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A2 Corporation

By Dan Stratful

Monday 31st October 2011

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A2 Corporation (NZX: ATM ) owns and commercialises unique intellectual property (patents, trademarks, proprietary processes) relating to a2 Milk and related products in international markets. A2 Milk is dairy milk which contains primarily the A2 type of beta casein protein whereas most standard milks contain a mixture of A1 and A2 beta casein.

A2 Milk is naturally obtained from cows tested and confirmed to be A2 producing. ATM has operations in Australia and New Zealand while pursuing international growth opportunities.

ATM’s strategic review of its business model has shown instant results, as the company repositions itself from a company earning revenue from its intellectual property, to a fast moving consumer goods (FMCG) company making sales of A2 milk. The move has showed immediate results with the company reporting a maiden preliminary net profit of $2.1 million in the year ending 30 June 2011, a vast improvement on several years of losses, including a $2.2 million loss in the previous financial year.

The result was a significant milestone for ATM and a direct result of its repositioning into a differentiated, branded, consumer goods and ingredients company. It has acquired its former JV partner A2 Dairy Products Australia giving it a dairy milk business in Australia, while also constructing a processing facility in Sydney to support continued growth.

During the year ATM reported strong growth in the Australian business which saw A2 Milk sales volumes increase 32% to 21.6 million litres giving it an estimated market share in the grocery channel of 4.2%. ATM’s maiden profit is encouraging but it needs to show more evidence that its bold new strategy is delivering results. In the meantime the shares are worth watching.

Status: HOLD

ATM shares last traded at 24c.

For sharemarket and fixed income trading enquires contact:
Dan Stratful at Investment Research Group (IRG)
Authorised Financial Adviser (AFA)
0800 437 8489, 09 304 0232,
**A disclosure statement is available, on request and free of charge.

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