenues and expenses are translated
at approximately the exchange rates ruling at the date of thetransaction. Exchange differences arising on translation arerecognised in other comprehensive income and accumulated
within equity in the foreign currency translation reserve.

Judgements, estimates and assumptions
The preparation of financial statements in conformity with
NZ IFRS requires management to make judgements, estimatesand assumptions.
– This may affect the application of policies and reported
amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
– Estimates and underlying assumptions are reviewed
on an ongoing basis.
– Revisions to accounting estimates are recognised in the
period in which the estimate is revised and in any future periods
affected.
– Information about significant areas of estimation, uncertainty
and critical judgements in applying accounting policies thathave the most significant effect on the amount recognised in
the financial statements are described in the following notes:– Note B6: Income taxes – Recoverability and recognition ofdeferred tax assets and liabilities– Note C2: Inventories – Estimation of net realisable value– Note C4: Property, plant and equipment – Recoverability
and determination of useful lives– Note C5: Investment property – Recoverability anddetermination of useful lives– Note C6: Intangible assets – Impairment review of goodwill
and intangibles– Note C6: Intangible assets – Allocation of goodwill– Note C7 and C8: Other financial assets and liabilities – Fairvalue measurement of foreign currency forward contracts– Note D5: Leases – Determination of lease term

Changes in significant accounting policies
The Group has applied all of the new and revised Standards andInterpretations issued by the New Zealand External Reporting
Board that are relevant to the Group’s operations and effective
for the current accounting period. Their application has not had
any material impact on the Group’s assets, profits or earnings
per share for the year ended 30 June 2023.

New standards and interpretations not yet adopted
There are no new standards and interpretations that are issued,
but not yet effective as at 30 June 2023, that are expected tohave a material impact on the Group in current or futurereporting periods.

ANNUAL REPORT 2023

89

Chair’s letter

CEO’s year in review

Building a sustainable growth business

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Group performancefor the year ended 30 June 2023

B. Group performanceThis section explains the results and performance of the Groupfor the year, including segment information, earnings per shareand taxation.
The Group’s key performance measures are segment revenue
and segment results before interest, tax, depreciation andamortisation (Segment EBITDA, a non-GAAP measure).
Further information and analysis of performance can be foundin the CEO’s year in review report, which forms part of theAnnual Report.

B1. Operating segments
Operating segments are identified on the basis of internal reports
about components of the Group that are regularly reviewed by thechief operating decision maker in order to allocate resources to thesegment and assess its performance.
For management purposes, the Group is organised into business
units based on geographical location, and in the current financial
year has four reportable operating segments as follows:– The Australia and New Zealand segment receives external
revenue from infant milk formula, milk and other nutritional
products along with rent, royalty and licence fee income.
– The China and Other Asia segment receives external revenue
from infant milk formula, milk and other nutritional products.
– The USA segment receives external revenue from milk sales
and licence fees.
– The Mataura Valley Milk segment receives external revenue
from the manufacturing and sale of nutritional andcommodity products.
Management monitors the operating results of its business units
separately for the purpose of making decisions about resource
allocation and performance assessment. Segment performance isassessed on segment EBITDA and is measured in conformity withthe accounting policies adopted for preparing and presenting thefinancial statements of the Group.

90

THE a2 MILK COMPANY

Corporate governance

Financial statements

Company disclosures

B1. Operating segments (continued)

2023

Consolidated sales
Other revenue
Total external revenue
Inter-segment revenue

Australia and
New Zealand$’000

China and
Other Asia
$’000

USA
$’000

MatauraValley Milk$’000

370,249

1,002,164

104,731

1,445

–

337

371,694

1,002,164

105,068

Eliminations
$’000

Total
$’000

113,944–

1,591,088

–

–

1,782

113,944–

1,592,870–––

32,270(32,270)–

Reportable segment revenue

371,694

1,002,164

105,068

146,214(32,270)

1,592,870

Reportable segment results(Segment EBITDA)

93,506254,055(23,311)(26,486)–

297,764

Corporate EBITDA(78,466)

Group EBITDA

219,298

Interest income

26,733

Interest expense(4,972)

Depreciation and amortisation(18,197)

Income tax expense(78,021)

Consolidated profit after tax

144,8412022

Consolidated sales
Other revenue
Total external revenue
Inter-segment revenue

MatauraValley Milk2 Eliminations
$’000
$’000

Australia and
New Zealand1$’000

China and
Other Asia
$’000

USA
$’000

530,508

726,498

82,384

104,350–

1,443,740

2,218

–

271

–

–

2,489

532,726

726,498

82,655

104,350–

1,446,229

Total
$’000

–

–

–

4,543

(4,543)–

Reportable segment revenue

532,726

726,498

82,655

108,893(4,543)

1,446,229

Reportable segment results(Segment EBITDA)

173,210145,078(36,677)(18,795)–

262,816

Corporate EBITDA(66,602)

Group EBITDA

196,214

Interest income

6,569Interest expense(2,467)

Depreciation and amortisation(18,929)

Income tax expense(66,646)

Consolidated profit after tax

114,741

1 Revenue for the year ended 30 June 2022 included one customer within the Australia and New Zealand segment that contributed revenue in excess of 10% ofGroup revenue of $175,391,000.
2 Mataura Valley Milk results for the year ended 30 June 2022 are for the eleven months from acquisition on 30 July 2021.

ANNUAL REPORT 2023

91

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Group performancefor the year ended 30 June 2023

B1. Operating segments (continued)
Other segment information
Australia and
New Zealand$’000

China and
Other Asia
$’000

USA
$’000

MatauraValley Milk$’000

Corporate
$’000

Total
$’000

Additions to non-current assets

7,716

5,118

17

6,289

7,197

26,337

Depreciation and amortisation

4,168

1,885

564

9,006

2,574

18,197

Additions to non-current assets

3,595

88

44

2,220

3,913

9,860

Depreciation and amortisation

5,098

2,223

505

8,420

2,683

18,9292023

2022

Geographical information
2023
$’000

2022
$’000

129,798

138,874

Australia

355,841498,203

China

985,257

714,133

Revenue from external customers based on the location of the customer
New Zealand1

Other

121,974

95,0191,592,870

1,446,229

New Zealand

234,640

233,553

Australia

44,53542,779

China

4,982

1,935

Non-current assets based on the geographical location of assets2

Other

2,407

2,886

286,564

281,153

1 Mataura Valley Milk revenue for the year ended 30 June 2022, which is included in New Zealand revenue, is for the eleven months from acquisition on 30 July2021.
2 Non-current assets exclude goodwill, financial instruments and deferred tax assets.

92

THE a2 MILK COMPANY

B2. Revenue
Disaggregation of revenue
In the following table, revenue is disaggregated by geographical location (reportable segments) and major product types.

2023

Australia and
New Zealand$’000

China and
Other Asia
$’000

USA
$’000

MatauraValley Milk
$’000

Total
$’000

–

559,336––559,336

162,508386,226––

548,734

184,094

15,159104,731–303,984

Infant milk formula:
China label
English and other labels

1

Liquid milk
Other

2

2022

25,092

41,443337

113,944

180,816

371,694

1,002,164

105,068

113,944

1,592,870

Australia and
New Zealand$’000

China and
Other Asia
$’000

USA
$’000

MatauraValley Milk
$’000

Total
$’000

Infant milk formula:
China label
English and other labels1–

437,591––

437,591

328,819

255,761––584,580

Liquid milk

171,964

11,09282,384–

265,440

Other2

31,94322,054271

104,350

158,618

532,726

726,498

82,655

104,350

1,446,229

1 Revenue is allocated based on management responsibility and usually reflects the geographical location of the Group’s wholesale customers. It is understood thatthe majority of the infant milk formula sales to customers in the Australia and New Zealand segment are ultimately consumed in China.
2 Other predominantly consists of the sale of milk powders and other nutritional products.

Contract balances
The following table provides information about receivables and contract liabilities from contracts with customers.

Note

2023
$’000

2022
$’000

Receivables

C1

57,731

67,411

Customer contract liabilities

C3(7,487)(3,171)

Customer contract liabilities are payments received in advance from customers. The amount of $3,171,000 recognised in customer
contract liabilities at 30 June 2022 was recognised as revenue in the year ended 30 June 2023.
Remaining performance obligations at 30 June 2023 have an original expected duration of one year or less.

ANNUAL REPORT 2023

93

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Group performancefor the year ended 30 June 2023

B2. Revenue (continued)
Recognition and measurement
Sales of products
The Group sells branded milk products made with milk from cows that are specially selected to produce milk that naturally contains
the A2-type protein, to wholesale customers; and manufactures nutritional and commodity products for sale to wholesale customers.
A sale is recognised when control of the product has transferred, being when the product is delivered to the customer and there is nounfulfilled obligation that could affect the customer’s acceptance of the product. Delivery occurs when the product has been shippedto the location specified by the customer and the customer accepts the product.
Revenue from sales is recognised based on arrangements as agreed with the customer. These arrangements are applied on an order byorder basis and do not commit the customers to purchase a specified quantity or type of product; nor do they commit the Group to delivera specified quantity or type of product. The arrangements set out the terms and conditions that apply to the parties each time an order isplaced by a customer and accepted by the Group, creating a sale contract for that order. The terms and conditions cover, as appropriate
to the customer, pricing, settlement of liabilities, return policies and any other negotiated performance obligations.
Revenue is recognised after offsetting items of variable consideration such as rebates agreed with customers.
Settlement terms range from cash-on-delivery or prepaid terms to various credit terms not exceeding 60 days from end of month.
These terms reflect assessment of customer credit risk and industry practice.
Customer contract liabilities refer to payments in advance received from customers, with subsequent delivery to customers,
and recognition of revenue, generally occurring within a week of receipt of the payment.
For credit customers a receivable is recognised when the products are delivered, being the point in time that the considerationis unconditional because only the passage of time is required before payment is due.
Interest revenue
Interest revenue is accrued on a time basis, by reference to the principal and the effective interest rate applicable, which is the rate thatexactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

B3. Expenses
2023
$’000

2022
$’000

Salary and wage costs

98,366

84,246

Profit before income tax includes the following significant items:
Equity settled share-based payments (refer to Note F2)

17,132

11,701

Directors’ fees

1,319

1,074

Audit fees (refer to Note F3)

1,515

1,695

(78)

30

24,51422,069Bad and doubtful debts (recovery)/expense
Insurance
Professional service fees

12,152

13,757

Depreciation and amortisation

18,19718,929Net foreign exchange (gains)/losses(8,853)

6,436

Cash flow hedge losses

18,511

5,487

2023
$’000

2022
$’000

640

592

Interest expense

4,332

1,875

Finance costs

120

124

5,092

2,591

B4. Finance costs

Interest expense – lease liabilities

94

THE a2 MILK COMPANY

B5. Earnings per share (EPS)
2023

2022

Profit attributable to members of the Company used in calculating basic and diluted EPS ($’000)

155,638

122,624

Weighted average number of ordinary shares (‘000) for basic EPS

733,065

743,618

Effect of dilution due to time-based and performance rights (‘000)

3,610

176

Weighted average number of ordinary shares (‘000) for diluted EPS

736,675

743,794

Basic EPS (cents)

21.23

16.49

Diluted EPS (cents)

21.13

16.49

Earnings per share

Recognition and measurement
Basic EPS is calculated as net profit attributable to members of the Company, adjusted to exclude any costs of servicing equity (other than
dividends), divided by the weighted average number of ordinary shares outstanding during the financial year.
Diluted EPS adjusts basic EPS for the dilutive effect of employee share rights that may be converted into ordinary shares in the Company.

B6. Income taxes
2023
$’000

2022
$’000

Current year

88,94745,482Adjustment for prior years(7,999)(6,908)(7,035)19,872

Income tax recognised in profit and loss
Current:

Deferred:Temporary differences
Adjustment for prior years

4,108

8,200

78,02166,646

Accounting profit before income tax

222,862

181,387

Income tax expense calculated at 28% (2022: 28%)

62,40150,788Difference in income tax rates: Australia 30% (2022: 30%), USA 25% (2022: 25%), and China 25%(2022: 25%)

2,780

923

Non-deductible expenses and non-assessable income

2,687

2,377

Prior period adjustment to tax expense(3,891)

1,292

Unutilised foreign tax credits

3,559

1,325

Deferred tax asset not recognised

10,485

9,941

Total tax expense

78,02166,646

Current tax–(3,759)Deferred tax

41

(702)

Tax expense/(benefit) in equity

41(4,461)

Total tax expense
The prima facie income tax on pre-tax accounting profit from operations reconciles to:

Income tax recognised directly in equity

ANNUAL REPORT 2023

95

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Group performancefor the year ended 30 June 2023

B6. Income taxes (continued)
Deferred tax balances

2023

Openingbalance$’000

Charge tocomprehensive
income$’000

Charge toequity$’000

Closingbalance
$’000

111

(34)

–

77

Gross deferred tax assets
Patents
Provisions and accrued expenses

22,235316–

22,551

Tax losses

193

(71)

–

122

Property, plant and equipment

29

1,970

–

1,999

1,112

1,964

–

3,076

–

–

342

342

Other

2,051

(1,601)–450

Net deferred tax

25,731

2,544

342

28,617

Charge tocomprehensive
income$’000

Charge toequity$’000

Closingbalance$’000

Employee share scheme
Hedging instruments

Charge to profit or loss

2,927

Charge to other comprehensive income

(383)
2,544

Openingbalance
$’000

2022

Gross deferred tax assets
Patents
Provisions and accrued expenses
Tax losses
Property, plant and equipment
Employee share scheme
Other

515

(404)

–

111

49,809(27,574)–

22,235

254

(61)

–

193

–

29

–

29

323

706

83

1,112

3,131

(1,080)–2,051

54,032(28,384)

83

25,731

(931)

931

–

–

(27,453)83

25,731Gross deferred tax liabilities
Property, plant and equipment
Net deferred tax
Charge to profit or loss
Charge to other comprehensive income

53,101(28,072)619(27,453)96

THE a2 MILK COMPANY

B6. Income taxes (continued)
Tax losses
The Group companies have the following estimated gross tax losses at balance date not recognised:
2023
$’000

2022
$’000

USA

100,066

85,918

New Zealand

207,357

190,624

307,423

276,542

Imputation and franking credits
The Company is a New Zealand company which has elected to maintain an Australian franking credit account. The imputation credit andfranking credit balances represent the sum of the imputation credit and franking credit account balances of the Group on an accrual basis.
The ability to use the imputation and franking credits is dependent upon the ability of the Group to declare dividends. The franking credit
account balance is stated in AUD.
Imputation and franking credits available within the Group, and ultimately available to the shareholders of the Company as at year end:
2023
$’000

2022
$’000

Imputation credits

49,31049,939Franking credits

517,273457,715

ANNUAL REPORT 2023

97

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Group performancefor the year ended 30 June 2023

B6. Income taxes (continued)
Recognition and measurement
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items credited or debited inother comprehensive income or equity, in which case that tax is recognised in other comprehensive income or equity respectively; orwhere they arise from the initial accounting for a business combination.
The tax currently payable is based on taxable profit for the year. The Group’s liability for current tax is calculated using tax rates that havebeen enacted or substantively enacted by the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised on differences between the carrying amount of assets and liabilities in the financial statements and thecorresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are generally recognised for all
deductible temporary differences to the extent that it is probable that taxable profits will be available in the future against which thosedeductible temporary differences can be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled
or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date.
The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which
the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax
assets and liabilities on a net basis.
The carrying amount of deferred tax assets is reviewed at each reporting date for recoverability. Likewise, unrecognised tax assets(not booked to balance sheet) are re-assessed at each reporting date, and recognised, to the extent that future taxable profits are
deemed likely to allow the asset to be recovered.

Key estimates and judgements
Recoverability of deferred tax assets
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences, to the extent
that it is probable that future taxable profits will be available against which they can be used.
Judgement is required when deferred tax assets are reviewed at each reporting date. Deferred tax assets may be reduced to theextent that it is no longer probable that future taxable profits will be available.
Assumptions about the generation of future taxable profits depend on management’s estimates of future cash flows. Changes in
expectations for the future performance of the business may impact the amount of deferred tax assets recoverable and recognisedon the Consolidated statement of financial position and the amount of other tax losses and temporary differences not yet
recognised.
Pillar Two model rules
Internationally, jurisdictions are at various stages of implementing the Pillar Two model rules published by the Organisation for
Economic Co-operation and Development including tax law that implements qualified domestic minimum top-up taxes described inthose rules (Pillar Two legislation). Due to the complexities of the Pillar Two model rules and the uncertainties surrounding theimpact of Pillar Two legislation on deferred taxes, no deferred tax assets or liabilities have been recognised under the Pillar Twomodel rules.

98

THE a2 MILK COMPANY

Operating assets and liabilities
for the year ended 30 June 2023

C. Operating assets and liabilities
This section provides details of the Group’s operating assets, and liabilities incurred as a result of trading activities, used to generate theGroup’s performance.

C1. Trade and other receivables

Trade receivables from contracts with customers
Allowance for expected credit losses

2023
$’000

2022
$’000

57,731

67,411

(45)

(125)

Goods and services tax

10,699

9,711

Other receivables

10,831

6,513

79,216

83,510

The Group’s exposure to credit risks and impairment losses related to trade and other receivables are disclosed in Note D1: Financial
risk management.

Recognition and measurement
Trade receivables from contracts with customers are recognised initially at their transaction price. Other receivables are recognised initiallyat fair value. Subsequent to initial recognition, they are measured at amortised cost using the effective interest rate method, less any
lifetime expected credit losses.

C2. Inventories
2023
$’000

2022
$’000

Raw materials

26,727

17,974

Finished goods

161,706

119,505

Goods in transit

5,007

2,565

193,440

140,044

Total inventories at the lower of cost and net realisable value

At year end $10,964,000 (2022: $12,227,000) was recognised as an expense in cost of sales for inventories written down or written off,with $3,458,000 (2022: $4,838,000) relating to Mataura Valley Milk (MVM) inventory.

Recognition and measurement
Inventories are valued at the lower of cost and net realisable value. Cost is calculated using standard costing or weighted average methods.
Standard costs are regularly reviewed and, if necessary, revised to reflect actual costs.
Net realisable value represents the estimated selling price in the ordinary course of business, less estimated costs of completion and theestimated costs necessary to make the sale.

Key estimates and judgements
Estimation of net realisable value
Estimation of net realisable value includes assessment of expected future turnover of inventory held for sale and the expected future
selling price of such inventory. Changes in trading and economic conditions may impact these estimations in future periods.

ANNUAL REPORT 2023

99

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Operating assets and liabilities
for the year ended 30 June 2023

C3. Trade and other payables
2023
$’000

2022
$’000

Current
Trade payables

54,71983,107

Rebates and promotional allowances

104,707

99,771

Accrued charges

119,698

164,797

Employee entitlements

26,601

28,407

Customer contract liabilities

7,487

3,171

313,212379,253

423

416

Non-current
Employee entitlements

Recognition and measurement
Trade payables are initially recognised at fair value, and subsequently carried at amortised cost using the effective interest rate method.
They represent liabilities recognised when the Group becomes obligated to make future payments resulting from the purchase of goods
and services. The amounts are unsecured.
Accrued charges represent amounts payable for supplies and services received but not invoiced at the reporting date.
Customer contract liabilities are payments received in advance from customers.
Employee entitlements
Provision is made for benefits accruing to employees in respect of wages and salaries, bonuses, annual leave, and long service leave
when it is probable that settlement will be required and they are capable of being measured reliably.
Provisions made in respect of employee benefits expected to be settled within 12 months are measured at their nominal values using the
remuneration rate expected to apply at the time of settlement.
Provisions made in respect of employee benefits which are not expected to be settled within 12 months are measured at thepresent value of the estimated future cash outflows to be made by the Group in respect of services provided by employees
up to the reporting date.

100

THE a2 MILK COMPANY

C4. Property, plant and equipment
Plant &
equipment
$’000

Total
$’000

3,541

174,967

240,54734

3

16,026

16,528

–

–

–

(31)

Leasehold
Furniture &fittings improvements
$’000
$’000

2023

Land
$’000

Buildings$’000

Office &computer$’000

Carrying amount 1 July 2022

8,763

50,183

2,360

733

Additions

–

67

398

Disposals

–

–

(31)

Depreciation–(1,290)(1,012)(177)(1,017)(8,111)(11,607)

Net foreign currency exchange
differences

–

–

19

(5)

(29)

(206)

(221)

Carrying amount 30 June 2023

8,763

48,960

1,734

585

2,498

182,676

245,216

Cost

8,763

51,427

5,071

1,331

6,043

207,287

279,922–(2,467)(3,337)(746)(3,545)(24,611)(34,706)

Carrying amount 30 June 2023

Accumulated depreciation

8,763

48,960

1,734

585

2,498

182,676

245,216

2022

Land
$’000

Buildings$’000

Office &computer$’000

Leasehold
Furniture &fittings improvements
$’000
$’000

Plant &
equipment
$’000

Total
$’000

Carrying amount 1 July 2021
Acquisition of subsidiary

–

–

936

814

4,010

11,402

17,162

8,763

51,162

2,247

–

–

166,741

228,913Additions

–

197

327

51

394

3,970

4,939

Depreciation–(1,176)(1,202)(176)(1,028)(7,505)(11,087)

Net foreign currency exchange
differences

–

–

52

44

165

359

620

Carrying amount 30 June 2022

8,763

50,183

2,360

733

3,541

174,967

240,547

Cost

8,763

51,359

4,698

1,281

6,023

191,313

263,437–(1,176)(2,338)(548)(2,482)(16,346)(22,890)

8,763

50,183

2,360

733

3,541

174,967

240,547

Accumulated depreciation
Carrying amount 30 June 2022

ANNUAL REPORT 2023

101

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Operating assets and liabilities
for the year ended 30 June 2023

C4. Property, plant and equipment (continued)
Recognition and measurement
All items of property, plant and equipment are stated at cost less accumulated depreciation and impairment. Cost includes expenditurethat is directly attributable to the acquisition of the item.
Depreciation is calculated on a straight-line basis so as to write off the net cost of the asset over its expected useful life to its estimatedresidual value. The estimated useful lives, residual values and depreciation methods are reviewed at each year end, with the effect of any
changes in estimate accounted for on a prospective basis. Land is not depreciated. The following estimated useful lives are used in thecalculation of depreciation:
Buildings		

20-90 years

Office and computer equipment		

2-25 years

Furniture and fittings		

5-10 years

Leasehold improvements		

2-10 years

Plant and equipment		

2-50 years

The carrying value of an item of property, plant and equipment is derecognised either upon disposal or when no future economic benefits
are expected from the asset. Any gain or loss arising from the derecognition (representing the difference between the net disposal
proceeds and the carrying amount of the asset) is included in profit or loss when the asset is derecognised.

Key estimates and judgements
Recoverability and determination of useful lives
If indicators of impairment are present, property, plant and equipment will be subject to impairment testing, which involves
estimates and judgements made with respect to assessing the recoverability of the carrying amount of property, plant andequipment. Judgement is also involved in determining the useful lives of property, plant and equipment which are reviewed andadjusted, where required, annually.

102

THE a2 MILK COMPANY

C5. Investment property
The Kyvalley Dairy Group (Kyvalley) is the Group’s long-term fresh milk supplier in Victoria. Kyvalley continues to operate the facility undera long-term operating lease and a long-term supply agreement. Under the agreement the Group has commenced an expansion andupgrade of the facility, to be subsidised by increased rent.
The purchase and upgrade of the Kyabram site is a strategic investment to ensure quality of products and processing capacity. The related
long-term product supply agreement entered into alongside the investment provides ongoing supply from Kyvalley’s contracted A1 protein
free milk pool.

2023

Carrying amount 1 July 2022
Additions
Depreciation

Work inprogress
$’000

Total
$’000

9,177

1,420

15,663

–

3,535

3,535

Land
$’000

Buildings$’000

Plant &
equipment
$’000

498

4,568

–

–

–

(285)

(792)

–

(1,077)

Net foreign currency exchange differences

(15)

46

(220)

(5)

(194)

Carrying amount 30 June 2023

483

4,329

8,165

4,950

17,927

Cost

483

5,291

11,4684,950

22,192–(962)(3,303)–(4,265)

483

4,329

8,165

4,950

17,927

Land$’000

Buildings$’000

Plant &
equipment$’000

Work inprogress
$’000

Total
$’000

293

5,166

10,291864

16,614

Accumulated depreciation
Carrying amount 30 June 2023

2022

Carrying amount 1 July 2021
Additions

–

–

553

518

1,071

Transfers

192

(192)

–

–

–

Depreciation

–

(528)

(1,912)–(2,440)Net foreign currency exchange differences

13

122

245

38

418

Carrying amount 30 June 2022

498

4,568

9,177

1,420

15,663

Cost

498

5,246

11,6881,420

18,852–(678)(2,511)–(3,189)

498

4,568

9,177

1,420

15,663

2023
$’000

2022
$’000

1,152

1,088

Accumulated depreciation
Carrying amount 30 June 2022

Profit arising from investment property

Rental income

ANNUAL REPORT 2023

103

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Operating assets and liabilities
for the year ended 30 June 2023

C5. Investment property (continued)
Future minimum rentals receivable under operating lease

Not longer than 1 year

2023
$’000

2022
$’000

1,144

1,132

Longer than 1 year and not longer than 5 years

4,578

4,529

Longer than 5 years

16,975

16,797

Total undiscounted lease payments to be received

22,69722,458

Measurement of fair value
The investment property was purchased in September 2020. The Group has not engaged an independent valuer for the current period. At
reporting date, the Directors have determined a fair value of $18,600,000 based on a capitalisation of rent valuation approach, adopting acapitalisation rate of 8%. Directors consider that this calculation represents a reasonable approximation of fair value as at 30 June 2023.

Recognition and measurement
Investment property
Investment property is held primarily to earn rental income and for capital appreciation. It is measured initially at cost, including transaction
costs such as transfer taxes and professional fees for legal services. Subsequent to initial recognition, the Group elected to measureinvestment property using the cost model (carried at historical cost less accumulated depreciation and impairment).
Depreciation is calculated on a straight-line basis so as to write off the net cost of the asset over its expected useful life to its estimatedresidual value. The estimated useful lives, residual values and depreciation methods are reviewed at each year end, with the effect of any
changes in estimate accounted for on a prospective basis. Land is not depreciated. The following estimated useful lives are used in thecalculation of depreciation:
Buildings

4-40 years

Plant and equipment

3-25 years

The carrying value of an item of property, plant and equipment is derecognised either upon disposal or when no future economic
benefits are expected from the asset. Any gain or loss arising from the derecognition (representing the difference between the net
disposal proceeds and the carrying amount of the asset) is included in profit or loss when the asset is derecognised.
Work in progress expenditure is capitalised only when the Group can demonstrate the potential for the asset to generate future
economic benefits on completion; and the ability to measure reliably the expenditure attributable to the asset during its development.
Depreciation commences when the asset is available for use.
Rental income
Rental income arising from operating leases on investment property is accounted for on a straight-line basis over the lease term, and isincluded in other revenue in the Consolidated statement of comprehensive income.

Key estimates and judgements
Recoverability and determination of useful lives
If indicators of impairment are present, investment property will be subject to impairment testing, which involves estimates andjudgements made with respect to assessing the recoverability of the carrying amount of investment property. Judgement is also
involved in determining the useful lives of investment property which are reviewed and adjusted, where required, annually.

104

THE a2 MILK COMPANY

C6. Intangible assets
Patents$’000

Trade marks$’000

Software$’000

Goodwill
$’000

Total
$’000

883

3,905

2,066

102,468

109,322

Additions

68

90

180

–

338

Amortisation

(34)

–

(1,073)–(1,107)2023

Carrying amount 1 July 2022

Net foreign currency exchange differences

–

–

(13)

(121)

(134)

917

3,995

1,160

102,347

108,419

Cost

1,595

3,995

5,147

102,347

113,084

Accumulated amortisation and impairment

(678)

–

(3,987)–(4,665)Carrying amount 30 June 2023

917

3,995

1,160

102,347

108,419

Patents$’000

Trade marks$’000

Software$’000

Goodwill
$’000

Total
$’000

806

3,812

2,347

8,172

15,137

Carrying amount 30 June 2023

2022

Carrying amount 1 July 2021

–

–

943

94,07895,021

Additions

Acquisition of subsidiary

118

93

18

–

229

Amortisation

(40)

–

(1,237)–(1,277)

Net foreign currency exchange differences

(1)

–

(5)

218

212

Carrying amount 30 June 2022

883

3,905

2,066

102,468

109,322

Cost

1,527

3,905

4,954

102,468

112,854

Accumulated amortisation and impairment

(644)

–

(2,888)–(3,532)Carrying amount 30 June 2022

883

3,905

2,066

102,468

109,322

Trade marks are allocated to the following cash-generating units (CGUs) for the purpose of impairment testing: Australia and New Zealand$318,000 (2022: $304,000); China and Other Asia $3,503,000 (2022: $3,436,000); USA $174,000 (2022: $165,000).
During the year the total value of research and development costs expensed was $6,307,000 (2022: $4,389,000).

Recognition and measurement
The costs of intangible assets other than goodwill are capitalised where there is sufficient evidence to support the probability of theexpenditure generating future economic benefits for the Group.
Patents
Patents are considered to have a finite life and are amortised on a straight-line basis over the lifetime of the patent.
Trade marks
Trade marks are not subject to amortisation as they are considered to have an indefinite life and are tested for impairment annually andwhenever there is an indication that the asset may be impaired.
Software
Software is amortised on a straight-line basis over 2 to 3 years.
The costs of configuring or customising a supplier’s application software in a Cloud Computing Software-as-a-service agreement are
expensed as incurred.
Goodwill
Goodwill is recognised on business acquisitions, representing the excess of the cost of acquisition over the Group’s interest in the net fairvalue of the identifiable assets, liabilities and contingent liabilities of the business recognised at the date of acquisition.
Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. For the
purposes of impairment testing, goodwill acquired in a business combination is, from the date of acquisition, allocated to the Group’s
cash-generating units that are expected to benefit from the synergies of the combination.

ANNUAL REPORT 2023

105

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Operating assets and liabilities
for the year ended 30 June 2023

C6. Intangible assets (continued)
Impairment testing for cash-generating units (CGUs) containing goodwill
Goodwill allocation
For the purposes of impairment testing, goodwill is allocated to the Group’s CGUs which represent the lowest level within the Group at
which goodwill is monitored for internal management purposes as follows:

Australia and New Zealand
China

2023
$’000

2022
$’000

50,61750,73851,73051,730102,347

102,468

Impairment testing of non-financial assets
Assets that have an indefinite useful life, such as goodwill and trade marks, are not amortised but are tested annually for impairment.
Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that thecarrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds
its recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and value in use. For the purposes ofassessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash‑generating units).
Impairment losses are recognised in the Consolidated statement of comprehensive income. They are allocated first to reduce the carrying
amount of any goodwill allocated to the CGU, and then to reduce the carrying amount of the other assets in the CGU on a pro-rata basis.
An impairment loss in respect of goodwill is not reversed. Non‑financial assets other than goodwill that have been impaired arereviewed for possible reversal at each reporting date. An impairment loss is reversed only to the extent that the asset’s carrying
amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if noimpairment loss had been recognised.

Key estimates and judgements
Goodwill and intangibles
Judgements are made with respect to identifying and valuing intangible assets on acquisitions of new businesses and the allocationof goodwill to the cash-generating units.
The Group assesses whether goodwill and intangibles with indefinite useful lives are impaired at least annually. These calculations
involve judgements to estimate the recoverable amount of the cash-generating units to which the goodwill and intangibles withindefinite useful lives are allocated.

106

THE a2 MILK COMPANY

C6. Intangible assets (continued)
Annual impairment testing as at 30 June 2023
The recoverable amount of CGUs containing goodwill and trade marks has been determined on a value in use basis using a
discounted cash flow approach, and projections based on financial budgets approved by the Board, and four-year forward plans supplied
by management.
As at 30 June 2023, the recoverable amount of the Group’s CGUs exceeds their carrying amounts. The directors believe that no reasonably
possible change in any of the key assumptions would cause the recoverable amount of these CGUs to be less than their carrying values.
Based on this assessment, no impairment write downs are considered necessary.

Key assumptions
Gross margins
Gross margins are based on budgeted margins for FY24, and estimates for future years, adjusted where appropriate to accountfor expected future trading conditions. Consideration has been given to the growth profile of each CGU when forecasting future
margin returns.
Discount rates
Discount rates (post-tax): 9.3% (2022: 8.9%)
Discount rates represent the risks specific to each CGU, taking into consideration the time value of money and individual risks of theunderlying cash flows expected from the CGU being assessed. CGU specific risk is incorporated by applying individual beta factors. The
discount rate calculation is based on the specific circumstances of the Group and its CGUs and is derived from its weighted average cost ofcapital (WACC). The WACC considers both debt and equity. The cost of equity is derived from the expected return on investment by theGroup’s investors.
Revenue growth
Revenue projections have been constructed with reference to the FY24 budget and four-year forward plans and adjusted for recent
performance trends across the regions (where necessary).
Terminal growth rate
A terminal growth rate of 2.0% (2022: 2.0%) has been used for future cash flow growth beyond the forecast period.
The terminal value (being the total value of expected cash flows beyond the forecast period) is discounted to present values using thediscount rate specific to each CGU.

Sensitivity to change in assumptions
The calculation of value in use is most sensitive to the following assumptions:––––

Gross margins
Discount rates
Revenue growth during the forecast period
Growth rates used to extrapolate cash flows beyond the forecast period (terminal growth rate)

ANNUAL REPORT 2023

107

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Operating assets and liabilities
for the year ended 30 June 2023

C7. Other financial assets
2023
$’000

2022
$’000

1,536

–

Current
Foreign currency forward contracts
Non-current
Foreign currency forward contracts
Listed investment at fair value

113–

71,965

135,260

72,078135,260

The listed investment is a 19.8% holding in shares in Synlait Milk Limited (Synlait). Synlait is a dairy processing company (listed on NZX andASX) with which the Group has an ongoing Nutritional Powders Manufacturing and Supply Agreement. No dividends were received fromthis investment during the year (2022: $nil).

Shareholding in Synlait Milk Limited
Movements in the period

Shares
‘000

Cost
$’000

Share price atreport date$Marketvalue$’000

Mark tomarket$’000

Balance 30 June 2022

43,353

288,7813.12

135,260(153,521)

Balance 30 June 2023

43,353

288,781

1.66

71,965(216,816)

Fair value loss in period(63,295)

A fair value loss of $63,295,000 (2022: $22,543,000) was recognised in other comprehensive income for the year.

Recognition and measurement
This listed investment is a long-term investment classified as a financial asset measured at fair value through other comprehensive income.
The Group does not control or have significant influence over the investee.
Unrealised gains or losses arising from changes in fair value are recognised through other comprehensive income in the Fair Value
Revaluation Reserve within equity.
Foreign currency forward contracts are stated at fair value, calculated by reference to current forward exchange rates for contracts withsimilar profiles, adjusted to reflect the credit risk of the various counterparties.

108

THE a2 MILK COMPANY

C8. Other financial liabilities
2023
$’000

2022
$’000

3,501

16,999235

872

Current
Foreign currency forward contracts
Non-current
Foreign currency forward contracts

Recognition and measurement
Foreign currency forward contracts are stated at fair value, calculated by reference to current forward exchange rates for contracts withsimilar profiles, adjusted to reflect the credit risk of the various counterparties.

Key estimates and judgements
Fair value measurement of foreign currency forward contracts
The fair value of foreign currency forward contracts is measured using valuation techniques. The inputs to these models are takenfrom observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values.
Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions relating to thesefactors could affect the reported fair value of these financial instruments.

ANNUAL REPORT 2023

109

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Financial risk and capital management
for the year ended 30 June 2023

D. Financial risk and capital management
This section outlines how the Group manages exposure to financial risk and capital structure, and provides details of its balance sheet
liquidity and access to financing facilities.

D1. Financial risk management
Financial risk management objectives
Exposure to credit risk, market risk (including currency risk, commodity price risk, interest rate risk, and equity price risk), and liquidity riskarises in the normal course of the Group’s business.
The Group’s financial risk management processes and procedures seek to minimise the potential adverse impacts that may arise from theunpredictability of financial markets.
The Group’s centralised treasury department (Group Treasury) provides treasury services to the business, co-ordinates access to domestic
and international financial markets, and monitors and manages liquidity. The Group’s corporate function monitors financial risks relating tothe operations of the Group through internal risk reports which analyse exposures by degree and magnitude of these risks.
Policies and procedures are reviewed periodically to reflect both changes in market conditions and changes in the nature and volume ofGroup activities.
The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.
Specific risk management objectives and policies are set out below.
The Group uses various methods to measure different types of risk exposures. These methods include ageing analysis for credit risk,
and sensitivity analysis in the case of foreign exchange risks and equity price risk.

Credit risk management
Credit risk is the risk of financial loss to the Group if a customer or the counterparty to a financial instrument fails to meet its
contractual obligations.
2023
$’000

2022
$’000

Maximum exposures to credit risk at balance date:Cash and term deposits (counterparty risk)

802,234

887,308

Trade receivables (customer credit risk)

57,731

67,411

Foreign currency forward contracts (counterparty risk)

1,649

–

861,614954,719

Counterparty risk
At balance date, the Group’s bank accounts were held with banks with acceptable credit ratings determined by recognised credit agencies,
including National Australia Bank, ANZ Bank, Westpac, ASB Bank, Bank of New Zealand, HSBC Bank, Bank of China, and JP Morgan Chase
Bank.
Counterparties to derivative financial instruments are large banks with which the Group has existing banking relationships, with acceptable
credit ratings determined by recognised credit agencies.
The Group does not have any other concentrations of counterparty credit risk.

110

THE a2 MILK COMPANYD1. Financial risk management (continued)
Credit risk management (continued)
Customer credit risk
The Group’s exposure to customer credit risk is influenced mainly by the individual characteristics of each customer. The majority of sales
on credit are to major retailers and other significant customers with established creditworthiness and minimum levels of default. Other
sales are made cash on delivery.
New customers are analysed individually for creditworthiness, taking into account credit ratings where available, financial position,
previous trading experience and other factors.
In monitoring customer credit risk, customers are assessed individually by their debtor ageing profile. Monitoring of receivable balances on
an ongoing basis minimises the exposure to bad debts. Historically, bad debt write-offs have been negligible.
There are significant concentrations of business within the Group. In 2023, 28% of sales with credit terms were to three customers(2022: 23% of sales to three customers). There is no history of default for these customers.
The allowance for expected credit losses is recognised based on an assessment of lifetime expected credit losses.

Ageing of trade receivables at reporting date
2023
$’000

2022
$’000

Not past due

54,82748,009

Past due up to 90 days

2,460

16,612

Past due 91 to 180 days

–

2,339

Past due 181 days to one year

412

449

More than one year32

257,731

67,411

Allowance for expected credit losses

(45)

(125)

57,686

67,286

The average credit period on sales is 14 days (2022: 15 days). No interest is charged on trade receivables outstanding.

Movement in impairment allowance for expected credit loss
2023
$’000

2022
$’000

Balance at beginning of year

125

107

Amount (reversed)/charged to the Consolidated statement of comprehensive income

(78)

30

Provisions reversed and net foreign exchange differences

(2)

(12)

Balance at end of year

45

125

Market risk management
Market risk is the risk that changes in market prices will affect the Group’s income or the value of its holdings in financial instruments. The
Group’s activities expose it primarily to the financial risks of change in foreign currency exchange rates to the NZ dollar, and to interest raterisk. Prices charged by manufacturers (including pricing of whole and skim milk powders) are subject to movements in commodity milk
pricing. The Group’s holding of a listed investment also exposes it to equity price risk.
Market risk exposures are monitored by management on an ongoing basis and there has been no change during the year to the Group’s
exposure to market risks or the way it manages and measures risk.

ANNUAL REPORT 2023

111

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Financial risk and capital management
for the year ended 30 June 2023

D1. Financial risk management (continued)
Interest risk management
The Group’s main interest rate risk arises from long‑term borrowings. Borrowings issued at variable rates expose the Group to cash flowinterest rate risk. Borrowings at fixed rates expose the Group to fair value interest rate risk. These risks have not been hedged given thelimited exposure.
Bank borrowings are primarily from New Zealand banks, in New Zealand dollars, at New Zealand market rates.

Fixed and variable rate exposure
2023
$’000

2022
$’000

450,000

500,000

Fixed rate instruments
Financial assets
Financial liabilities(52,038)(63,206)

397,962436,794

Financial assets

176,170

55,663Financial liabilities(30,000)(30,000)

146,170

25,663

Variable rate instruments

Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss and does not employ
derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. A change in interest rates at thereporting date would not affect profit or loss for the Group.
Cash flow sensitivity analysis for variable rate instruments
A reasonably possible change of 100 basis points in interest rate at the reporting date would have increased or decreased profit or loss by$1,462,000 (2022: $257,000). This analysis assumes all other variables remain the same.

Foreign currency risk management
The Group’s exposure to foreign currency risk arises principally from its operations in Australia, the USA, and China; and the resultant
movements in the currencies of those countries against the NZ dollar.
The Group hedges a portion of this risk using derivative financial instruments such as foreign currency forward contracts, designated as
cash flow hedges, to hedge certain highly probable foreign currency transactions. These contracts are executed by Group Treasury inaccordance with the Group’s Treasury Risk Policy.
The Group may also transfer cash balances from time-to-time between currencies to reduce exposure or to match underlying liabilities.

112

THE a2 MILK COMPANYD1. Financial risk management (continued)
Foreign currency risk management (continued)
Hedging currency risk
On entering into a hedging relationship, the Group formally designates and documents the hedge relationship and the risk management
objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged itemor transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting theexposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly
effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they wereactually highly effective throughout the financial reporting periods for which they are designated.
Changes in the fair value of derivatives that are designated and qualify as cash flow hedges, which hedge exposure to variability in cash
flows of a highly probable forecasted transaction, are recognised directly in other comprehensive income and accumulated in the hedging
reserve. The ineffective portion is recognised in profit or loss within other expenses. Hedge accounting is discontinued when the hedging
instrument expires or is sold, terminated or exercised. At that point in time, any cumulative gain or loss on the hedging instrument
recognised in equity is kept in equity until the forecasted transaction occurs or until cash flows arising from the transaction are received.
The amount recognised in other comprehensive income is transferred to profit or loss in the same period that the hedged item affects
profit or loss. If the forecast transaction is no longer going to occur the item is transferred to profit or loss when hedging is discontinued.
The gross value to be received or paid and the weighted average contracted exchange rates for foreign currency forward contracts
outstanding at year end are as follows:
Carrying
amountCarrying
amountNotional amount
NZ dollars

Weighted averageexchange rate

2023
$’000

2022
$’000

Term

2023
$’000

2022
$’000

2023
$’000

2022
$’000

(1,041)(110)

One year or less

72,232

66,6320.89990.9005(117)–

One year or less

2,933

–

0.6287–

Buy NZD/sell USD

3,122

17,109One year or less

173,574

266,5700.6222

0.6640

Buy NZD/sell USD

123

872

More than one year

43,371

40,9500.61100.6349AUD
Buy NZD/sell AUD
EUR
Buy AUD/sell EUR
USD

The carrying amount of foreign currency forward contracts is recognised in Other financial assets (refer to Note C7) and Other financial
liabilities (refer to Note C8).
The foreign currency forward contracts are considered to be highly effective hedges. There was no significant cash flow hedge
ineffectiveness in the current year.
Expressed in NZ dollars, the table below indicates exposure and sensitivity to movements in exchange rates on the pre-tax equity of theGroup based on closing exchange rates as at 30 June 2023, applied to the Group’s foreign currency forward contracts at 30 June 2023.
Exchange rates and foreign currency forward contracts will fluctuate over the course of normal operations.
Impact on pre-tax equity gain or (loss)
2023

Movement on exchange rate

$’000

$’000

+10%

–10%

US Dollar(24,011)18,933

AU Dollar(7,777)

6,358

305

(291)

Euro

ANNUAL REPORT 2023

113

Chair’s letter

CEO’s year in review

Building a sustainable growth business

Financial statements

Corporate governance

Company disclosures

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Financial risk and capital management
for the year ended 30 June 2023

D1. Financial risk management (continued)
Foreign currency risk management (continued)
Expressed in NZ dollars, the table below indicates exposure and sensitivity to movements in exchange rates on the profit or loss of theGroup based on closing exchange rates as at 30 June, applied to the Group’s unhedged financial assets/(liabilities) at 30 June. Exchange
rates and assets and liabilities held in foreign currencies will fluctuate over the course of normal operations.
The analysis is performed consistently from year to year.
Net exposure on
reporting date
$’000

2023

$’000

$’000

–

+10%

–10%

(1,631)

(181)

148

Movement on exchange rate
AU Dollar

Impact on pre-tax profit or (loss)

US Dollar

62,608

6,956(5,692)Chinese Yuan Renminbi(131,333)(14,593)

11,939Net exposure on
reporting date
$’000

2022

$’000

$’000

–

+10%

–10%

(2,169)

(241)

197

Movement on exchange rate
AU Dollar

Impact on pre-tax profit or (loss)

US Dollar

65,1887,243(5,926)Chinese Yuan Renminbi(142,135)(15,793)

12,921As the unhedged foreign currency denominated monetary financial instruments of the Group consist only of cash, and trade and otherreceivables and payables, foreign exchange movements do not have any impact on equity, other than the above-mentioned impact on
profit or loss.
Exchange rates
The following significant exchange rates applied during the year:
Average rate

Reporting date spot rate

2023

2022

2023

2022

AU Dollar

0.9153

US Dollar

0.61680.93790.91910.90580.68130.60790.6248Chinese Yuan Renminbi

4.28564.39584.40664.1860Equity price risk
The Group is exposed to equity price risk on its listed investment classified and measured at fair value through other comprehensive
income (FVOCI). This risk is not hedged.
The Group monitors this risk exposure by comparing the movement in the quoted share price of this long-term investment against
movements in the S&P/NZX 50 index over the same period.
As at 30 June 2023, the exposure to the listed investment at FVOCI was $71,965,000 (2022: $135,260,000). A 10% increase or decreasein the share price of this listed investment would result in an increase or decrease of $7,197,000 (2022: $13,526,000) in the fair value
revaluation reserve through other comprehensive income, with no effect on profit or loss.

Liquidity risk management
Liquidity risk is the risk that the Group will be unable to meet its obligations as they fall due. This risk is managed by establishing a target
minimum liquidity level, ensuring that ongoing commitments are managed with respect to forecast available cash inflows.

114

THE a2 MILK COMPANYD1. Financial risk management (continued)
Liquidity risk management (continued)
The Group holds significant cash reserves which enable it to meet its obligations as they fall due, and to support operations in the event ofunanticipated external events.
Loans and borrowings within the Group are specific to the operations of Mataura Valley Milk Limited (refer to Note D6). No other entities
within the Group have borrowings (2022: $nil).

Contractual maturities of financial liabilities
The contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting arrangements
are set out below. No interest is payable on trade and other payables.
Contractual cash flows

2023

Carrying
amounts
$’000

Total
$’000

6 monthsor less$’000

6 to 12months$’000

1 to 2years$’000

2 to 5 More than
5 years
years
$’000
$’000

Non-derivative financial liabilities
Secured bank loans

45,00047,472

16,278

1,025

30,169––Unsecured loan from MVM’s non-controllingshareholder

37,03842,021–––42,021–

Lease liabilities

19,491

21,867

2,410

2,421

4,442

8,526

4,068

Trade and other payables - excluding employee
entitlements and customer contract liabilities

279,124

279,124

279,124

–

–

–

–

217,136

85,945

104,893

26,298––Derivative financial liabilities
FX hedging contracts:
Carrying amount at fair value

3,736

Outflow
Inflow(213,400)(83,789)(103,548)(26,063)––384,389394,220299,968

4,791

34,84650,547

4,068

Secured bank loans

57,00059,377

27,662538

1,088

30,089–Unsecured loan from MVM’s non-controllingshareholder

50,00055,834–

13,794––42,040

Lease liabilities

17,352

19,249

2,075

1,603

2,578

7,116

5,877

Trade and other payables - excluding employee
entitlements and customer contract liabilities

347,675

347,675

347,675

–

–

–

–

392,023

159,206

190,996

41,821––(374,152)(148,752)(184,450)(40,950)––

500,006

387,866

22,481

4,537

37,20547,9172022

Non-derivative financial liabilities

Derivative financial liabilities
FX hedging contracts:
Carrying amount at fair value

17,871

Outflow
Inflow
489,898

ANNUAL REPORT 2023

115

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Financial risk and capital management
for the year ended 30 June 2023

D1. Financial risk management (continued)
Change in liabilities arising from financing activities

2022
$’000

Cash flow$’000

Non-cash
$’000

2023
$’000

Secured bank loans

57,000(12,000)–

45,000Unsecured loan from MVM’s non-controlling shareholder

50,000(13,794)

832

37,03817,352(4,218)6,356

19,490124,352(30,012)

7,188

101,528

Lease liabilities

Carrying amounts versus fair value
The fair values of financial assets and liabilities, together with the carrying amounts shown in the Consolidated statement of financial
position, are as follows:
2023

2022

Carrying
amount$’000

Fair Value$’000

Carrying
amount$’000

Fair Value$’000

Cash and term deposits

802,234

802,234

887,308

887,308

Trade and other receivables

79,216

79,216

83,51083,510

Hierarchy
level

Foreign currency forward contract assets

2

1,649

1,649

–

–

Listed investment

1

71,96571,965

135,260

135,260

Secured bank loans

2(45,000)(42,924)(57,000)(54,861)

Unsecured loan from MVM’s non-controlling shareholder

2(37,038)(30,197)(50,000)(45,113)(279,124)(279,124)(347,675)(347,675)(3,736)(3,736)(17,871)(17,871)590,166

599,083

633,532

640,558

Trade and other payables - excluding employee
entitlements and customer contract liabilities
Foreign currency forward contract liabilities

2

Fair value hierarchy
Financial instruments carried at fair value are classified by valuation method based on the following hierarchy:– Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
– Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices)or indirectly (i.e. derived from prices).
– Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Carrying amount (equalling fair value) is applied consistently in the current and prior year to assets and liabilities not recognised in theConsolidated statement of financial position at fair value.

Estimation of fair value
The following methods and assumptions are used in estimating the fair values of financial instruments:– Listed investment - closing share price on NZX.
– Foreign currency forward contracts - calculated by reference to current forward exchange rates for contracts with similar maturity
profiles, adjusted to reflect the credit risk of the various counterparties.
– Loans and borrowings - present value of future principal and interest cash flow, discounted at the market rate of interest at thereporting date.
– Cash and term deposits, trade and other receivables and payables - carrying amount approximates fair value.

116

THE a2 MILK COMPANYD2. Capital management
The Group’s objective when managing its capital is to safeguard the Group’s ability to continue as a going concern and to continue togenerate value for stakeholders. The Group is not subject to externally imposed capital requirements, and currently has no debt, otherthan loans and borrowings specific to Mataura Valley Milk Limited (refer to Note D6).
The Group’s capital structure may be modified by payment of dividends to shareholders, returning capital to shareholders, or issuing newshares. The Board continuously assesses its capital position in order to deliver the optimum structure to drive shareholder returns in linewith the Company’s strategy and capital allocation framework.
The Board regularly assesses the Group’s balance sheet position when considering how to deliver the optimum structure to enhanceshareholder value in line with the Company’s strategy and capital allocation framework. In accordance with the Company’s Capital
Allocation Framework, the Group has decided to prioritise investment in growth opportunities (focused on Supply Chain transformation)and balance sheet strength, ahead of returning further capital to shareholders as at 30 June 2023, but will continue to review this on aregular basis.
During the year, the Group undertook a capital return to shareholders through an on-market share buyback of $149,057,000 (2022: $nil).
The buyback commenced in November 2022 and concluded in March 2023. Shares bought back were cancelled on acquisition. (Refer toNote D7).

D3. Cash and term deposits
2023
$’000

2022
$’000

Cash at banks and on hand

176,064

331,646

Short-term deposits

176,170

105,662

Cash and short-term deposits

352,234

437,308

Other current term deposits

450,000

450,000

Cash and term deposits

802,234

887,308

2023
’000

2022
’000

AU dollars

27,78984,460

US dollars

40,15454,709Chinese Yuan Renminbi

341,872

229,639

Expressed in the relevant currency, cash at banks and on hand includes:

Bank balances and cash comprise cash held by the Group. Cash and short-term deposits earn interest at floating rates based on daily bankdeposit rates. The carrying value of cash assets and term deposits approximates their fair value.
Other current term deposits comprise term deposits with a maturity greater than three months and less than twelve months, having an
average maturity of eight months and a weighted average interest rate of 5.57% per annum.
Term deposits are presented as cash equivalents in the Consolidated statement of cash flows if they have a maturity of three months orless and are readily convertible to known amounts of cash with no significant risk of changes in value.
For the purposes of the Consolidated statement of cash flows, cash and cash equivalents comprise the following:
2023
$’000

2022
$’000

Cash at banks and on hand

176,064

331,646

Short-term deposits

176,170

105,662

Cash and short-term deposits

352,234

437,308

ANNUAL REPORT 2023

117

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Financial risk and capital management
for the year ended 30 June 2023

D4. Cash flow information
Reconciliation of after tax profit with net cash flows from operating activities
2023
$’000

2022
$’000

144,841

114,741

Depreciation and amortisation

18,19718,929

Share-based payments

17,132

11,701

Net foreign exchange gain

(1,917)(8,787)

Trade and other receivables

4,294(3,562)

Prepayments

10,912(20,852)

Inventories(53,396)(19,679)

Trade and other payables(71,633)

69,504

Net profit for the year
Adjustments for non-cash items:

Changes in working capital:

Tax balances

42,85341,805

Net cash inflow from operating activities

111,283

203,800

118

THE a2 MILK COMPANY

D5. Leases
Group as lessee
The Group has entered into leases for office and industrial premises, motor vehicles and equipment. There are no financial restrictions
placed upon Group entities by entering into these leases. The Group has the option, under some leases, to lease the assets for additionalterms. All lease contracts with options to renew contain market review clauses in the event that an option to renew is exercised.
Right-of-use assets
Carrying amounts of right-of-use assets recognised and movements during the period:
Leasedproperty$’000

Office &computer$’000

Plant &
equipment
$’000

Total
$’000

Carrying amount 1 July 2022

15,334102594

16,030Additions

5,228

–

708

5,936

Depreciation(3,890)

(46)

(470)

(4,406)2023

Net foreign currency exchange differences
Carrying amount 30 June 2023

(201)

–

(10)

(211)

16,471

56822

17,349Cost

28,789189

1,978

30,956

Accumulated depreciation(12,318)(133)(1,156)(13,607)

Carrying amount 30 June 2023

16,471

56822

17,349Leasedproperty$’000

Office &computer$’000

Plant &
equipment
$’000

Total
$’000

15,039101

162

15,302

2022

Carrying amount 1 July 2021
Acquisition of subsidiary

88

17

537

642

Additions

3,308

24

289

3,621

Depreciation(3,688)

(41)

(396)

(4,125)

Net foreign currency exchange differences

587

1

2

590

Carrying amount 30 June 2022

15,334102594

16,030Cost

23,684

188

1,297

25,169

Accumulated depreciation(8,350)

(86)

(703)

(9,139)Carrying amount 30 June 2022

15,334102594

16,030ANNUAL REPORT 2023

119

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Financial risk and capital management
for the year ended 30 June 2023

D5. Leases (continued)
Lease liabilities
Carrying amounts of lease liabilities and movements during the period:

Balance at beginning of the year
Acquisition of subsidiary

2023
$’000

2022
$’000

17,352

16,498

–

642

5,936

3,621

640

592

(4,218)(4,681)

(220)

680

Balance at end of the year

19,49017,352Current

4,181

3,128

Non-current

15,30914,224

19,49017,352

2023
$’000

2022
$’000

4,406

4,125

Interest expense - lease liabilities

640

592

Expenses relating to short-term leases (included in administrative and other expenses)

978

461

Expenses relating to low-value assets (included in administrative and other expenses)

33

5

6,057

5,183

2023
$’000

2022
$’000

640

592

3,578

4,089

4,218

4,681

5,936

3,621

Additions
Accretion of interest
Payments
Net foreign currency exchange differences

Amounts recognised in profit or loss

Depreciation expense - right-of-use assets

Total amount recognised in profit or loss
Cash flows for leases

Total cash outflows:
Lease interest
Payment of lease principal
Non-cash additions to right-of-use assets and lease liabilities

120

THE a2 MILK COMPANY

D5. Leases (continued)
Recognition and measurement
A right-of-use asset and a lease liability are recognised at the lease commencement date.
The right-of-use asset is initially measured at cost, and subsequently at cost, less accumulated depreciation as the asset is written off
over the term of the lease, impairment losses, and any adjustments for remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments payable from the commencement date, discounted
using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate.
Generally, the Group uses its incremental borrowing rate as the discount rate.
The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It isremeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of
the amount expected to be payable, or changes in the assessment of whether a purchase or extension option is reasonably certain
to be exercised.

Key estimates and judgements
Determination of the lease term
Judgement is applied to determine the lease term for those lease contracts that include renewal or termination options. This
assessment impacts the lease term, which may significantly affect the amount of lease liabilities and right-of-use assets recognised.
In determining the lease term consideration is given to all facts and circumstances that create an economic incentive to exercise
an extension option, or not to exercise a termination option.

Group as lessor
Refer to Note C5: Investment property

ANNUAL REPORT 2023

121

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Financial risk and capital management
for the year ended 30 June 2023

D6. Loans and borrowings
2023
$’000

2022
$’000

15,00027,000Current
Secured:Bank loans
Unsecured:
Loan from MVM’s non-controlling shareholder–

13,79415,00040,79430,00030,00037,03836,206

67,03866,206

Non-current
Secured:Bank loan
Unsecured:
Loan from MVM’s non-controlling shareholder

All of the loans and borrowings are specific to Mataura Valley Milk Limited (MVM) and are interest bearing.
The bank loans are secured against MVM’s property at Pease Street, Gore, New Zealand, and are subject to compliance with financial
covenants requiring the maintenance of specified financial ratios, related solely to MVM. All borrowing covenant ratios and limits havebeen complied with as at 30 June 2023.
The non-current bank loan matures in July 2024. The interest rate applicable as at 30 June 2023 was 6.85%.
The average interest rate applicable at 30 June 2023 for the current bank loans was 6.37%.
Finance facilities available to MVM:
– Total bank debt facilities of $75 million, of which $45 million was drawn as at 30 June 2023.
– A performance guarantee facility of $10 million, fully drawn as at 30 June 2023.
The unsecured subordinated loan is provided by MVM’s non-controlling shareholder. The non-current loan has an initial term through to
FY27, to be repaid thereafter at a time to be agreed by the shareholder lenders. The current loan was repaid during the year. The interest
rate applicable as at 30 June 2023 was 2.56%.
Other Group entities have access to bank guarantee facilities totalling $1,783,000 of which $1,246,000 was drawn as at 30 June 2023.

Recognition and measurement
Interest bearing loans and borrowings are initially recognised at fair value at transaction date, less directly attributable transaction costs,
and subsequently measured at amortised cost using the effective interest rate method.

122

THE a2 MILK COMPANY

D7. Share capital
2023

2022

Numberof shares

Share capital$’000

Numberof shares

Share capital$’000

743,656,528

149,157

743,410,790

149,121

Movements in contributed equity:
Fully paid ordinary shares:
Balance at beginning of year
Movements in the period:
Vesting of time-based rights––

201,636–

Gift shares––

29,778–

Share match programme

–

–

6,038

45

Vesting of matching share rights

–

–

8,286

–

Share issue costs

–

–

–

(9)

Share buyback
Balance at end of year

(21,680,314)(149,057)––(21,680,314)(149,057)

245,73836

721,976,214

100

743,656,528

149,157

Share buyback
When the Company re-acquires its own ordinary shares as the result of a share buyback, those shares are deducted from equity and theassociated shares are cancelled. No gain or loss is recognised in profit or loss and the consideration paid including any directly attributable
incremental costs is recognised directly in equity. On 29 August 2022, the Company announced an on-market buyback of shares with anaggregate value of up to $150 million, which commenced on 7 November 2022. From 7 November 2022 to 17 March 2023 the Company
purchased and cancelled 21,680,314 ordinary shares at a total cost of $149,057,000 including brokerage costs at an average price of $6.87
excluding brokerage costs.
Holders of fully paid ordinary shares are entitled to receive dividends as may be declared from time to time and are entitled to one vote pershare at shareholders’ meetings.
The Company does not have authorised capital or par value in respect of its issued shares.

ANNUAL REPORT 2023

123

Chair’s letter

CEO’s year in review

Building a sustainable growth business

Financial statements

Corporate governance

Company disclosures

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Financial risk and capital management
for the year ended 30 June 2023

D8. Nature and purpose of reserves
Employee equity settled payments reserve
The employee equity settled payments reserve is used to record the value of share-based payments provided to employees andcontractors, including key management personnel.

Fair value revaluation reserve
The fair value revaluation reserve is used to record movements in the fair value of listed investments classified as financial assets measured
at fair value through other comprehensive income.

Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements offoreign operations.

Treasury shares reserve
The treasury shares reserve comprises the cost, net of any tax effects, of the Company’s shares purchased and held by the trustee of thea2MC Group Employee Share Trust to be available solely for participants in Group employee share plans. When treasury shares
subsequently vest to employees under employee share plans, the carrying value of the vested shares is transferred to the employee equity
settled payments reserve.
2023

2022

Number ofshares$’000

Number ofshares$’000

2,372,842

15,798362,823

3,773

–

–

2,200,000

13,306

Movements in treasury shares reserve:
Balance at beginning of year
Movements in the period:
On-market purchases
Vesting of matching share rights(14,011)

(93)

–

–

Vesting of time-based rights(261,505)(1,741)(178,526)(1,189)Gift shares
Balance at end of year

(54,378)(362)(11,455)(92)(329,894)(2,196)2,010,019

12,0252,042,948

13,602

2,372,842

15,798

Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging instruments used in cash
flow hedges pending subsequent recognition in profit or loss when the associated hedged transactions are recognised in profit or loss.
Movements on these reserve accounts are set out in the Consolidated statement of changes in equity.

124

THE a2 MILK COMPANY

D9. Capital expenditure commitments
2023
$’000

2022
$’000

21,277

5,575

Contracted but not yet provided for and payable
Property, plant and equipment

D10. Contingent liabilities
On 6 October 2021, the Company announced that group proceedings had been filed in the Supreme Court of Victoria by Slater & Gordon
Lawyers, which named the Company as the defendant. The proceeding relates to the period from 19 August 2020 to 9 May 2021
(Relevant Period) and makes allegations that the Company engaged in misleading and deceptive conduct and breached its disclosure
obligations by failing to disclose certain information to the market. The claim filed by Slater & Gordon Lawyers is said to be brought onbehalf of shareholders who acquired an interest in fully paid ordinary shares in the Company on the Australian Securities Exchange (ASX)or NZX Main Board (NZSX) between 19 August 2020 and 9 May 2021 (inclusive).
On 24 November 2021, the Company was served with a representative proceeding filed in the Supreme Court of Victoria by Shine
Lawyers, which names the Company as the defendant. The proceeding makes allegations which are broadly similar to those advancedby the class action proceeding filed by Slater & Gordon Lawyers on 5 October 2021. The claim filed by Shine Lawyers is said to bebrought on behalf of group members who acquired an interest in ordinary shares in the Company on the ASX or the NZSX:(1) prior to 19 August 2020, and retained those shares until a date after 28 September 2020; or (2) during the Relevant Period.
On 14 June 2022, the Supreme Court of Victoria approved the proposal to consolidate the proceedings filed by Slater & Gordon Lawyers
and Shine Lawyers (the Australian Proceedings). The consolidated claim is brought on behalf of shareholders who acquired an interest in
fully paid ordinary shares in the Company on the ASX or the NZSX: (1) during the Relevant Period; and (2) prior to 19 August 2020 andretained those shares until a date after 28 September 2020. The claim makes allegations under both Australian and New Zealand law.
On 28 November 2022, the Supreme Court of Victoria ruled that it has jurisdiction to hear and determine the claims brought under
New Zealand law.
On 18 May 2022, the Company announced that a representative proceeding had been filed in the High Court of New Zealand whichnames the Company as the defendant (the New Zealand Proceeding). The New Zealand Proceeding, filed by Thorn Law and funded by
CHC Investment Fund III Pty Limited relates to the same period (19 August 2020 to 9 May 2021) and makes allegations under New Zealandlaw only which are substantially the same as those advanced in the Australian Proceedings. The claim is commenced on behalf of groupmembers who acquired an interest in ordinary shares in the Company on the ASX or the NZSX: (1) during the Relevant Period; and (2)prior to the Relevant Period and continued to hold some or all of those shares for part or all of the Relevant Period.
The Company filed an interlocutory application for a stay of the New Zealand Proceeding under the Trans-Tasman Proceedings Act 2010
(NZ) on 23 June 2022. On 23 January 2023, the Auckland High Court granted the Company’s application for a stay of the New Zealand
Proceeding, pending judgment on liability or a final settlement of the Australia Proceeding, whichever occurs first.
The Company considers that it has at all times complied with its disclosure obligations, denies any liability and will vigorously defend theproceedings. The Company filed its defence in the Australian Proceedings on 8 November 2022. The Company has not filed a defence in
the New Zealand Proceeding, which is stayed.
As at 30 June 2023, a date for the next case management conference in the Australian Proceedings has not been set by the Court.
The claims of group members have not yet been and are not required to be quantified. Based on the current status of the Australian
Proceedings and the New Zealand Proceedings, it is not practicable to provide: (a) an estimate of the financial effect; (b) an indicationof the uncertainties relating to the amount or timing of any outflow; or (c) the possibility of any reimbursement.

ANNUAL REPORT 2023

125

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Group structure
for the year ended 30 June 2023

E. Group structureThis section provides details of the Group structure and the entities included in the consolidated financial statements.

E1. Consolidated entities
Details of the Company’s subsidiaries at 30 June 2023 are as follows:
Parties to Deed of
Cross Guarantee(note E3)*

Principal placeof business

Proportion of ownership interest
2023

2022

Parent entity:
The a2 Milk Company Limited✓

New Zealand––

The a2 Milk Company (Export) Limited–

New Zealand

100%

100%

a2 Holdings UK Limited–

New Zealand

100%

100%

Subsidiaries:

a2 Infant Nutrition Limited✓

New Zealand

100%

100%

The a2 Milk Company (New Zealand) Limited–

New Zealand

100%

100%

Mataura Valley Milk Limited–

New Zealand

75%

75%

a2 Australian Investments Pty. Limited✓

Australia

100%

100%

#

a2 Botany Pty Ltd–

Australia

100%

100%

The a2 Milk Company (Australia) Pty Ltd✓

Australia

100%

100%

a2 Exports Australia Pty Limited✓

Australia

100%

100%

a2 Infant Nutrition Australia Pty Ltd✓

Australia

100%

100%

The a2 Milk Company (Nutrition) Pty Ltd✓

Australia

100%

100%

a2MC Group Employee Share Trust–

Australia

100%

100%

The a2 Milk Company Limited

–

UK

100%

100%

The a2 Milk Company LLC

–

USA

100%

100%

The a2 Milk Company

–

USA

100%

100%

The a2 Milk Company Limited–

Canada100%

100%

a2 Infant Nutrition (Shanghai) Co., Ltd

–

China

100%

100%

The a2 Milk Company (Singapore) Pte. Ltd–

Singapore

100%

100%

*	Each party to the Deed of Cross Guarantee is a member of the ‘closed group’ under the ASIC Corporations (Wholly-owned Companies) Instrument 2016/785.
# a2 Infant Nutrition Limited is the subject of an ASIC declaration under section 601 CK(7) of the Corporations Act 2001 (Cth, Australia), providing relief from therequirement to prepare and lodge an audited financial report in Australia.

There were no entities over which the Company gained or lost control during the year.
All subsidiaries have a balance date of 30 June, except for The a2 Milk Company Limited (UK), The a2 Milk Company LLC, anda2 Infant Nutrition (Shanghai) Co., Ltd which have a balance date of 31 December.

Recognition and measurement
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns fromits involvement with the entity and has the ability to affect those returns through its powers over the entity. The financial statements ofsubsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those of
the Group.
Transactions eliminated on consolidation
All intragroup assets and liabilities, equity, income, expenses, and cash flows relating to transactions between members of the Group are
eliminated in preparing the consolidated financial statements.

126

THE a2 MILK COMPANY

E2. Business combinations
During the year ended 30 June 2023
There were no business combinations during the year ended 30 June 2023.

During the year ended 30 June 2022
Acquisition of subsidiary: Mataura Valley Milk Limited
On 30 July 2021, The a2 Milk Company Limited (a2MC) acquired a 75% controlling interest in Mataura Valley Milk Limited (MVM), a dairy
nutrition business, located in Southland, New Zealand.

Fair value of net identifiable assets acquired, goodwill and total cash outflow$’000

Net identifiable assets acquired

90,312

Less: non-controlling interests(22,578)a2MC’s share of net identifiable assets acquired

67,734

Loan payable to a2MC in net assets acquired

106,694
174,428

Goodwill

94,078

Total cash outflow

268,506

Total goodwill of $94,078,000 was allocated to the following CGUs: Australia and New Zealand: $42,348,000; China $51,730,000. The
net outflow of cash on acquisition of $213,746,000 consisted of the total cash outflow of $268,506,000, less cash balances acquired of$54,760,000.

Recognition and measurement
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of theconsideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for
non-controlling interests, over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.
Acquisition-related costs are expensed as incurred and included in profit or loss as administrative and other expenses.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designationin accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.

ANNUAL REPORT 2023

127

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Group structure
for the year ended 30 June 2023

E3. Deed of cross guarantee
Pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785, the Australian-incorporated wholly owned subsidiaries
listed in Note E1 as parties to the Deed of Cross Guarantee are eligible for relief from the Corporations Act 2001 (Cth, Australia)
requirements for preparation, audit and lodgement of financial reports and directors’ reports in Australia.
It is a condition of the ASIC Corporations Instrument that the Company and each of the subsidiaries listed enter into a Deed of Cross
Guarantee. The effect of the Deed is that each party guarantees to each creditor of each other party payment in full of any debt in theevent of winding up of the other party under certain provisions of the Corporations Act 2001 (Cth, Australia). If a winding up occurs underother provisions of the Act, the guarantee will only apply if after six months after a resolution or order for winding up any creditor has notbeen paid in full.
A Consolidated statement of comprehensive income and statement of financial position, comprising the Company and controlled entities
which are parties to the Deed of Cross Guarantee (each party being a member of the closed group as listed in Note E1), after eliminating
all transactions between parties to the Deed of Cross Guarantee, at 30 June 2023 are set out as follows:

Consolidated statement of comprehensive income and retained earnings for the year ended 30 June 2023
2023
$’000

2022
$’000

Revenue

1,400,813

1,273,571

Expenses(1,158,508)(1,058,365)

Finance income (net)30,874

8,140

Profit before tax

273,179

223,346

Income tax expense(69,032)(59,291)

Profit after tax

204,147

164,055

6,929

(654)

Other comprehensive income
Total comprehensive income for the year

211,076

163,401

Retained earnings at beginning of the year

1,212,969

1,048,914

Transfers to and from reserves
Retained earnings at end of year128

THE a2 MILK COMPANY(6,929)654

1,417,116

1,212,969

E3. Deed of cross guarantee (continued)
Consolidated statement of financial position as at 30 June 2023
2023
$’000

2022
$’000

AssetsCurrent assets
Cash and short-term deposits

713,042

797,296

Trade and other receivables

192,998

153,906

Prepayments

40,00949,229Inventories

164,112

95,678Other financial assets

1,291

–

Income tax receivable–

12,648

Total current assets

1,111,452

1,108,757

Property, plant and equipment

23,25115,802Right-of-use assets

10,967

12,460Investment property

17,927

15,663

Non-current assets

Intangible assets

13,723

14,441Other financial assets

606,522565,047

Deferred tax assets

20,892

18,424

Total non-current assets

693,282

641,837

1,804,734

1,750,594

286,230

338,987

2,141

832

Other financial liabilities

6,524

12,553

Income tax payable

35,220–Total current liabilities

330,115352,372

Total assets
Liabilities
Current liabilities
Trade and other payables
Lease liabilities

Non-current liabilities
Trade and other payables

421

416

Lease liabilities

235

12,517

10,396872

Other financial liabilities
Total non-current liabilities

11,05213,805

Total liabilities

341,167

366,177

1,463,567

1,384,417

Net assets
EquityShare capital
Retained earnings
Reserves
Total equity

100

149,157

1,417,116

1,212,969

46,351

22,291

1,463,567

1,384,417

ANNUAL REPORT 2023

129

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Other disclosures
for the year ended 30 June 2023

F. Other disclosures
F1. Related party transactions
Ultimate Parent
The a2 Milk Company Limited is the parent of the Group. The Group consists of The a2 Milk Company Limited and its subsidiaries as listed
in Note E1.

Key management personnel
Key management personnel are defined as those persons having significant authority and responsibility for planning, directing andcontrolling the activities of the Group, and includes the directors, and a number of senior executives.
Key management personnel compensation:

Short-term employee benefits
Other long-term benefits
Share-based payments

2023
$’000

2022
$’000

9,160

6,802

–

1

6,560

6,358

15,72013,161Other than non-executive directors, key management personnel in FY23 include the following senior executives:
Managing Director and CEO
Chief Financial Officer (from 18 October 2022)
Interim Chief Financial Officer (to 17 October 2022)
Chief Executive, Greater China
Transactions with key management personnel and their related parties
During the year there were no related party transactions with key management personnel or their related parties (2022: $nil).
Loans to key management personnel and their related parties
No loans were outstanding or made to key management personnel and their related parties at any time during the 2023 and 2022
financial years.

130

THE a2 MILK COMPANYF2. Share-based payments
Long-term incentives (LTI)
The LTI plan is designed to retain and motivate senior management to achieve the Group’s long-term strategic goals by providing rewards
that align the interests of management with shareholders.
During the period the Board authorised the issue of 2,472,270 performance rights to senior management under the LTI plan.
The performance rights vest subject to:– Continuing employment; and– Achieving the following performance hurdles over the performance periods:
Revenue CAGR hurdles
Performance rights grants:

Performance period

EPS CAGR

50% vest

85% vest

100% vest

3 years to 30 June 2024

20%

6%

8%

10%

3 years to 30 June 2025

10%

6%

8%

10%

FY22 plan
5,000 rights
FY23 plan
2,467,270 rights

Both the minimum EPS CAGR (compound annual growth in diluted earnings per share) and minimum Revenue CAGR (compound annual
growth in revenue) must be achieved for any vesting of performance rights. The minimum vesting proportion is 50%; thereafter, vesting is
on a straight-line basis.
EPS CAGR and Revenue CAGR are derived from the annual report of the Company for the relevant financial years and are subject toadjustment to remove the impact of material items as the Board may determine in its absolute discretion to normalise results (up or down)
to more appropriately reflect underlying performance. Without limitation, adjustments may be made to exclude the impact of unusual or
one-off items, discontinued operations, acquisitions and disposals, and capital management.
No amount is payable upon vesting of the performance rights and conversion to shares. Each exercised right is an entitlement to one fully
paid ordinary share in the Company.
Fair value of performance rights
The fair value of services received in return for performance rights granted to employees is measured by reference to the fair value of therights granted. The estimate of the fair value of the services received is measured by reference to the vesting conditions specific to the
grant based on a simplified Black-Scholes option pricing model.
Fair value of performance rights granted during the period and assumptions
Grant date

Fair value at measurement date
Share price at grant date
Performance rights life

30 Sept 22

6 Dec 22

13 June 23

$6.12

$6.77

$5.63

$6.12

$6.77

$5.63

2.9 years

2.7 years

2.2 years

ANNUAL REPORT 2023

131

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Other disclosures
for the year ended 30 June 2023

F2. Share-based payments (continued)
Performance rights granted in previous years
In FY22 performance rights were issued in two tranches to accommodate the deferral of the LTI programme in FY21. They have differing
performance periods and performance hurdles as set out below.
The performance rights vest subject to:– Continuing employment; and– Achieving the following performance hurdles over the performance periods:
Revenue CAGR hurdles
Performance rights grants:

Performance period

EPS CAGR

50% vest

85% vest

100% vest

Tranche 1 (FY21 plan)

2 years to 30 June 2023

Tranche 2 (FY22 plan)

3 years to 30 June 2024

20%

7.5%

10%

12.5%

20%

6%

8%

10%

Both the minimum EPS CAGR (compound annual growth in diluted earnings per share) and minimum Revenue CAGR (compound annual
growth in normalised sales) must be achieved for any vesting of performance rights. The minimum vesting proportion is 50%; thereafter,
vesting is on a straight-line basis.
EPS CAGR and Revenue CAGR are derived from the annual report of the Company for the relevant financial years and are subject toadjustment to remove the impact of material items as the Board may determine in its absolute discretion to normalise results (up or down)
to more appropriately reflect underlying performance. Without limitation, adjustments may be made to exclude the impact of unusual or
one-off items, discontinued operations, acquisitions and disposals, and capital management.
No amount is payable upon vesting of the performance rights and conversion to shares. Each exercised right is an entitlement to one fully
paid ordinary share in the Company.
The average fair value of the Tranche 1 and Tranche 2 awards at grant date was $7.18.
LTI outstanding as at 30 June 2023

NumberGrant Dates

Vesting Dates

Expiry Dates

Performance rights – FY22 grants Tranche 1 (FY21 plan)

1,752,286

22-Oct-21

21-Aug-23

21-Aug-23

Performance rights – FY22 grants Tranche 2 (FY22 plan)

2,080,611

22-Oct-21

21-Aug-24

21-Aug-24

2,261,612

30-Sep-22

21-Aug-25

21-Aug-25

Performance rights – FY23 grants

6,094,509

132

THE a2 MILK COMPANYF2. Share-based payments (continued)
Number
2023

Number2022

Performance rights movements:
Outstanding at the beginning of the year

4,690,064

881,060

Forfeited during the period(1,067,825)(546,310)

Granted during the period

2,472,270

4,355,314

Vested during the period––

6,094,509

4,690,064

Number
2023

Number2022

261,505

685,336–(3,080)

Outstanding at the end of the year
The weighted average remaining contractual life of performance rights is 1.2 years (2022: 1.5 years)

Time-based rights movements:
Outstanding at the beginning of the year
Forfeited during the period
Granted during the period––

Vested during the period(261,505)(420,751)–

261,505

Outstanding at the end of the year

Other employee equity schemes
In the period, employees not participating in the LTI plan were invited to participate in a gift offer scheme in which employees each
received Company shares to the value of approximately A$1,000.

Amounts recognised in the Consolidated statement of comprehensive income
During the year ended 30 June 2023, a $17,132,000 expense was recognised in the Consolidated statement of comprehensive income for
equity settled share-based payment awards (2022: $11,701,000).

Recognition and measurement
The grant date fair value of share‑based payment awards made to employees is recognised as an employee expense with a corresponding
increase in the employee equity benefit reserve, over the period that the employees become unconditionally entitled to the awards.
The amount recognised as an expense is adjusted over the period to reflect the number of awards for which the related service andnon‑market vesting conditions are expected to be met but is not adjusted when market performance conditions are not met.

ANNUAL REPORT 2023

133

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Other disclosures
for the year ended 30 June 2023

F3. Auditor’s remuneration
The auditor of the Company is Ernst & Young Australia.

Amounts received or due and receivable by Ernst & Young for:

2023
$’000

2022
$’000

1,400

1,586

177

118

178

240

1,755

1,944

Fees to Ernst & Young (Australia):
Fees for auditing the statutory financial statements of the parent covering the Group and auditing
the statutory financial statements of any controlled entities
Fees for other assurance and agreed-upon-procedures services
Fees for other services:
Market research1
Total fees to Ernst & Young (Australia)
Fees to other overseas member firms of Ernst & Young:
Total fees to other overseas member firms of Ernst & Young for local statutory audits

115

109

1,870

2,053

1 The market research reports prepared are solely for the Group’s internal use and contents of these reports are not subject to Ernst & Young audit.

F4. Subsequent events
No matters or circumstances have arisen since the end of the financial year which have significantly affected or may significantly affect theoperations, the results of these operations or state of affairs of the Group in subsequent periods.

134

THE a2 MILK COMPANY

Company
disclosures
For the year ended 30 June 2023

Contents
1. Substantial product holders

135

2. Voting rights

135

3. Twenty largest fully paid equity security holders

136

4. Spread of security holders as at 1 August 2023 and number of holders

137

5. Directors’ relevant interests and share dealings

138

6. Credit rating status

139

7. NZX Waivers

139

8. Particulars of notices or statements given to or approved by the Board

139

9. Limitations on the acquisition of securities

141

10. On-market buyback141

11. On-market purchases

141

12. Donations

141

13. Directors and officers

142

14. Employee remuneration range

142

15. Principal activities

143

16. Reconciliation of EBITDA to net profit after tax

143

1. Substantial product holders
The shares of the Company are quoted on NZX, ASX and Cboe Australia.
According to substantial product holder notices and the Company’s records, the following persons were substantial product holders in
respect of the ordinary shares of the Company as at 30 June 2023 (such disclosure being required by the Financial Markets Conduct Act
2013 (NZ)) and as at 1 August 2023 (such disclosure being required by the ASX Listing Rules):As at 30 June 2023

Name

Number ofordinary sharesin the Company
in which a
Relevant
Interest is held

As at 1 August 2023

Number ofordinary sharesin the Company
in which a% of ordinary
Relevant
shares held1 Interest is held

% of ordinary
shares held1

Perpetual Limited and subsidiaries

51,749,373

7.167

51,749,373

7.167

The Goldman Sachs Group, Inc

38,857,882

5.382

38,857,882

5.382

1 Based on issue share capital of 721,976,214 as at 30 June 2023 and 1 August 2023.

The total number of voting shares on issue as at 30 June 2023 was 721,976,214 and the total number of voting shares on issue as at
1 August 2023 was 721,976,214.

2. Voting rights
During the period 1 July 2022 to 30 June 2023, each fully paid ordinary share of the Company gave the holder the right to cast one vote pershareholder on a show of hands and one vote per share on a poll on any resolution. All votes cast at shareholder meetings are by way of poll.

ANNUAL REPORT 2023

135

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

COMPANY DISCLOSURES CONTINUED

3. Twenty largest fully paid equity security holders
The names of the 20 largest holders of ordinary shares in the Company as at 1 August 2023 are listed below:

Investor name

Number ofshares% Issuedcapital1

HSBC Custody Nominees (Australia) Limited

102,193,637

14.15

2

J P Morgan Nominees Australia Pty Limited

42,678,694

5.91

Rank

3

Citicorp Nominees Pty Limited

41,070,224

5.69

4

Bnp Paribas Nominees NZ Limited Bpss40*

32,248,620

4.47

5

Tea Custodians Limited*

25,502,735

3.53

6

HSBC Nominees (New Zealand) Limited*

22,757,500

3.15

7

HSBC Nominees (New Zealand) Limited*

22,307,717

3.09

8

Citibank Nominees (Nz) Ltd*

20,759,419

2.88

9

Accident Compensation Corporation*

19,790,745

2.74

10

JPMORGAN Chase Bank*

19,756,171

2.74

11

New Zealand Superannuation Fund Nominees Limited*

15,948,875

2.21

12

New Zealand Depository Nominee

15,850,202

2.20

13

National Nominees Limited

13,975,179

1.94

14

Bnp Paribas Noms Pty Ltd

10,635,729

1.47

15

Premier Nominees Limited*

8,734,699

1.21

16

HSBC Custody Nominees (Australia) Limited Gsco Eca

7,146,025

0.99

17

JBWERE (Nz) Nominees Limited

6,784,269

0.94

18

Public Trust*

6,316,029

0.87

19

HSBC Custody Nominees (Australia) Limited

6,000,490

0.83

20

Custodial Services Limited

4,931,622

0.68

445,388,581

62.00

Total

*	These shares are held through New Zealand Central Securities Depository Limited (NZCSD), a depository system which allows electronic trading of securities tomembers.

136

THE a2 MILK COMPANY

4. Spread of security holders as at 1 August 2023 and number of holdersa) Fully paid ordinary shareholders
Number ofholders

Number ofshares

%1 – 1,000

54,584

19,418,165

65.39

1,001 – 5,000

21,70552,693,474

26.00

5,001 – 10,000

4,146

30,773,605

4.97

10,001 – 100,000

2,861

68,990,542

3.43

174

550,100,428

0.21

83,470721,976,214

100

Size of Shareholding

100,001 shares or more
Total

As at 1 August 2023, and based on the closing market price on that date, the number of holders with 181 or less ordinary shares (being
less than a minimum holding of NZ$1,000 under the NZX Listing Rules) was 1,718 and the number of holders with 97 or less ordinary
shares (being less than a marketable parcel of A$500 under the ASX Listing Rules) was 10,511.

b) Performance rights (unlisted securities not quoted by the ASX or NZX)
Size of holding

1 – 5,000

Number of
Holders

Number ofrights

%

1

4,234

0.069

5,001 – 10,000

538,9160.639

10,001 – 100,000

39

1,583,045

25.975100,001 performance rights or more

15

4,468,314

73.317

Total

60

6,094,509

100

ANNUAL REPORT 2023

137

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

COMPANY DISCLOSURES CONTINUED

5. Directors’ relevant interests and share dealings
Directors of the Company reported the following acquisitions and disposals of relevant interests in financial products of the Company
during the period 1 July 2022 to 30 June 2023:

Beneficial/
Non-beneficial

Acquired/(Disposed)

Class of financial
product

Date

Consideration
paid/(received)
NZD

Beneficial

501,180

Performance Rights

30 September 2022

N/A

DMZSK Pty Ltd

Beneficial(155,641)

Time-based rights

2 February 2023

N/A

DMZSK Pty Ltd1

Beneficial

155,641

Ordinary shares

2 February 2023

N/A

Beneficial

30,000Ordinary shares

29 November 2022

187,905.90

Registered holder

David Bortolussi
DMZSK Super Pty Ltd

Pip Greenwood
The New Zealand Guardian
Trust Company Limited as
the supervisor for Craigs
KiwiSaver Scheme

1 Reflects the issue of ordinary shares to David Bortolussi following the vesting and automatic exercise of time-based rights.

Directors of the Company as at 30 June 2023 held the following relevant interests in the financial products of the Company as atthat date:
Beneficial/Nonbeneficial

Balance held
No.

Class of financial
product

Beneficial

1,055,000

Ordinary sharesDMZSK Pty Ltd as trustee of D&M Bortolussi Family Trust

Beneficial

311,283

Ordinary sharesDMZSK Pty Ltd as trustee of D&M Bortolussi Family Trust

Beneficial

969,483

Performance rights

Beneficial

501,180

Performance rights

Warwick Every-Burns as trustee of Wake Super Fund

Beneficial

75,000Ordinary shares

Kathryn Every-Burns

Beneficial

25,000Ordinary shares

Beneficial

30,000Ordinary shares

Beneficial

50,000Ordinary shares

Beneficial

1,000

Ordinary shares

Registered holder

David Hearn
David Lovat Gordon Hearn
David Bortolussi

DMZSK Super Pty Ltd as trustee for D&M Bortolussi
Superannuation Fund
Warwick Every-Burns

Pip Greenwood
The New Zealand Guardian Trust Company Limited as thesupervisor for Craigs KiwiSaver Scheme
Julia Hoare

1

Julia Cecile Hoare
Kate Mitchell
Forsyth Barr Custodian Limited
1 Retired on 30 June 2023.

138

THE a2 MILK COMPANY

6. Credit rating status
Not applicable.

7. NZX Waivers
There were no waivers granted and published by NZX following an application by the Company or relied upon by the Company during thereporting period ended 30 June 2023.

8. Particulars of notices or statements given to or approved by the Board
8.1 Interests register
The Company is required to maintain an interests register in which the particulars of certain transactions and matters involving thedirectors must be recorded. The interests register for the Company is available for inspection on request by shareholders.
Directors have declared interests during the reporting period ended 30 June 2023 as follows:– The Company has arranged and paid for policies for directors’ liability insurance which ensure that the directors are protected against
liabilities and costs for acts or omissions by them in their capacity as directors of the Company and its subsidiaries.
– The Company has provided Deeds of Indemnity to all directors for potential liabilities and costs they may incur for acts or omissions intheir capacity as directors of the Company and its subsidiaries.
– Directors’ relevant interests and share dealings as outlined in section 5, above.
– Julia Hoare, who retired as a director of the Company at the end of the reporting period, is a director of Meridian Energy Limited,which is expected to supply electricity to MVM under a new power purchase agreement following completion of the project to convert
MVM’s current coal-fired boiler to a high-pressure electric boiler. While Ms Hoare had no involvement in the matters which are thesubject of discussion between Meridian and MVM, the Company and Ms Hoare have a protocol whereby Ms Hoare abstained from all
Board discussions and decisions involving the supply of electricity to MVM in connection with the boiler conversion project, and did notreceive relevant Board papers or parts of any Board papers, where this occurred.
– During the reporting period ended 30 June 2023, directors advised the Company of the following changes or additional entries in the
Company’s interests register:Name of Director

EntityPosition

Pip Greenwood

Vulcan Steel Limited

Ceased to be a director

Warwick Every-Burns

Treasury Wine Estates Limited

Ceased to be a director

Julia Hoare

Primeport Timaru Limited

Appointed as a director

Julia Hoare

Northport Limited

Appointed as a director

Julia Hoare

Comvita Limited

Appointed as a director

Kate Mitchell

Chambers @ 151 Limited

Director and shareholder

Kate Mitchell

Christchurch International Airport Limited

Director

Kate Mitchell

Farmright Limited

Director

Kate MitchellFirsttrax Limited

Director and shareholder

Kate Mitchell

Heartland Bank Limited

Director

Kate Mitchell

Heartland Group Holdings Limited

Director

Kate Mitchell

Helping Hands Holdings Limited

Director and shareholder

Kate Mitchell

Link Engine Management International (NZ) Limited

Director

Kate Mitchell

Link Engine Management Limited

Director

Kate Mitchell

Morrison Horgan Limited

Director and shareholder

Kate Mitchell

The New Zealand Merino Company Limited

Director

David Wang

China’s State Agriculture Technology Innovation
Investment Consortium

Appointed as Vice President

No other entries were made in the interests registers of the Company’s subsidiaries during the reporting period.

ANNUAL REPORT 2023

139

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Company disclosures

COMPANY DISCLOSURES CONTINUED

8.2 Directors of subsidiary companies
The following persons held office as directors of subsidiary companies during the year ended 30 June 2023.
Subsidiary

Jurisdiction

Directors (or equivalent)

The a2 Milk Company (Export) Limited

New Zealanda2 Infant Nutrition Limited

New Zealanda2 Holdings UK Limited

New Zealand

The a2 Milk Company (New Zealand) Limited

New ZealandMataura Valley Milk Limited

New Zealanda2 Australian Investments Pty. Limited.

Australia

a2 Botany Pty Ltd

Australia

The a2 Milk Company (Australia) Pty Ltd

Australia

a2 Infant Nutrition Australia Pty Ltd

Australia

a2 Exports Australia Pty Limited

Australia

The a2 Milk Company (Nutrition) Pty Limited

Australia

The a2 Milk Company Limited

British Columbia, Canada

The a2 Milk Company Limited
The a2 Milk Company

Scotland, UK
Delaware, USA

The a2 Milk Company LLC

Delaware, USA

a2 Infant Nutrition (Shanghai) Co., Ltd.
The a2 Milk Company (Singapore) Pte. Ltd.

China
SingaporeDavid Bortolussi
Mark Sherwin (resigned 14 November 2022)
David Muscat (appointed 14 November 2022)
David Bortolussi
David Muscat (appointed 14 November 2022;
resigned 28 May 2023)
Ping Zhang (appointed 28 May 2023)
David Bortolussi
Mark Sherwin (resigned 14 November 2022)
David Muscat (appointed 14 November 2022)
David Bortolussi
Julia Hoare (resigned 30 June 2023)
David Bortolussi (resigned 28 May 2023)
Shareef Khan (resigned 5 December 2022)
Deyong Zhang
David Muscat (appointed 5 December 2022)
Ping Zhang (appointed 5 December 2022)
Mark Sherwin (appointed 22 July 2022; resigned
5 December 2022)
Cao Siyuan (appointed 22 July 2022)
David Bortolussi
Mark Sherwin (resigned 14 November 2022)
David Muscat (appointed 14 November 2022)
David Bortolussi
Mark Sherwin (resigned 14 November 2022)
David Muscat (appointed 14 November 2022)
David Bortolussi
Mark Sherwin (resigned 14 November 2022)
David Muscat (appointed 14 November 2022)
David Bortolussi
David Muscat (appointed 14 November 2022)
David Bortolussi
Mark Sherwin (resigned 14 November 2022)
David Muscat (appointed 14 November 2022)
David Bortolussi
Mark Sherwin (resigned 14 November 2022)
David Muscat (appointed 14 November 2022)
David Bortolussi
Mark Sherwin (resigned 14 November 2022)
David Muscat (appointed 14 November 2022)
David Hearn
David Hearn
David Bortolussi
David Bortolussi
Mark Sherwin (resigned 14 November 2022)
David Muscat (appointed 14 November 2022)
Xiao LiDavid Bortolussi
Mark Sherwin (resigned 14 November 2022)
David Muscat (appointed 14 November 2022)
Shaun SinghNo employee of the Company appointed as a director of the Company or its subsidiaries receives remuneration or other benefits in theirrole as a director. The remuneration and other benefits of such employees, received as employees, are included in the relevant bandings
for remuneration disclosed under Employee remuneration range in section 14.
140

THE a2 MILK COMPANY

8.3 Use of Company information
The Board received no notices during the reporting period ended 30 June 2023 from directors requesting to use Company information
received in their capacity as directors which would not have been otherwise available to them.

9. Limitations on the acquisition of securities
The Company is not subject to chapters 6, 6A, 6B and 6C of the Corporations Act 2001 (Cth, Australia) dealing with the acquisition of its
shares (including substantial holdings and takeovers).
Limitations on the acquisition of the securities imposed by New Zealand law are as follows:(i)	In general, fully paid ordinary shares in the Company are freely transferable, and the only significant restrictions or limitations inrelation to the acquisition of fully paid ordinary shares in the Company are those imposed by New Zealand laws relating to takeovers,
overseas investment and competition.
(ii)	The New Zealand Takeovers Code creates a general rule under which the acquisition of more than 20% of the voting rights in the
Company, or the increase of an existing holding of 20% or more of the voting rights in the Company, can only occur in certain
permitted ways. These include a full takeover offer, a partial takeover offer, an acquisition approved by an ordinary resolution, an
allotment approved by an ordinary resolution, a creeping acquisition (in certain circumstances) or compulsory acquisition if ashareholder holds 90% or more shares in the Company, in each case in accordance with the New Zealand Takeovers Code.
(iii)	The New Zealand Overseas Investment Act 2005 regulates certain investments in New Zealand by overseas persons. In general terms,
the consent of the New Zealand Overseas Investment Office will likely be required where an ‘overseas person’ acquires shares or aninterest in shares in the Company that amount to more than 25% of the shares issued by the Company or, if the overseas person
already holds 25% or more, the acquisition increases that holding.
(iv)	The New Zealand Commerce Act 1986 is likely to prevent a person from acquiring shares in the Company if the acquisition would
have, or would be likely to have, the effect of substantially lessening competition in a market.
The Company has complied with, and continues to comply with, the requirements of the NZX Listing Rules with respect to the issue of
new securities.

10. On-market buyback
During the reporting period ended 30 June 2023, the Company completed its on-market share buyback programme. Over the course of
the buyback programme, the Company acquired 21,680,314 shares, representing 2.9% of issued capital. The average price for thepurchases was $6.87 per share (excluding brokerage costs), for a total consideration of approximately $149 million (including brokeragecosts). The acquired shares have been cancelled.

11. On-market purchases
Other than the on-market buyback as set out above, no shares of the Company were purchased on-market during the reporting period
ended 30 June 2023.

12. Donations
The Company and its subsidiaries have made donations of cash and products totalling $2,840,890 during the year ended 30 June 2023
(2022: $3,159,176).

ANNUAL REPORT 2023

141

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Company disclosures

Financial statements

COMPANY DISCLOSURES CONTINUED

13. Directors and officers
Remuneration Range$ (gross)

Value of
Number of
exercised
employees inoptions andthe year ended
30 June 2023 rights included(based on actual in remuneration
range $
payments)$280,000 – $289,999

4–

At 30 June 2023 At 30 June 2022

$290,000 – $299,999

7–Directors

6

6$300,000 – $309,999

4–

Females3

3$310,000 – $319,999

5

–

3

–

For the purposes of NZX Listing Rule 3.8.1(c), the quantitative
breakdown as to the gender composition of the Company’s
directors and officers as at 30 June 2023 and 30 June 2022
is as follows:

Males

3

3

$320,000 – $329,999

Gender diverse––$330,000 – $339,999

5–

Officers

10

12$340,000 – $349,999

2–

Females33$350,000 – $359,999

2

–

Males

7

9

$360,000 – $369,999

1–

Gender diverse––$370,000 – $379,999

2–$380,000 – $389,999

1–$400,000 – $409,999

1–

14. Employee remuneration range$420,000 – $429,999

1–

The following table shows the number of employees and former
employees of the Company and its subsidiaries (not being directors
or former directors of the Company) who, in their capacity as
employees, received remuneration and other benefits valued at orin excess of $100,000 during the year to 30 June 2023.

$430,000 – $439,999

1–$460,000 – $469,999

1–$480,000 – $489,999

1–$510,000 – $519,999

1–$530,000 – $539,999

2–$550,000 – $559,999

1–$560,000 – $569,999

1–$590,000 – $599,999

1–$630,000 – $639,999

1–$670,000 – $679,999

3–

The remuneration bands are expressed in New Zealand Dollars.

Remuneration Range$ (gross)

Value of
Number of
exercised
employees inoptions andthe year ended
30 June 2023 rights included(based on actual in remuneration
range $
payments)$680,000 – $689,999

1–$100,000 – $109,999

26–$690,000 – $699,999

1–$110,000 – $119,999

24–$700,000 – $709,999

1–$120,000 – $129,999

26–$730,000 – $739,999

1–$130,000 – $139,999

16–$780,000 – $789,999

1–$140,000 – $149,999

22–$800,000 – $809,999

1–$150,000 – $159,999

11–$810,000 – $819,999

1–$160,000 – $169,999

18–$820,000 – $829,999

1–$170,000 – $179,999

11–$830,000 – $839,999

1–$180,000 – $189,999

9–$840,000 – $849,999

2

17,971$190,000 – $199,999

12–$970,000 – $979,999

1–$200,000 – $209,999

7–$990,000 – $999,999

1–$210,000 – $219,999

8–$1,080,000 – $1,089,999

1–$220,000 – $229,999

5–$1,190,000 – $1,199,999

1–$230,000 – $239,999

3–$1,350,000 – $1,359,999

1–$240,000 – $249,999

9–$1,520,000 – $1,529,999

1–$250,000 – $259,999

2–$1,750,000 – $1,759,999

1–$260,000 – $269,999

3–$2,280,000 – $2,289,999$270,000 – $279,999

4

–

Total

142

THE a2 MILK COMPANY

1561,511286

579,482

The table includes base salaries, short-term incentives, contributions paid to an individual’s superannuation fund, or, if an individual is a
KiwiSaver member, contributions of 3% of gross earnings towards that individual’s KiwiSaver scheme, and exercised options andperformance rights. The table does not include amounts paid after 30 June 2023 relating to FY24, and long-term incentives that havebeen granted and have not yet vested or been exercised (as applicable).

15. Principal activities
There were no significant changes to the nature of the business of the Company (or its subsidiaries) or to the classes of business in which
the Company (or its subsidiaries) had an interest during the year ended 30 June 2023.

16. Reconciliation of EBITDA to net profit after tax
Earnings before interest, tax, depreciation and amortisation (EBITDA) is a non-GAAP measure. However, the Company believes that itprovides investors with a comprehensive understanding of the underlying performance of the business.
2023
$’000

2022
$’000

Group EBITDA

219,298

196,214

Depreciation and amortisation(18,197)(18,929)

EBIT

201,101

177,285

Interest income

26,7336,569

Interest expense(4,972)(2,467)

Income tax expense(78,021)(66,646)

Net profit after tax

144,841

114,741

155,638

122,624

Attributable to:
Owners of the Company
Non-controlling interests(10,797)(7,883)

144,841

114,741

ANNUAL REPORT 2023

143

Chair’s letter

CEO’s year in review

Building a sustainable growth businessCorporate governance

Financial statements

Corporate directory

Company

The a2 Milk Company Limited

New Zealand share registry

Link Market Services Limited
PO Box 91976
Victoria Street West
Auckland 1142
New Zealand
Telephone: +64 9 375 5998

Australian share registry

Link Market Services Limited
Locked Bag A14
Sydney South NSW 1235
Australia
Telephone: +61 1300 554 474

Registered offices

Level 1051 Shortland Street
Auckland 1010
New Zealand

Level 4
182 Blues Point Road
McMahons Point NSW 2060
Australia
Telephone: +61 2 9697 7000

AuditorErnst & Young
200 George Street
Sydney NSW 2000
Australia

Company Secretary

Jaron McVicar

Corporate website

www.thea2milkcompany.com

144

THE a2 MILK COMPANY

Company disclosures

ANNUAL REPORT 2023

145

thea2milkcompany.com

The a2 Milk Company Limited (Australian Registered Body Number 158 331 965 – Incorporated in New Zealand)