Thank you for standing by, and welcome to The a2 Milk Company Limited FY 2021 results release. All participants are in a listen-only mode. There'll be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by one on your telephone keypad. I would now like to hand the conference over to Mr. David Muscat. Please go ahead. Hi, everyone. Thanks for joining the call today. Given the lockdown restrictions in various geographies, we're all dialing in from different locations. We're cognizant that COVID-19 restrictions will likely be affecting you as well and hope you and your families are safe. On the call today, we have David Bortolussi, our Managing Director and Chief Executive Officer, and Race Strauss, our Chief Financial Officer. David and Race will present the full year results, some additional updates, and our outlook, and there'll be time at the end for questions. With that, let me hand it over to David Bortolussi. Thanks, David, and good morning, everyone. There's no hiding from the fact that this past financial year has been a very challenging year for a2. The company was impacted by unprecedented levels of uncertainty and volatility due to the prolonged impact of COVID-19 and a rapidly changing China infant nutrition market. That said, there are areas of the business that performed well, with market share gains in our China label infant nutrition business and Australian fresh milk businesses. We were impacted by China market growth reducing significantly and disruption to cross-border English label infant nutrition and other nutritional sales, which we have updated the market on previously and taken actions to address. We've commenced our growth strategy review, while I can see many opportunities to drive growth and create value in the future, the near-term outlook in FY 2022 is challenging, and it will take time to recover due to a soft outlook for the China infant nutrition market and the ongoing impacts of COVID-19 on our English label business. Moving to slide five and a summary of our results and additional updates we've announced today. Group revenue came in at NZD 1.21 billion with an EBITDA margin of 11.1%, excluding MVM costs. Both of these are within the guidance range we provided in May, and Race will take you through the financials in more detail in a moment. We've responded to the challenges that we've had this year and focused on a number of key initiatives in the second half. In particular, we've taken aggressive action to address excess inventory issues, which I'll provide an update on shortly. Rebuilt the executive team and reorganized the Australia Pacific organization to provide more management focus on our key businesses. Increased our planned investment in our brand in China to drive demand. Commenced our growth strategy review, which we'll provide an update on to the market, and completed the MVM acquisition in partnership with China Animal Husbandry Group and reviewed capital management options. I often get asked about our brand health, which we track regularly. Our brand health is strong overall. China label has improved consistently, and while English label metrics weakened somewhat in the earlier part of the year, there was some improvement in the fourth quarter on the back of our China marketing campaign. Turning to slide six. Given the significance of the actions taken in the fourth quarter, we thought it was important to provide an update on this upfront. Channel inventory dynamics are improving as a result of the actions we took. Our own inventory has reduced, reflecting the stock write-down and related initiatives, and the age of stock we are selling to customers for both China and English label has improved significantly. As far as inventory in the channels is concerned, China label inventory is approaching target levels with some further rebalancing required in the first quarter. For English label, inventory across CBEC and Daigou has improved and is at target levels. A combination of these actions, plus swapping longer-dated stock with distributors, is improving our product freshness at retail for our consumers, particularly compared to what it would otherwise have been if we hadn't taken the action. Visible market pricing in C. CBEC and some Daigou channels has improved. There is still some aged stock from last year being sold by certain wholesale traders and online platforms, which is holding back some of our price recovery. It is difficult to tell with certainty, we are expecting that this will clear in the first half, probably by the end of the 11.11 peak trading event. I'll now hand back to Race to take you through the financials. Thanks, David. Good morning, everyone. I hope everyone's keeping safe and well. Turning to slide eight in the key financials. As David's already noted, FY 2021 was a challenging year, impacted by unprecedented levels of uncertainty and volatility due to COVID-19. Revenue for the year was particularly impacted by the challenges in English label, as well as actions taken in the second half to address the excess channel inventory. To pull out some key points relating to the financial results of the business. Breaking down the revenue result, group revenue declined by 30%. Importantly, our China business label delivered growth of 15%. China label now represents the highest revenue of all segments of the group. The English label result was poor, with CBEC decreasing 51% and Daigou sales decreasing 52%. As you're aware, a number of initiatives have been put in place to address this and rebalance the inventory levels in the trade. Fresh milk in Australia performed very well, growing over 10%, as well as gaining share. Revenue in the U.S. decreased by 3.7%. However, the losses were substantially reduced by NZD 17 million. Gross margin decreased significantly, primarily due to the NZD 109 million stock write-down. I'll touch on gross margin in a bit more detail on the next slide. The shape of the P&L was impacted by a number of costs below gross margin. Distribution costs were higher. This was due to the increased shipping rates and U.S. freight, which have also been impacted by various COVID-19 related restrictions. We have incurred higher warehousing costs due to the higher levels of inventory held throughout the year. Marketing investment was lower than FY 2020, but broadly in line for China and Australia. In other words, the lower spend reflects the change in approach in the U.S. for the year. Employee costs were lower overall, mainly due to the reduction in incentive benefits. However, this was partly offset by our continued investment in our people. We added people in China and further improved our corporate capability. Admin and other costs were lower as a result of reduced consulting costs, offset by the ERP implementation cost and a significant increase in insurance premiums. I also want to point out that our effective tax rate was marginally higher than last year due to the proportional increase of the U.S. losses and the MVM acquisition costs, which are not tax-deductible. Our NPAT was therefore NZD 81 million, which represents a 79% decline from prior year. Coming back to gross margins on slide nine, the decrease in FY 2021 was primarily due to the stock write-down. However, there were some additional factors as well. Liquid milk represented a higher proportion of sales relative to infant nutrition compared to last year. Within infant nutrition, the reduced amount of the higher margin English label products have impacted our gross margin. Additionally, we experienced adverse foreign currency movements, particularly in the second half. COGS was a bit higher, driven by the increase in milk prices. The underlying gross margin, if you back out the one-off stock write-down, was 51.3%. Moving to slide 10. Our balance sheet remains in a strong position, with closing cash position at NZD 875.2 million. Operating cash flow for the year was NZD 89 million, significantly behind the prior year due to the lower sales and the fact that the inventory was not converted into cash due to the stock write-off. The business made a number of key strategic investments during the year, including the Kyvalley milk processing facility, the ERP implementation, and the Synlait capital raise. Despite these investments, the business was still able to generate a net positive cash flow of NZD 21 million. Post-year-end, we utilized NZD 268 million to complete the acquisition of MVM. I'll now hand back to David. Thanks, Race. I'll take you through the regional performance for infant nutrition, and then I'll hand back to Race to take you through liquid milk for ANZ and the U.S. and other nutritionals. The China infant nutrition market structure is changing rapidly after many years of strong growth. In volume terms, the market decreased in FY 2021, primarily driven by a significant reduction in the birth rate impacting early-stage products, partially offset by an increase in product penetration. Value growth was flat as premiumization was not enough to offset the decrease in volume and was partially offset by increased promotional activity. Competitive intensity has increased, and local players continue to gain share against the traditional multinational brands, driven both by the strength of local brands in domestic channels as well as an overall mix shift from cross-border to domestic channels. Our China label infant nutrition sales grew 15% for the year. However, sales in the second half decreased 7%. This reflected the impact of the actions we took from the fourth quarter to reduce channel inventory, the cycling of a higher comparative period, as well as the lower birth rate and increasing competition just mentioned. While our ex-factory sales reduced, it is important to note that our retail sales, that is our sales from mother and baby stores to consumers, as measured by Nielsen, were stronger than our ex-factory sales and ahead of MBS market growth, resulting in an increase in share. We invested in the brand and via in-store activation, particularly in the fourth quarter, which we've illustrated in the next slide. The MBS channel continues to be a great opportunity for us to engage with our consumers and increase our distribution and gain market share. On slide 14, we highlight some of the key activities during the year in terms of brand comms as well as investment in point-of-sale materials, promotional people, mama classes, and large-scale roadshows, which our China team execute exceptionally well. Our 12-month rolling market value share in MBS was 2.5% at the end of June, versus 2.4% at the end of December and 2% at the beginning of the financial year. Distribution has also increased to nearly 23,000 stores, and we have increased the proportion of the marketing investment allocated to China. Turning to slide 16. I won't labor the points here. We believe that the actions taken in the fourth quarter will put us in a better position for FY 2022 than we would otherwise have been in. We are also improving the way we operate to gain better control of inventory and increasing channel visibility. There's been a reduction in overall inventory as well as an improvement in product freshness, and market pricing has improved since our May announcements. Slide 17 shows our market value share in CBEC and Daigou. The challenges we have experienced in English label channels clearly put pressure on our share. I also want to point out, as I'm sure it will come up in Q&A, we are again showing Kantar data. Kantar data has been expanded and covers a broader range of consumers, which we think is more representative of the business and the market. While limitations still exist, it remains the only comprehensive source for Daigou sales and share data. I'll hand over again to Race to take you through the other regional updates. Thanks, David. Moving to slide 18. It was another good year for the Australian fresh milk business, with double-digit revenue growth in a mature category, as we have continued to invest behind the brand. We are also pleased to have achieved another record market share of 12.2%. As the brand over-indexes in retail versus out-of-home, the first half benefited from the impact of COVID-19 restrictions, growing at 17%, with growth in the second half reducing to a more moderate 6% as restrictions were lifted. This consistent performance over a number of years highlights the importance of continued brand investment alongside high-quality products to drive awareness, loyalty, sales, and share. Some images on Slide 19 show some of the investment activities and also the in-store executional excellence delivered by our passionate team. Turning to slide 20. It was an extremely difficult year in our other nutritional segment. Revenue was down 38%, also impacted by the challenges in the Daigou and reseller channel. We are examining our product and channel approach as part of the growth strategy review to drive demand and ensure other opportunities are explored to maximize the full potential of this segment. We shifted our execution approach in the United States in FY 2021 with lower marketing investment and increased price investment with the objective of improving conversion, household penetration, and shelf presence. The business leveraged trade investment to being priced to an affordable premium, as well as increasing range, facings, and improving overall shelf positioning. Overall, for the year, revenue decreased by 3.7% within an improved EBITDA result. Revenue in the second half was down 23%. This does reflect a reduction in distribution due to the exit of a club channel customer across a number of regions in the U.S., as well as unfavorable foreign exchange and the phasing of trade spend being more weighted to the second half. Volume growth for the year was up 13%, or 26% up if you exclude the major club customer. Slide 22 shows some of the key marketing, trade, and PR activities undertaken to build the brand and to engage with consumers. Despite spending less in marketing and more in trade and price activities, we ranked in the top two brands in the category for brand loyalty and realized an increase in prompted brand awareness. Slide 23 shows our national footprint with distribution now up to 26,800 stores. Turning to slide 25. Post-year-end, we completed the acquisition of the 75% interest in Mataura Valley Milk. We're pleased to have formed a partnership with China Animal Husbandry Group. The strategic rationale for this acquisition is very strong, but it will take some time to realize all the benefits this acquisition brings. It had previously been expected that post the acquisition, MVM would process additional third-party volumes. However, due to the changing dynamics in the market, this has been significantly reduced. In addition, we have now revised down the volume assumptions that our products will be transferred to MVM during this transitional period. This will increase the EBITDA loss expected from MVM in FY 2022 to NZD 20 million for the 11 months compared to NZD 10 million that we indicated previously. We still expect MVM will return a positive EBITDA during FY 2025. MVM is exploring further business development opportunities and will seek to work with additional third parties to improve its financial performance. I draw your attention to slide 26, which is one we've shown before to highlight our capital allocation framework. I won't go through this in detail now, but of course, I'm happy to address any questions. The key point is that the framework prioritizes investment in growth initiatives ahead of returning capital to shareholders. We indicated in our May announcement that the board would consider a potential share buyback and that we'd provide an update in our results. Capital planning is an ongoing activity for management and the board, and our current capital planning process is considering how to maximize the value of our strong capital position in line with our growth strategy. The board is currently of the view that there is greater opportunity to create value by investing in the business and through potential acquisitions to complement existing operations rather than returning capital to shareholders. We also consider it prudent to maintain a conservative cash reserve in these uncertain times. This is particularly relevant in the context of volatile consumer markets, which continue to be impacted by COVID-19. The board has therefore decided not to undertake any capital returns at this time. It's important to note that while several mechanisms are available when considering the return of excess capital to shareholders, the effectiveness of these options is impacted by our ownership structure and taxation profile. For any potential on-market share buyback, consideration would need to be given to the company's available subscribed capital, which at the end of 2021 was in the order of NZD 175 million. Handing back to David now. Thanks, Race. As you know, in May, we also announced we were commencing a growth strategy review to consider how best to respond to the change in China market dynamics. The review is underway, and we will update the market on October 27 through a virtual event with our wider leadership team. The review is focusing on the China infant nutrition opportunity, particularly how to maximize our China label growth and evolve our English label distribution channels. It's also focusing on rethinking our product portfolio and developing an innovation pipeline, as well as capturing adjacent growth opportunities. A further aspect that we are focusing on is how we enhance our brand positioning and comms to ensure continued distinctiveness and relevance to Chinese mothers. Turning to slide 29. In FY 2021, we made significant progress in our sustainability agenda. We're proud of what we are doing in this space for our people in animal welfare and farm environmental plans and through various community support programs. We've made a number of commitments and invested in initiatives to operate in a way that creates a positive impact on the planet, particularly in relation to addressing coal-fired boilers at Synlait and MVM. We plan to provide further details on our goals and strategy at our Investor Day in October. Slide 30 shows our executive leadership team. There were some vacant positions when I started, and I've also bolstered the team recently to build capability and provide more dedicated management focus on our key businesses and global functions. Hopefully, you'll be able to meet and engage with the team virtually at our Investor Strategy Day in October. Turning lastly to our outlook. Over the past year, it's been necessary for the company to provide specific guidance updates in response to market dynamics and company-specific factors materially impacting our outlook at the time. In our announcement released this morning, you will see that we have provided qualitative outlook in relation to FY 2022 to provide the market with the company's expectations in relation to the potential shape of our results this coming year. We appreciate given the challenging result this year and continuing uncertainty and volatility, that a detailed qualitative outlook is necessary, and we've tried to be helpful in this respect. I don't propose to read out the outlook in its entirety, but we'll summarize key aspects of it now. I would encourage you all to review and consider the full statement we have provided, which takes precedence over my comments now. In summary, we expect the following in relation to FY 2022. We expect the China infant nutrition market will reduce in value, due mainly to a sharp decline in the birth rate. Our China label business will grow sales and achieve a modest increase in share. A wide range of outcomes is possible for our English label business, and that the company is targeting sales stabilization. Our Australian and U.S. milk businesses will deliver modest growth. We've quantified the sales and earnings impact of including MVM, which as Race just mentioned, is a greater loss than expected due to lower volume assumptions. From a phasing perspective, first half of 2022 group sales to be marginally lower and our second half sales to be significantly higher than PCP respectively. Gross margin percent to be broadly similar to FY 2021 levels, excluding the impact of stock write-downs, but before taking into account MVM in FY 2022. A planned increase in our marketing and capability investment, MVM and other factors will increase total SG&A significantly. In terms of EBITDA, it's difficult to predict with precision the wide range of outcomes possible with respect to FY 2021 levels before the impact of stock write-downs. Finally, from a net profit after tax perspective, the market should expect an increase in depreciation and a higher effective tax rate in the range of 37%-39%, due mainly to the inclusion of MVM. That takes me to the end of the presentation, so I'll pass back to David Muscat to move us on to Q&A. Thanks very much, David. I'll ask that we open up for questions now. If people can limit themselves to two questions, please, and then, please rejoin the queue. Rachel, can you please open up for the first question? Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Larry Gandler with Credit Suisse. Please go ahead. Thanks, guys. Can you hear me? Yeah, I can, Larry. My second question relates to the English Label. Just wondering if you could talk to how you think it's positioned now and how you want it positioned in the market, given that Chinese consumers are more prepared to buy locally made products and perhaps buying that on the basis that there are additives and improved quality? Where does that position the English Label? What's the differentiating feature for that brand today? Or where do you want to get to? Well, I think our English Label business has been and continues to be positioned well. We have one of the most premium brands in the market. The quality of our product, its New Zealand source, and the overall a2 proposition, which we have leadership on the market, has always been a compelling proposition, together with somewhat of a lifestyle positioning around the brand as well. That still holds true. I guess what's happened to us as this COVID-19 has disrupted our cross-border business is we have lost the activity and support of a proportion of thousands of Daigou that have helped build the brand successfully. That's the area that, I think from a product and brand positioning point of view, I think the proposition still holds. We've just lost that push marketing. We've got to work creatively to think about how we can continue to generate that demand pull for the product going forward. I think over time, you mentioned product formulation, and that leads me to innovation. We've had a very narrow portfolio that's been incredibly successful over time, and we haven't had the need to innovate. Going forward, we'll share some thoughts on this in our strategy day, we definitely need to innovate going forward in formulation and breadth of our portfolio as well to drive growth. Fantastic. Thanks, David. Thank you. Your next question comes from Chelsea Leadbetter with Forsyth Barr. Please go ahead. Thanks. Morning, team. Maybe if I can start with China Label and conscious the fourth quarter had quite a few moving parts in it, but obviously quite a big step down versus recent trends. I guess I'm interested in how much of that is actually your intended work to reduce channel inventory, and maybe if you can give us any color or how we should be thinking about the increased marketing spend that is going through that area and what that's actually driving. I'm just trying to get a little bit more context on almost the underlying exit run rate, if you like. Chelsea, most of that decline is due to the Well, there's a few things going on in the China Label business. Overall, the 15% growth was strong for the year, but as you point out, the second half was, the reported number was down, 7%. There's a lot going on there and driving that result. We're obviously cycling COVID-19 in the previous year that led to a spike in demand. The market is slowing and competition is getting more difficult, as I was just discussing. Inventory rebalancing in the second half and particularly in the fourth quarter did have an impact. We haven't quantified that explicitly, but we did pull back on our shipments into distributors, and our distributor shipments out to some extent to retail. There's a little bit of that rebalancing that needs to happen, but we're still working on in the first quarter of this year. The MBS sales at retail, as measured by Nielsen, were pretty healthy for the period. They were significantly higher. They were something in the high teens, I think, for the second half, which was greater than channel sales as measured by Nielsen. That's why our share obviously went up in the second half. The combination of our rebalancing has really had an impact on that, plus cycling a tough comp. What's encouraging is that our retail sales, which is the most important thing in MBS and also in Dole, has been pretty positive throughout the period. I'll also highlight currency. Currency's had not an immaterial impact. The second half was down 7%, but if you did it on a constant currency basis, it was down 2% as well. There's a lot going on in that second half for our China Label business. Hopefully, that provides you a bit more color. Yep. No, appreciate it. Just second question for me. MVM, I appreciate you've given us a bit of context on your revised thought process here. What I'm trying to understand is, it has changed a couple of times now. How confident are you in the revised assumption sets around what you're transitioning of your product to that facility and maybe just how we think about the path from FY 2022 to get you to profitability as you've continued to articulate, when we get to FY 2025, and also the CapEx spend potentially along that way? I'll hand to Race on this in a moment. He's been pretty close to this transaction over the period. I'll just reemphasize the long-term importance of that acquisition and the partnership we have there. For me, I'm supportive of the acquisition. I think it makes entire sense for the future and future-proofing our business. Strategically, the partnership we have with China Animal Husbandry Group in relation to MVM is really important for us from a market access point of view, insight in terms of the market and relationships, etc. That's a really important partnership that we have forged with China Animal Husbandry Group in addition to State Farm, China State Farm, which we already have a partnership with. As you know, probably know, that both of those entities are part of CNADC, which is a really important state-owned enterprise. That's extremely important. Secondly, the diversification of our supply chain risk. We've had this great relationship with Synlait, which continues. Having all of our registration and production in one facility in Dunsandel is a level of concentration that we're not comfortable with in the long term. We hope that we're able to develop a dual source proposition with Synlait over time, this will also provide us the opportunity to get closer to manufacturing and innovation opportunities for us going forward. The strategic rationale still hold strong. In the meantime, volume impacts have impacted the near-term financial outlooks for MVM. I'll let Race perhaps answer some of the other questions that you raised. Yeah. Hey, Chelsea. Look, you're absolutely right. The big issue that we've got with MVM, like the issue that we had, the market being down in IMF, means that the third-party sales that they had, have also come down. That's one big issue, that the assumptions that we had and the volumes that they had, their forward orders have come down significantly for their third parties. Secondly, we are very clear what we were going to transfer during the transitional period. Unfortunately, as our volumes have dropped, we're unable to make the quantity of the transfer that we thought. Those two issues is what's really driven down the assumptions. In terms of the path to profitability, it is the same. We are confident that we can get this business to profitability. As David said, the strategic intent is absolutely there, and we do believe that we can navigate to get this business to profitability using our volume. In terms of CapEx, yes, we've been very clear that we will invest in terms of building capabilities, particularly in the labs and things like that. The business, over time, we will continue to invest, but of course, we will adjust that investment in line with the market. Therefore, our plans will adjust as they have for further expansion. Of course, we wouldn't do until the market has recovered. Hopefully, that answers your questions. Yep. No, thank you very much. Appreciate the call. Thank you. Your next question comes from David Errington with Bank of America. Please go ahead. Morning, David. Morning, Race. Maybe, Race, this might be to you, although, David, you might want to provide a bit of color, too. My first question is on margin and the outlook for margin going forward. Race, I think your gross margin, if we exclude the write-down, went from 56%- 51%. If I read it correctly, you're basically saying that 51% is going to sustain in FY 2022. That's largely because of COGS increases, mix, et cetera. Expect the gross margin. What not worries me, but it's a statement of reality. Your cost of doing business in FY 2022 is gonna be sizably higher because you have to increase marketing spend back to FY 2020 levels, which is roughly, what's that? About NZD 25 million. Employee costs are gonna have to return. You've got Mataura Valley Milk costs are gonna go in there. You're probably looking about a NZD 50 million increase in your cost of doing business on a flat gross margin. Is that the right way to read through to cut through your commentary with regard to your outlook? Yeah. Thanks, David, and I hope you're well. Yeah Let me try and help you there. Gross margin, yeah. If we take the FY 2021 gross margin and you add back the obsolete stock provision. Yeah You'll get to about what the underlying number is, but you then you do have to overlay MVM on top of that, which will take that margin down by 3% or 4%, because we, of course, have to consolidate MVM. Right. That's the first thing. In terms of then sort of the other investments, you're right that we will be increasing our marketing costs, as we've certainly said. With regards to overheads, we'll get some reversal of costs like the ERP and the MVM acquisition costs. However, they'll be more than offset when we have to put back the incentive type costs. We expect there'll be a little bit of travel. Actually, our gross margin, our overheads will be higher than FY 2021. To clarify, I think if we do gross margin, because I'm not that smart, I'm pretty basic as David will attest. I think your gross margin in FY 2020 was 56%. Excluding the write-down, it dropped to 51%. What you're basically saying is you're gonna get NZD 80 million of sales from MVM, but your gross margin is gonna drop to 47%. That's basically what you're saying on gross margin, we can do the calculations on your cost of doing business line. That's pretty well to summarize, not putting words in your mouth, that's basically what you're saying, what's gonna happen. You're a little low on the gross margin. I'd go up a little bit. In principle, yes, your logic is right. Right. Your math is slightly wrong. I'd lift it a little bit. A little bit, yeah. 48% point Yeah, okay. The gross margin- David, most of the reduction in the underlying business is mix-driven. There's a little bit of COGS pressure, but most of it's mix. What you've just worked through then is roughly right. Yeah. Okay. The second question, David. This is a bit more of a generic one. Well, it's not generic. It's getting to the guts of the future of a2. Obviously, investors are wondering whether we're catching a falling knife or whether you're actually going to stabilize this business and to grow. It looks as though, as you're saying, you're working hard to stabilize it. First half's going to be tough, but then you're expecting a significant improvement in the second half. I know that you're going to give us a bit of an outlook and you're going to have got some ideas. Clearly, I know you too well. You've got ideas and plans, and you want to keep that to yourself in October. Can you give us a few sniffs, two or three key points as to why we should believe that second half is going to be sizably better? You've said that the China market is really tough. You've said that it increased competition. You've said all of this. It's really tough now. It's a different market. Why should you get a better second half in terms of sales performance? Why should we? Two or three key points. I know you're going to try to keep it to October, but I think we deserve a little bit of a presway, if you like, or a precursor as to why we think 2022 second half is going to be better. Well, it's a great question, David. The second half of this year obviously was impacted by market conditions and also the general inventory issues we had and inventory rebalancing. In effect, when you look to the second half of this coming financial year, we are cycling, hopefully, what should prove to be a softer comp in FY 2021. When I look into the second half of this current financial year, in essence, we've got four businesses. Three of them are performing pretty well at the moment, and one of them, well, in accordance with plan, and one of them is challenging. Our China label domestic business has grown 15% during the period. If you look at retail sales and you adjust for currency, it's actually better than that. The market is slowing a bit. The China label domestic business continues to grow well. Our domestic milk business in Australia and New Zealand is growing well. It's a market-leading position there and continues to grow. COVID, as we come out of restrictions, hopefully, for many reasons, not for milk sale purposes, but hopefully as we come out of that will be a bit of a headwind as in-home consumption goes out of home. The U.S. business is expected to continue to grow top line. Our real challenge, as you know, is our cross-border English label business. We're focusing on stabilizing that. If we can stabilize that and achieve the growth that we're expecting in the other markets, then we should be able to deliver that growth in the second half. We've also got MVM sales, which are a little bit second half weighted coming in as well. Hopefully we should be able to deliver that second half, and that's why we've clarified that phasing to the market. The big issue for us, the big uncertainty for us, and we're targeting stabilization. That's what our plans are built on. As we've called out in our outlook statement, there is a wide range of outcomes in relation to our English label business. As you know, it's a high margin business. It could be positive or it could be negative around that stabilization goal. That could swing quite significantly in that, given the operational leverage in the business, it can have a pretty significant impact on the underlying result. We've seen how much that's impacted us in the past financial year. Hopefully that gives you a little bit more color on the second half, but also highlights both the risk and the opportunity associated with our English label business. Okay. Thanks, David. We're starting to see now, David. I'll just have one final comment on that. The pain that we took in May on our stock write-downs, that was very painful for us and our shareholders. We're starting to see that starting to have an impact in terms of inventory getting back into more balance, stock freshness improving, particularly our sales into our distributors, then starting to progressively flow through to product freshness on shelf. The price and the secondary market pricing, which is an important indicator for engagement of the Daigou and other participants in the channel in our business, is starting to improve as well. There's still some old stock from last year, that June, July peak orders that we've talked about in the past, still clearing through the channel. That's still deep in the channel. That's frustrating, and it's holding back some visible price movement. Hopefully that'll clear as we move into the 11.11 event, then hopefully we'll get stronger price recovery. I'm hoping all that. It could be possible that we end up with a better result in the second half in English label, but it's really hard to predict. Yeah. Well, thank you, David. Appreciate it. Thanks, David. Thank you. Your next question comes from Anna Guan with Goldman Sachs. Please go ahead. Morning, guys. Thanks for taking my questions. My first one is a sort of a follow-up on the inventory comments earlier. Just looking at the quantum of the write-downs, the write-offs this year, it looks like a majority of it has gone towards CBEC and English label products, I should say. Just thinking, can you give some color in terms of, based on your early look into the China label inventory level at the moment? Can you give us a feel for further write-offs there, please? I might hand over to Race if you've got any further comments. Yes, you're right. Most of the write-offs were in relation to our English label business and our inventory levels in distributors for English label in our Daigou reseller accounts, corporate Daigou accounts, and also with our CBEC platform in terms of our distributors in Hong Kong and China and also the platform inventory. Of Tmall and JD.com and all the other platforms that we deal with, they look to be well balanced at the moment and very close to our targeted levels. We don't have any concern there. My concern I was just talking to David about then is that stock that was sold last year is still in the channels and still being sold on C2C platforms and even B2C as well. That's the concern there. That's deep in the channel, and that needs to clear in this second half. Our China label inventory, we've made some progress on that, but it's taken time to execute the swaps of inventory to improve freshness and also to pull back on our shipments in and get that into balance. It's not far away from our targeted levels, but I hope we've made progress on that in the July and currently in the August month, and I'd hope by the end of the first quarter that that's at targeted levels. That reduction in sales associated with those shipments are factored into our guidance for the year going forward. Anna, just to help you with the allocation, about NZD 19 million of the write-off provision was allocated to China label, the rest was all English label. Right. Okay. NZD 50 million towards China segment, and out of that NZD 50, NZD 19 was China label, the residual NZD 30 would be CBEC related. Correct. Yeah. Okay. That's super helpful. My final question is on marketing in China. Can you give us some color in terms of how you are thinking about allocating marketing spend in China? Perhaps, if you can talk about sort of that online or digital, or social media versus offline, and also off the back of maybe June 2018 sales event, have you had any observations in terms of changes in marketing efficiency there? Anna, we're planning on increasing our total level of marketing and nearly all of that increase is going to go to China market. In terms of channel mix of that marketing, we'll definitely be upweighting our digital spend and all the components that go with that. We will also be incrementally increasing our offline below-the-line spend in terms of the areas that I highlighted in the presentation in terms of all the trade work that we do in promotional people and mama classes and trade shows and point of sale and investment in flagship stores, et cetera, which is really important in terms of engaging with our consumers at point of sale. The above-the-line work that we do drives awareness and engagement in the brand to be one of the few brands when a mother enters a mother and baby store, where it's kind of top of mind, but it's really important at that stage to have the in-store execution to convert that opportunity at point of sale. That's why we attack it as many brands do from both above the line and below the line and we're dialing up our investment. Yeah. Then just that efficiency question around, perhaps your observation on the back of June 2018 sales, have you noticed any particular changes there? Not as much in relation to June 2018. We pulled back on our level of promotional activity in 618. We achieved a pretty good result in that respect. We were trying to get inventory balanced and we didn't want to heavily promote and fuel further price reduction because of the balance between CBEC and Daigou sales. We're conscious of that. We got that a little bit out of whack in the second quarter of last year. We wanted to manage that carefully. In terms of our fourth quarter above-the-line campaign, we've dialed back our traditional spend on TV, etc, and we've actually dialed up our digital spend and we've found that we've improved our reach and our impact across China. That delivered a better result in terms of our brand health metrics, which is probably the most objective way of measuring that in the fourth quarter. We got both an improvement in our China label brand health as well as our English label in the fourth quarter. Excellent. Thanks, guys. Appreciate it. The next question comes from Tom Kierath with Barrenjoey. Please go ahead. Morning, guys. Just a question on, I think you mentioned pricing was improving in the market for your products in China. Can you just talk to month-to-month sales trends? Have they kind of bottomed now, do you think? Is that improved pricing indicative of better underlying trading performance there? When I was referring to the pricing, I was referring to observed CBEC pricing on the major platforms, but also B2C and C2C pricing that we see in Taobao and even on PDD, we kind of track that as well, but also the wholesale pricing on Hipac and CTEND as well. We're just looking at multiple kind of different elements of supply chain, what is happening with our secondary market pricing. We've seen that CBEC during the second half, through not over-investing in promotional activity, et cetera, we've seen that remain reasonably stable and high. We've seen our English label pricing and Daigou and reseller market improve a bit, particularly in stage two and four. We're starting to see some recovery in stage one and three as well. We're starting to see that improve. Our rate of sale, it is probably not meaningful, Tom, to be commenting on at this stage because of the stock rebalancing that we have done has just had such dramatic shifts in our English label business that it is probably not that meaningful for you. The only thing I would say is that our retail sales, generally our distributor sales and our retail sales are better than our shipments in. That gives me some encouragement for the year ahead. Yeah. Okay. Cool. That's helpful. Just the second one, in terms of kind of share loss or competitive intensity, is it the domestic Chinese brands that are proving tougher or are you noticing the big foreign brands kind of increasing investment and improving pricing, etc? Where's the? Yeah, the competitive intensity and activity across the market, both from a marketing investment point of view as well as promotional activity is pretty much across the board. Both domestic players as well as traditional multinational companies. In terms of share gain, from a multinational point of view. We're one of the few brands that have held and marginally increased share over the period. Many of our international competitors have lost a bit of share during the period. The domestic players have picked up substantial share. Yeah. In particular, the two key market leaders that you're aware of. They've had a pretty significant gain. If you have a look at Nielsen data and SmartPath data for Dole as well, you can see pretty significant shifts in share in that. Feihe's share for the year is up roughly about 5%, and Junlebao's up a couple of points as well. They're pretty significant share movements over the course of a year. Yeah. Cool. Thanks very much, David. Thank you. Your next question comes from Marcus Curley with UBS. Please go ahead. Good morning. David, I just wondered if you could quantify, if you can, the level of channel tightening that you've done on the English Label product in the second half. Obviously, it'd be quite helpful when we think about the comparative comp heading into FY 2022? Marcus, we haven't clarified that specifically because I think you've almost got to look at it across the full year. With the benefit of hindsight, probably there was a bit more that went in in the first half and even the second half of 2020, and then we've tightened a bit in the second half. David asked me about what gives us confidence in the second half growth that we're predicting, and we said that would be significant, and we wouldn't say that unless we expected greater than 10% growth on PCP in the second half. That should hopefully give you some indication. It's probably a little bit misleading to say we'll pull back X. We could quote tins or sell-ins into distributors, but it's probably a little bit misleading because of the balancing across the year, because we took out some in the second half that probably there was more that went in in the first half. I'd probably prefer not to do that. Just secondly, can you talk a little bit to what you think has happened in terms of your sellout performance in English label over the course of the half? I suppose, when we look at your guidance comments for the first half of this year, would suggest that you're expecting that to weaken. If that's the case, could you give some color in terms of what's driving that? The CBEC in the second half. Our sales were down 65%. From memory, was only down about 12%. The SmartPath measure of our sales at retail for the platforms that SmartPath track in English label was down 14%. You're looking at distributor sell-out and SmartPath sell-out in the teens, but our sell-in was down materially, like at 65%. I don't know whether that's probably more of an impact than it was in the Daigou area, but that might give you some color on what the underlying sales rate might be. The only thing I would say, just a word of caution around SmartPath, though. SmartPath, it is the most objective measure of sales in e-commerce. One of the things just to be cautious about with our business is that there's a degree, and we'll get more control over this over time, but there's a degree of cross-channel sales between Daigou reseller, retail sales, ex-Australia, New Zealand. We think there's a degree of cross-channel sales from those sales into the CBEC platforms as well. When you look at CBEC platform overall, that was up marginally and our share was only down marginally, but our shipments then were down quite a lot. We think there's a degree of stock coming across from other channels into CBEC and then being sold out again. As all this stock unravels in this first half of this year, we should hopefully see more clarity around those numbers. That's why we noted in our release that this may put pressure on our CBEC share going forward. I apologize, it is pretty messy in terms of data points at the moment as all this stock clears through the system. Yeah. I suppose my point here is I was just trying to understand where the potential downside comes from in English Label. You are mentioning here sell-out metrics which are down the teens in the second half. Your sell-in was down 50%-60%. Where is the downside to sell-in as we head into next year, given that gap? Well, the downside is, the two biggest downside is the impact of the birth rate, which could have a significant impact on our business, including English label. Unless we can reengage the Daigou effectively, they have been incredibly supportive and effective in building our brand over time. Unless we can get the channel economics right, reengage the Daigou to support and push our brand, then the impact on stage one, two, and the rolling impact on our English Label business could be quite significant. In our announcement, we said, I was talking about it before, is that we have lost share in Daigou, but particularly in stage one, which is a concern. That's something that we need to focus on. Part of our strategic review is focusing on how we manage the overall channel evolution of the Daigou business, but also how do we reengage and activate on new user recruitment as well, which the Daigou channel has been so successful for us in the past. Our stage one share is down quite a lot. Okay. Thank you. Thank you. Your next question comes from Adrian Allbon with Jarden. Please go ahead. Good afternoon. Hey, just wondering on the China label side, can you just give us an update? Obviously, you would've had to reset your KPIs with your distributors. Is there any level of increase required in terms of support for them to resubscribe to volume growth? My understanding, over the past year or two, we have been working on restructuring the number of distributors and the territories in which they serve, and then also trying to get the incentives right between front margin and back margin and then trying to put a little bit more on the back margin and hold our distributors more accountable for their activity in the market. There's nothing really specific that I'd be prepared to share that's not commercially sensitive around our goals and plans with our distributors around that. Just only to say that we are incentivizing them more for growth and activity, to acquire new accounts and build our distribution and to activate those accounts and generate same store sales. Right. Okay. Is that incentive getting netted off against your sales? That is not below the line sort of stuff, is it? No. No. It's netted off against sales. Yeah. Sorry, Race, you jump in. Yeah, I was going to say, that just comes into above your net revenue. Okay. Yeah. Between growth sales and net sales. You only see the net sales. Yep. Understood. Just in terms of in the presentation, obviously quite key to the forward picture of the business, you said there was quite a skip up in the fourth quarter marketing into China, and you've given us some sort of sense of what the difference for the China label retail sales versus your sales as flows. Are you able to give us a little bit of a bridge on how you're judging the effectiveness of that marketing spend, in terms of some of the brand health metrics that you sort of talk about qualitatively but don't really share quantitatively? Yeah. Adrian Allbon, I will undertake to provide more disclosure and transparency on this at our strategy day in October. I know this is obviously a critical aspect to our business, and the market's concerned about that and looking for more transparency. Just a few high-level comments, and we'll come back to it in October. The most relevant measure of the effectiveness of the spend is our brand health tracking. Hopefully, over time, that will translate into consumer engagement and sales. The most objective measure we look at is our brand health tracking. We do that on a quarterly basis, and there's a panel of 10,000 mothers that respond to that, and that's a rolling panel. It's not the same 10,000 each time. We track brand health through the funnel. From awareness through to loyalty, or buy most often, NPS, and also some attitudinal equity measures that we ask as well. The fourth quarter, the results from our brand health tracking showed that our China label business across nearly all metrics, improved in the fourth quarter. Our English label had come off recently in the last couple of brand health trackers, but pleasingly, that improved in the fourth quarter. It's not back to where it was at the start of the financial year. It is really pleasing to see that recover somewhat, at least half of that recovery in the fourth quarter. We'll share some of these in a little bit more detail for ourselves and, to the extent we can, relative to the competition as well in our October session. Hopefully that gives you a little bit of color on what we do and where that's the trend of it. Yeah, that was good. Thank you. Just maybe finally, are you able to give us a quick summary of, I guess all the stuff you've put in place to have a better track of inventory through the supply chain, but what's different relative to what was happening in the first half of the year? Yeah. We haven't had much in the past because it hasn't been a real focus of the business because the main thing we've been trying to get hold of stock to sell in the market, and we've made a lot of progress on that. I might let Race talk to some of the measures that we've put in place to date, and it is a bit of a journey. We've got a lot of scope for improvement in this area. Yeah. What we've done is we've now been working with our major Daigou customers to actually build automatic interfaces between their systems and ours. We've created now ultimately a data warehouse where we can get that data coming in. We've got automated now stock movements and reporting through our distributors. We are currently in the process of building that automation into our CBEC distributors. As David said, we never had this before. We moved immediately to getting this information, when the board initiated this work, so we could get the information manually. We are now building that, so it's automatic. It's now part of our regular reporting, both through management and through to the board. We are very close now to our inventory. I said this automation, which we expect to be complete by the end of the calendar year. Do you want to talk about, we're still working on traceability as well, which is the other side to this? Yeah. The traceability system is obviously very important. This is about ensuring that, as David mentioned before, the way that we track product, because there is cross-channel sales, goes into various areas. Previously, we've had no visibility. We've put this tracking traceability system in place. This is being rolled out. We expect to have it fully operational by, I believe it is now October. Of course, the product needs to be sold through the system for it to be able for us to use. We initially had it at one of Synlait's facilities. It's now being put in place across all of their facilities. We're also working with Mainfreight. They've now put it through their facility. As that product gets sold through the supply chain, we will be able to trace it. Of course, all that does is tell us where the stock has come from. It doesn't by itself fix the problem. It just tells us that the stock in a particular place, wherever we can pick it up from, where it was originally sold to. Okay. Thank you. Your next question comes from Sam Teeger with Citi. Please go ahead. Oh, hi. Good morning, David and Race. Hi, Sam. Good day. When you assume a stabilization of the high-margin English label in FY 2022, just keen to understand, what are you assuming regarding border reopenings and Chinese tourists and students returning to Australia? Sam, we're not assuming any material change in that. If and when that comes back and there's more freer movement of people across border, which would be great outcome for many reasons, that would be an improvement on our plans that we're currently assuming at the moment. It is still challenging for us. I think we're sort of starting to see that stable, even though the sales in the fourth quarter were not great, we're starting to see some early signs of stabilization. The Delta variant that's impacting the world at the moment is having an impact, people aren't traveling between the two territories, it's having an impact on freight and logistics again, which is concerning. I'm hoping that won't have a material impact on us, I'm hoping that'll stabilize as well. In the longer term, we all hope that mobility comes back and that has a benefit to our business. At the moment, we're not factoring that into next year. All right. Thanks. How likely is it that you will look to commence local manufacturing in China as part of the strategic review going on right now? Look, it's not part of our immediate plans. It is possible in the future. The growth strategy review that we're focusing on is really focused on the front end of the business, and I won't preempt that work at the moment. Part of that will be to identify what we think our portfolio of the future should look like from a brand point of view in market, brand positioning and the categories that it should be in and the price points that we should be in, etc, and the segments that we play in. As you know that our local business there at the moment focuses on the ultra-premium segment, which is the fastest-growing segment, and we're well-positioned within that. The super-premium segment is also growing, and it's a big market that we don't play in domestically. It would be probably challenging for us to play in that market on a fully imported premium point of view. It may be that over time, if we decided that we wanted to enter into that space, it may be appropriate that we would need local manufacturing capability. There's a few jumps in that logic, which we haven't worked through yet. That's probably somewhat down the track. As we've mentioned in the call, our main focus at the moment is making sure that we get the most out of our MVM acquisition and continue to partner effectively with Synlait on our fully imported product. Right. Thank you. Your next question comes from Richard Barwick with CLSA. Please go ahead. All right, thanks. Hi, guys. Hi, Richard. The May downgrade you indicated then the expected, I guess, effective FY 2021 revenue, once you backed out the fact you'd held back sales, et cetera, was closer to NZD 1.3 billion. Once you backed out the inventory write-down and so on, an EBITDA margin of low-to-mid 20%. Just not that I've seen it, you don't seem to have mentioned those sort of metrics again. I just want to double-check if, do those sort of metrics there, do you think that still holds or do they still apply given the way the fourth quarter finished up? I'll let Race comment on that. That was merely a statement at the time. If you took account of the impacts that we had, then if you added back the stock provision and the MVM one-off costs and the ERP write-off of the costs that were investment in implementing the system, that's kind of what you get to by definition. Race spent a little bit of time with David just exploring the margin and profitability impact of rolling into next year. There are other variables at play but Race, have you got anything further you'd like to add to that? Well, just to clarify, Richard, you're talking about 2021 or 2022? Just trying to understand your basis of your question. No. Well, that comment was made on effectively an underlying FY 2021 result. I figured that's a useful starting point also to think about as we move into FY 2022. I'm just double-checking if those metrics or those parameters as provided, if you still think that held effectively given, I mean, you gave that in early-ish May, obviously a bit of water to go under the bridge to get through to June 30. We are in line with the guidance that we provided in May, and the key metrics that we explained are still relevant. There hasn't been any material change. The main change when you're looking through in 2022, of course, is MVM that we've already explained. Yep. Okay. All right. I guess you're probably referring to the NZD 1.3 sales. I mean, that's a point estimate and it could be plus or minus a few percent around that. The context, there was a statement in relation sort of like pro forma, this is what otherwise FY 2021 might have been. The context has changed quite a lot. There are other business specific things impacting our outlook for 2022. Also I think the outlook in terms of the birth rate impact in this coming year is probably more significant month by month. I think, we and other industry participants are sort of getting a perspective on that. It's uncertain, but I think it is fairly significant next year. Okay. All right. Thank you. The second one is around the Mataura Valley Milk. Obviously, the loss that you got into in FY 2022 is bigger. You've said yes, you're still clear on the pathway back to a break-even FY 2025. I mean, the way we should be thinking through that is that sort of that NZD 20 million loss, is that the best guide for FY 2023 and 2024? Is it a gradual work back from the NZD 20 million back to something closer to zero in FY 2025? What's the pathway most likely to look like? Look, the pathway would be a gradual. It won't be an all of a sudden. That said, we've of course got to work around our commercial in confidence and supply contracts as to when items can actually be transferred, how quickly the milk pool gets built up in MVM. Generally speaking, we would expect it to be a sort of gradual movement to that pathway to profitability. I'm sorry if that's not particularly clear, but that's just the way it needs to be. No. That's okay. Thanks, Race. Just to clarify, you've also made comments before about the CapEx associated with MVM as well. Can you just outline exactly what the CapEx expectations are? I presume that the canning and sort of packaging is still going ahead. Can you just confirm what that looks like on a, I guess a FY 2022, FY 2023 basis for CapEx? Yeah, look, sort of split it into two. There will be regular CapEx as you'd expect with a manufacturing facility. There will be some investment done in 2022, 2023 in terms of building up the labs, I would call that small scale investment. The blending and canning facility that we talked about, we need to obviously align that with the market. Because of the drop in the volumes in the market, that will not be happening certainly in 2022, in terms of there won't be any cash outlay for that in 2022. We need to reassess when is the right time to build that in line with the market dynamics. Okay. All right. That's, I guess, a delay on what the original expectations were. Well, yes. Well, we'll have to have a solution for blending and canning. Like, it's not really viable just to have the drying facility. We'll have to work on the scale and capability and timing of that, and that work's in progress. Okay. All right. Thank you, guys. Your next question comes from Stephen Ridgewell with Craigs Investment Partners. Please go ahead. Yeah. Hi. I'm just trying to understand the guidance for indications for the first half of 2022, which seems to imply revenue X for a value down, say down about 5%-10%. Does that guidance bake in some growth in China label in the first half? This is also presuming or assuming a double-digit decline potentially in English label. Just trying to get some goalposts for the first half. Yeah. Race, do you want to I mean, yes, we're planning for growth in China label in the first half, but we're cycling some stronger comps. Race, you want to comment on the growth profile that we've factored into the plan? It is exactly what we said, that we expect there will be growth in China label, both in the first half and the second half. Of course it will be more in the second half than in the first half. I'm not going to give clear guidance in terms of quantification. We do need to refer you back to that outlook statement in terms of how the phases are going to work. It's very important. We can't give any quantified guidance based on the variability. The first half that we're cycling from 2021, I mean, our shipments in China label and English label were, they're pretty high. We're cycling that going into the first half of this year, obviously, in a softer market. It's probably a helpful context. Yeah, no, that's helpful. Just on the U.S. business, and the outlook for the year, the loss will be a little bit reduced in FY 2022. It still implies a pretty decent EBITDA loss in the current financial year. Can you give us a little bit of color on the strategy to turn that business around? Over what kind of timeframe should we be thinking that perhaps we could get a bit closer to breakeven? Is there some light at the end of the tunnel in terms of that business? Look, I believe the company in the past has given some timelines and numbers around it, but I'm a bit reluctant to do that at the moment. We'll work on our plan to communicate. We might just give you a bit more of an indication around that in October. I think the team's done a great job in building the brand in the U.S. and building nationwide distribution, which is great. We're still subscale and unprofitable, and what we need to do to the business is we need to scale it and leverage the great investment that we've done in the brand over the years, build that scale and importantly, improve the margin structure in the business. Our delivered margins are not where they need to be sustainably. We need to work on that, and improving our cost of goods, as well, potentially through different supplier arrangements or some participation in manufacturing, who knows? We fundamentally need to scale and improve the profitability of the business going forward. Great. Thank you. We'll share more in October around growing in terms of scaling the business and growth through innovation that we're working on at the moment, including our half-and-half product that we've launched recently, and then building distribution on that. We'll give you an update on that and hopefully some other initiatives that we'll be able to share with you in October as well. Your next question comes from Jonathan Snape with Bell Potter Securities. Please go ahead. Yeah, thanks. Hey, guys. Can you hear me okay? Yeah, very well. Yep. Great. Look, just a couple if I can. Look, I'm going to come back to the inventory one again, some of these sales numbers. Simplistically, if I'm listening right, and I've gone through your annual report, and there's a fair bit of detail in there, you're saying that in CBEC, the sell out was down 14% year-on-year. The sell in was down about 65% year-on-year. There's a 50% difference there. If I looked at offline, I think you quoted that the market was up 13%, and your market share was up a little bit. In the second half, I'm referencing here. You should have got that, but your sales are down into the channel by about 7%, so there's about a 20% undersell there. If I look at your dive through comments around Kantar, it looks like the market was down in the second half somewhere around about 40%. Yeah, you lost a little bit of share, so maybe you're down 45% or something. Your selling was down 87%, so there's about a 40% underselling there. Is it as simple as going that your sell-in rates were that far below the sell-out rates by the looks of it? It looks like there's almost a NZD 200 million difference in terms of revenue. Is that the kind of impact that you would say, inventory swaps, because that's obviously lost sales and pullbacks, that kind of thing? Am I doing the math completely wrong? Is that roughly just looking at the difference between the sell-in and the sell-out- Yeah quite material? Yeah. No, I understand where you're coming from. In relation to China label, I think that that's a way to look at it, but also, again, I would just ask you, Jonathan, the rest of the market to be just cautious about the birth rate impact on the market and the rolling impact year-on-year. That's something you'll need to consider there. In English label, though, it's very challenging to look at it that way. Yeah. There's a lot of product that went into the market over the past 12 or 18 months. Yeah. COVID-related spikes in demand. The brand was running hot. There's multiple layers in the supply chain that kind of absorb that supply over a long period of time. We're still seeing, that's why I put that caveat on the CBEC numbers is that there's a lot of repurchasing in the market of that product that's being resold. It doesn't necessarily mean that that demand is when everything settles and that stock clears out of the system on a sustainable basis, it doesn't necessarily mean that that's all going to resume and bounce back. That's what I'm very cautious of. Yeah. We could pop the result of the company by pulling back on marketing and flooding the channel with stock. That's not going to build a sustainable business, and we've just got to be cautious and wait. We're being very careful in our stock allocations and management of the business now to make sure that we rebuild the pricing and brand equity and perception in the market and continue to invest in the brand, and we'll see how that responds. Yeah. It's probably just a bit early. I think it's really a little bit dangerous to assume that we bounce back, in English label to that extent that quickly based on the sell out in the market. Yeah on the platforms versus what we've sold in. Yeah. Looking at the sell out rates, they're 20%-50% higher than your sell-in rates. If you look at the year-on-year changes in the second half. I guess that's what I'm trying to get my head around is because that would seem to imply, or you could figure out then from that, whether the second half baseline is right last year or not. Yeah. All I'm saying is, I guess in China label, you can think about it that way. Be careful- Yeah of what's going on market. Also, you probably can see from our presentation that our rate of distribution expansion has come off from what it was historically. Distribution, typically what happens is when we enter a store, we ramp up and grow sales for a period of time, and then it starts to mature. The distribution expansion has been driving a lot of our growth, just be cautious about. That's one thing that our strategic review will be focusing on, is one, how can we continue to expand our distribution, but how can we improve our same store sales going forward. The mix of our business in China label was also something to be careful about because we over-indexed for Key and A cities and under-indexed- Yep in a way for B, C, D. Our share of Key and A is quite significantly higher. It's almost 3x what it is in B, C, D. The birth rate impact is disproportionate the other way in terms of the impact on Key and A, where the birth rate is falling a lot faster than it is in B, C, D. Yep. Look, can I ask one on the U.S.? I know you're going to touch on this on the strategy day, but obviously, your guidance on the tax rate kind of implies that you're not going to be bringing any tax assets next year to account in the U.S., which means that you obviously don't have any visibility that thing's going to be profitable in the next three years. You're hemorrhaging NZD 30 million-NZD 35 million a year into that business. Have done in excess of that for the last three years. I'm kind of struggling to see why you're still there. It looks like it just hasn't worked, full stop. In U.K., you pulled out well before this, I know it was a previous management team, but your tax rate guidance is basically telling us you don't think there's a profit until 2025 at the earliest. I don't get why you're still in that market at all. It seems like you're chasing a pretty skinny margin of liquid milk. Wouldn't you be better off just pursuing a licensing agreement or something like that you had in New Zealand just to eradicate the losses and the cash drain? Because it seems like the biggest opportunity for you from a management time perspective is getting China right, the backward integration and margin shift. It just seems like it's a huge distraction and a huge loss for something that you clearly don't think is going to be profitable in the next three years. Yeah. We'll share a bit more on this again in October, but you're right. At the moment, our plans are that it's going to take several years to get the business to break even and then to get leverage beyond that. We've invested a lot of money in the brand and distribution to date, and I think we're on the cusp now. The brand is really well-positioned, some really encouraging signs there, and I think we're on the cusp now of either taking it to that next level or maybe in the longer term, reevaluating our options. At the moment, I think there's a great brand that's been built by the team. We've got opportunities. I'm hoping we may have some business development news to share either between now and October or at October in terms of scaling the business. Then we need to work on our margins going forward. If we ultimately can't get comfortable with the risk-return proposition associated with that, then we may well consider other options. I think that's a little bit premature at this particular point in time until we work through all those opportunities that we have. All right. Thank you. You're welcome. The next question comes from Xavier Waterstone with QuayStreet Asset Management. Please go ahead. Hi, guys. I've just got a couple of quick ones on trade spend. I noticed the rebate payables almost doubled to about NZD 70 million. Just want to know if you think there's been a structural change in how much of the profit pool needs to be shared downstream. Also, I guess, given that the trade spend has become an increasingly important line item that complements marketing, would you consider reporting gross versus net revenue to help investors get a clearer picture? Race, do you want to answer those questions for Xavier? Sure. Yeah. Look, with the rebate payables, the reason that that's happened is because of the timing of payments with China State Farm, because last year there was a receivable on the balance sheet that allowed us to net off the payments. Your logic is exactly right. Why is that number up when volumes come down? It is just because last year it had been paid and netted off, and this year it isn't. Hopefully that answers that question as to why the rebate payables is higher. The second one on reporting gross versus net, like some of the other opposing distributors do? Well, look, we have talked about this internally. The way that we operate with China State Farm, we have a fairly complicated gross up arrangement. It's not something that we intend on making a change of at this point. It is something that we have talked about internally. We do manage internally the trade spend, of course, and we get good visibility. In terms of if you're suggesting why are we not reporting it's just something that internally we've decided is not the right thing to do at this point. Our trade structure and incentives and things like that are slightly different in ways to the market, and it's a little bit commercially sensitive as well. Xavier, we'll take on board your feedback and have a think about it. All right. Thank you. Thank you. There are no further questions at this time. I'll now hand back to Mr. Bortolussi for closing remarks. Thanks, Rachel. Thanks, everybody, for joining the call today. It's been a challenging year. It's a difficult result to explain, and our outlook's a little bit complicated. I hope you appreciate the level of disclosure and transparency we've provided in our announcements today and the discussion that we've just had. I look forward to continuing the discussion with our investors and the analyst community over the next week or so and catching up with you, hopefully virtually at our investor strategy day in October. Thanks again. Cheers.