Australian Dairy Nutritionals (ADN) FY21 annual report reveals significant milestones including the near completion of its vertical integration strategy, a new executive appointment and unexpected financial results.
As part of the group’s transition to a fully vertically integrated speciality infant formula and nutritional producer, ADN completed its key FY21 goal of constructing a new infant formula plant in Victoria.
Financial lows and new goals
The group has expressed FY21’s financial result was ‘very disappointing’.
Compared to the group’s FY20 total income, ADN experienced a marginal decrease, achieving $21.7 million and an operating EBITDA loss of $2.99 million. Its farm portfolio had an operating EBITDA of $1.44 million while the processing segment recorded $2.03 million.
With the yoghurt category being one of the most competitive divisions in Australia, ADN’s low demand of its The Collective brand has been a significant factor in driving down the group’s processing segment and affecting its FY21 financial results.
The group also credits high farm gate milk prices as a negative impact on its processing segment, with the average price per litre being 4 cents higher, directly impacting the costs of raw materials.
While ADN’s financial result did not meet its expectations, the group has set three key goals it will pursue in FY22, building upon its vertical integration strategy.
1. New launch: two new infant formula ranges will be added to the dairy group’s portfolio, including an organic A2 infant formula range which will be manufactured in the company’s newly constructed Victorian plant.
2. Investment: the company will support its speciality milk production by funnelling funds into its farming operations and leverage the farms’ environmental and sustainable aspects.
3. Peak performance: the group will ensure its business assets and arrangements are contributing to the company’s core objectives through optimisation of its operations.
Farms and milk production
With good weather conditions in Southwest Victoria and high farm gate milk prices, the company reported a positive farm performance with an operational EBITDA of $1.44 million.
Primarily derived through lower fodder and pasture maintenance costs, the group reported an increase of $400,000 for its farm segment when compared to FY20.
In February, ADN sold its Drumborg farm and entered an unconditional agreement to sell the Ecklin South farm. This came after the group conducted an analysis of its farm portfolio compared to milk production requirements, recognising that downsizing the farms owned was necessary to suit future manufacturing requirements.
Through the $12 million the group expects to raise with the sale of the two farms, ADN will pay out its finance facility completely before reaching maturity in early October and utilise its remaining three farms to focus on speciality milk production. ADN said by the end of the year all three farms will receive organic pasture certification and two of three farms are converting to organic A2 protein milk production.
To fund the company’s high speed infant formula and canning line acquisition, ADN raised $7.7 million from new and existing securityholders, the finance will also be used to invest in the launch of its two new infant formula ranges.
Distribution
With online deliveries becoming common for household staples, the group’s home delivery channel was able to capitalise on this occurrence and has employed a general manager for expansion, website development and service improvement purposes. The group plans on expanding the service in Victoria during FY22.
Camperdown Dairy has also acquired all assets of ADN’s wholesale distribution facility Jonesy’s Distribution, along with 100 per cent of its Jonesy’s Dairy Fresh brand in FY21. To reduce operational workload, the group has outsourced logistics to Melbourne based distributor Sealane, which will distribute all of Jonesy’s Dairy Fresh products.
New appointment
To replace Michael Hackett and Paul Morell who both retired in FY21, Jason Dong has been appointed as the group’s new non-executive director with a focus of expanding the company into Asia.
Having worked previously to promote international trade and industry relations with Australian and Chinese organisations, Dong will provide insight for the group’s objective of establishing distribution relationships in China and Asia overall.
