Astral Foods Limited · JSE:ARL

Astral Foods — H1 2022 Earnings Presentation

64 slides from Astral Foods's earnings presentation, March 2022

  1. Slide 1: Interim Results Presentation

    2022 Interim Results Presentation for the six months ended 31 March 2022

  2. Slide 2: Agenda

    AGENDA ▪ Business Overview Slide 3 – Chris Schutte ▪ Operational Overview Slide 11 – Gary Arnold ▪ Industry Matters Slide 29 – Gary Arnold ▪ Financial Overview Slide 32 – Dries Ferreira ▪ Strategic Matters Slide 43 – Chris Schutte ▪ Outlook Slide 48 – Chris Schutte ▪ Additional Information Slide 51

  3. Slide 3: Business Overview

    BUSINESS OVERVIEW Chris Schutte Chief Executive Officer

  4. Slide 4: Salient Points

    Business Overview SALIENT POINTS ▪ Raw material input costs increased sharply over the period on high maize and soya prices, driven by global fundamentals in the coarse grain markets ▪ Broiler production efficiencies improved with a net benefit continuing to be realised through a revised feeding pro

  5. Slide 5: Salient Points

    Business Overview SALIENT POINTS ▪ Continued high levels of poultry imports notwithstanding the import tariffs and anti-dumping duties ▪ Record level of unemployment in South Africa with weak economic growth, however informal economy and social grant supporting disposable spend ▪ Disposal of Astral’

  6. Slide 6: Key Financial Indicators

    Business Overview KEY FINANCIAL INDICATORS ▪ Revenue @ R9,4 billion 26% (R9,5 billion including discontinued operations) ▪ Profit before interest and tax @ R785 million 134% (R802 million including discontinued operations) ▪ Profit for the period @ R562 million 145% ▪ Headline earnings per share @ 1

  7. Slide 7: Divisional Overview

    Business Overview DIVISIONAL OVERVIEW Feed Poultry ▪ Raw material costs up sharply ▪ Feeding programme change ▪ Internal feed requirements increased ▪ Broiler performance improvement ▪ External sales volumes increased ▪ Broiler sales volumes increased ▪ Expenses well controlled ▪ Broiler sales reali

  8. Slide 8: Broiler Selling Price vs. Feed Price

    -30% -20% -10% 10% 20% 30% 40% 0% Apr-17 Jun-17 Source: Own Data Aug-17 Oct-17 Business Overview Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18 Dec-18 Feb-19 Apr-19 % Change in broiler feed price Jun-19 Aug-19 Oct-19 Dec-19 Feb-20 Apr-20 Jun-20 Aug-20 BROILER SELLING PRICE vs. FEED PRICE Oct-20 Dec-20 Fe

  9. Slide 9: Broiler Net Margin vs. Feed Price

    Business Overview BROILER NET MARGIN vs. FEED PRICE 16 14 12 10 8 6 4 2 0 -2 -4 -6 Broiler net margin % Change in broiler feed price Source: Own Data 9

  10. Slide 10: PBIT Movement 1H2022 vs. 1H2021

    100 200 300 400 500 600 800 700 900 0 1 000 1 100 1 200 1 300 PBIT 1H2021 336 (R million) Business Overview Broiler selling 739 price Broiler raw 240 material cost Broiler non- 189 feed cost Broiler sales 151 volume Feed 26 conversion efficiency Broiler feed 75 change PBIT MOVEMENT 1H2022 vs. 1H2021

  11. Slide 11: Raw Materials

    RAW MATERIALS Gary Arnold Group Chief Operating Officer

  12. Slide 12: RSA Total Maize Supply & Demand

    Operational Overview RSA TOTAL MAIZE SUPPLY & DEMAND Marketing year (May to April) 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22E 2022/23F '000 tons Actual Actual Actual Actual Actual Estimate Forecast Carry In (1 May) 2 471 1 093 3 689 2 662 1 000 2 115 2 207 Crop Estimate 7 779 16 820 12 510 11

  13. Slide 13: SAFEX Yellow Maize Price

    Operational Overview SAFEX YELLOW MAIZE PRICE Source: CJA Strategic Risk Brokers 13

  14. Slide 14: Durban Soya Meal Price

    Operational Overview DURBAN SOYA MEAL PRICE Source: CJA Strategic Risk Brokers 14

  15. Slide 15: Feed Division

    FEED DIVISION

  16. Slide 16: Feed Division

    Operational Overview FEED DIVISION Revenue - R million Operating profit - R million 5000 300 4000 4 509 250 264 272 3 964 200 3000 150 2000 100 1000 50 0 0 1H2021 1H2022 1H2021 1H2022 Revenue up 13.8% Operating profit up 2.9% ▪ Raw material costs up ▪ Net margin 6.0% (1H2021: 6.7%) ▪ Average selling

  17. Slide 17: Feed Division

    Operational Overview FEED DIVISION ▪ SAFEX yellow maize price increased for the period under review 1H2022 avg. R3 773 per ton (1H2021: R3 397) up R376 per ton ▪ DBN soya meal price increased for the period under review 1H2022 avg. R8 949 per ton (1H2021: R8 738) up R211 per ton ▪ Internal feed sale

  18. Slide 18: Feed Division – Sales Mix

    Operational Overview FEED DIVISION – SALES MIX 1H2021 1H2022 12% 12% 23% 21% 647 328 Tons 691 352 Tons 60% 62% 5% 5% ◼Poultry Integrated ◼ Poultry External ◼ Dairy ◼ Other 18

  19. Slide 19: Poultry Division – Commercial

    POULTRY DIVISION COMMERCIAL

  20. Slide 20: Poultry Division - Consolidated

    Operational Overview POULTRY DIVISION - CONSOLIDATED Revenue - R million Operating profit - R million 8000 450 7 862 400 447 6000 350 6 115 300 250 4000 200 150 2000 100 50 61 0 0 1H2021 1H2022 1H2021 1H2022 Revenue up 28.6% Operating profit up 627% ▪ Broiler sales volumes up 15.7% ▪ Net margin 5.7%

  21. Slide 21: Poultry Division - Commercial

    Operational Overview POULTRY DIVISION - COMMERCIAL ▪ Profits benefitted from improved economies of scale linked to an increase in broiler slaughter numbers ▪ Broiler sales volumes increased on higher bird numbers and sales out of stock, with additional volumes slaughtered under the new Festive expan

  22. Slide 22: Poultry Division – Sales Mix

    Operational Overview POULTRY DIVISION – SALES MIX 1H2021 1H2022 22% 21% 7% 230 209 Tons 51% 7% 266 276 Tons 51% Volume increase ≈ 15.7% 12% 11% 5% 3% 4% 6% IQF Mixed Portions IQF Single Portions Frozen Fresh Value Added Tertiary 22

  23. Slide 23: Poultry Division – Agriculture

    POULTRY DIVISION AGRICULTURE

  24. Slide 24: Poultry Division - Agriculture

    Operational Overview POULTRY DIVISION - AGRICULTURE ▪ Parent stock sales were higher for the period under review, as demand for the Ross broiler genetics continued to increase market share for the breed ▪ Feed input costs increased on the back of escalating raw material costs, adversely affecting th

  25. Slide 25: Broiler Production Performance

    Operational Overview BROILER PRODUCTION PERFORMANCE 110% 108% 106% 104% 102% 100% 98% 96% 94% F2011 F2012 F2013 F2014 F2015 F2016 F2017 F2018 F2019 F2020 F2021 1H2022 Slaughter age Live weight Average daily gain *Key indicators base-lined to 100% in F2011 25

  26. Slide 26: Broiler Production Performance

    Operational Overview BROILER PRODUCTION PERFORMANCE 145% 140% 135% 130% 125% 120% 115% 110% 105% 100% 95% 90% 85% 80% F2011 F2012 F2013 F2014 F2015 F2016 F2017 F2018 F2019 F2020 F2021 1H2022 Mortality Feed consumption Performance efficiency factor *Key indicators base-lined to 100% in F2011 26

  27. Slide 27: Other Africa

    OTHER AFRICA a © HATCHERY TIGERChicks eM

  28. Slide 28: Other Africa Division

    Operational Overview OTHER AFRICA DIVISION Revenue - R million Operating profit - R million 250 50 45 200 216 40 43 35 150 30 146 25 100 20 15 50 10 5 10 0 0 1H2021 1H2022 1H2021 1H2022 Revenue up 47.5% Operating profit up 333% ▪ Selling prices up ▪ Net margin 20.3% (1H2021: 6.9%) ▪ Sales volumes st

  29. Slide 29: Industry Matters

    INDUSTRY MATTERS

  30. Slide 30: Poultry Imports

    10 000 15 000 20 000 25 000 30 000 35 000 40 000 45 000 50 000 55 000 60 000 65 000 0 5 000 Source: SAPA Apr-17 May-17 Tons Jun-17 Jul-17 Industry Matters Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 POULTRY IMPORTS Nov-18 Dec-18 Total poul

  31. Slide 31: Industry Overview

    Industry Matters INDUSTRY OVERVIEW ▪ Based on industry statistics broiler slaughter numbers are approximately 21.2 million birds per week ▪ Imports for the period averaged 37 348 tons per month (≈ 5.9% down on 1H2021 @ 39 705 tons), equalling approximately 24% of total consumption ▪ Highly Pathogeni

  32. Slide 32: Financial Overview

    FINANCIAL OVERVIEW Dries Ferreira CFO Designate

  33. Slide 33: Income Statement

    Financial Overview INCOME STATEMENT 2022 2021* Six months ended 31 March % change R million R million Revenue 9 427 7 453 26% Operating profit - continuing operations 762 336 127% Gain on disposal of interest in National Chicks Swaziland 23 - Operating profit margin 8.3% 4.5% Net finance costs (17)

  34. Slide 34: Group Six Monthly Revenue & Profit

    Financial Overview GROUP SIX MONTHLY REVENUE & PROFIT 2000 9000 (R million) 9 427 1800 8 413 15.7% 8000 1600 14.2% 7 453 13.2% 7000 7 069 7 035 1400 6 600 6 775 6 710 6000 6 556 6 379 1200 5 795 5000 1000 1036 8.3% 906 7.7% 7.4% 4000 866 800 5.6% 785 3000 600 4.5% 4.5% 546 4.2% 2000 3.7% 503 400 379

  35. Slide 35: Feed Six Monthly Revenue

    Financial Overview FEED SIX MONTHLY REVENUE (R billion) 4 509 4 338 3 964 3 448 3 509 3 470 3 405 3 303 3 271 3 096 3 102 1H17 2H17 1H18 2H18 1H19 2H19 1H20 2H20 1H21 2H21 1H22 Revenue Change in volumes Change in feed price 35

  36. Slide 36: Poultry Six Monthly Revenue

    Financial Overview POULTRY SIX MONTHLY REVENUE (R billion) 7 862 6 963 6 115 5 472 5 644 5 699 5 394 5 415 5 405 5 124 4 456 1H17 2H17 1H18 2H18 1H19 2H19 1H20 2H20 1H21 2H21 1H22 Revenue Change in poultry selling price Change in volumes 36

  37. Slide 37: Group Six Monthly Operating Profit

    Financial Overview GROUP SIX MONTHLY OPERATING PROFIT 1,5 (R million) 1044 1,3 191 898 844 1,1 266 762 207 0,9 272 546 0,7 503 243 239 0,5 379 375 336 292 250 265 0,3 212 265 265 184 0,1 22 616 836 617 258 113 287 8 61 85 447 -0,1 1H17 2H17 1H18 2H18 1H19 2H19 1H20 2H20 1H21* 2H21 1H22** Poultry Fee

  38. Slide 38: Balance Sheet

    Financial Overview BALANCE SHEET March 2022 September 2021 R million R million % change Non-current assets (excl. ROU assets) 3 193 3 235 1% Non-current assets – ROU assets 356 340 5% Net assets held for sale 17 60 72% Net working capital 1 290 1 455 11% Current assets (excl. cash) 3 664 3 520 Curre

  39. Slide 39: Capital Expenditure

    Financial Overview CAPITAL EXPENDITURE 2022 2021 Six months ended 31 March R million R million Depreciation and amortisation 162 213 Property, plant & equipment 108 106 Right of use assets 54 107 Total capex spend 90 121 Expansion 47 27 Replacement 43 94 Outstanding commitments 440 273 39

  40. Slide 40: Working Capital

    Financial Overview WORKING CAPITAL March 2022 September 2021 Variance R million R million R million Current assets 3 664 3 520 144 Biological assets 989 976 13 Inventory - Poultry 406 535 (129) - Feed 426 328 98 - Other Africa 33 58 (25) Trade receivables 1 642 1 438 204 Advance capex payments 34 26

  41. Slide 41: Statement of Cash Flows

    Financial Overview STATEMENT OF CASH FLOWS 2022 2021 Six months ended 31 March R million R million Cash generated from operating activities 1 077 465 Tax paid (146) (51) Net interest and dividends received 7 10 Proceeds from disposal of assets held-for-sale 45 - Capital expenditure (90) (121) Lease

  42. Slide 42: In Summary

    Financial Overview IN SUMMARY ▪ Revenue at R9,4 billion* up 26.5% (prior year at R7,5 billion) ▪ Profit before tax at R785 million* up 134% on higher volumes and improved margins ▪ Capital expenditure of R90 million (slow) due to timing of projects ▪ Cash inflow of R639 million on the recovery of po

  43. Slide 43: Strategic Matters

    STRATEGIC MATTERS Chris Schutte Chief Executive Officer

  44. Slide 44: Confirmed Strategy

    Strategic Matters CONFIRMED STRATEGY Declared Strategy: To remain a pure poultry company Defined Strategy: Astral’s strategy is to be the best cost integrated poultry producer in selected Southern African countries Confirmed: At the Astral Foods Board strategic planning session in March 2022 Source:

  45. Slide 45: Poultry Volume Growth

    Strategic Matters POULTRY VOLUME GROWTH (million bpw) (R million) Expansion Festive 6,0 600 5,5 Expansion Feed Mill / County Fair Acquisition 50% Earlybird 5,0 500 4,5 Acquisition Mountain Valley KZN 4,0 Expansion Goldi 400 3,5 Expansion Festive Expansion Feed Mill Automation Poultry Expansion Goldi

  46. Slide 46: Strategic Update

    Strategic Matters STRATEGIC UPDATE ▪ Astral’s capex investment programme in new capacity, has continuously created new job opportunities - directly and indirectly through the integrated value chain ▪ Based on poultry production forecasts Astral will be at full capacity by April 2023 (6,2 million bpw

  47. Slide 47: ESG

    Strategic Matters ESG ▪ Environmental, Social, and Governance (ESG) - Stakeholders are increasingly applying this factor as part of their investment criteria ▪ Under sustainability; Astral is proud to report that volume growth over the past 15 years has resulted in no requirement to retrench any sta

  48. Slide 48: Prospects

    PROSPECTS Chris Schutte Chief Executive Officer

  49. Slide 49: Outlook

    Prospects OUTLOOK ▪ Record high unemployment levels have been reported for South Africa, and it is surmised that some support is gained from the informal economy and social grants ▪ Volatile raw material markets on global supply and demand, notwithstanding the very good South African maize crop for

  50. Slide 50: Thank You

    Confirmed March 2022 THANK YOU

  51. Slide 51: Additional Information

    Financial Overview ADDITIONAL INFORMATION

  52. Slide 52: World Corn Ending Stocks

    Additional Information WORLD CORN ENDING STOCKS Million Tons 375 30% 27,80% 27,70% 350 26,20% 25,00% 325 22,80% 21,90% 23,10% 25% 300 22,40% 20,90% 275 250 20% 19,80% 225 200 15% 175 150 125 10% 100 75 5% 50 25 214 279 311 326 343 303 302 296 293 299 0 0% 2014 2015 2016 2017 2018 2019 2020 2021 2022

  53. Slide 53: El Niño Oscillation

    Additional Information EL NIÑO OSCILLATION Source: International Research Institute for Climate and Society (IRI) – Columbia University 53

  54. Slide 54: Vegetative Health Index

    Additional Information VEGETATIVE HEALTH INDEX Source: NOAA - National Environmental Satellite, Data, and Information Service (VHI) 54

  55. Slide 55: Broiler Feed Ingredient Contribution

    Additional Information BROILER FEED INGREDIENT CONTRIBUTION Inclusion & Cost Contribution 100% 5,4 5,0 5,6 5,4 5,2 4,7 4,6 12,6 3,2 10,4 11,3 11,7 12,3 2,2 11,4 1,8 10,4 3,3 3,6 3,7 3,7 90% 7,0 9,2 11,5 16,2 6,0 7,4 8,7 14,4 9,4 7,3 18,2 16,6 14,8 9,8 0,7 0,6 80% 5,2 4,7 0,6 0,7 0,7 0,7 4,1 3,8 16,1

  56. Slide 56: Broiler Selling Price

    80% 90% 100% 110% 120% 130% 140% Apr-17 Source: Own Data Jun-17 Aug-17 Oct-17 Additional Information Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18 Dec-18 Feb-19 Apr-19 Broiler selling price index BROILER SELLING PRICE Jun-19 Aug-19 Oct-19 Dec-19 Feb-20 Apr-20 Jun-20 Aug-20 Oct-20 Dec-20 Feb-21 Apr-21 Si

  57. Slide 57: Broiler Price vs. Food Price Inflation

    Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Additional Information Jan-14 Apr-14 Jul-14 Oct-14 Source: Own Data & CJA Strategic Risk Brokers Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Broiler selling price Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 BROILE

  58. Slide 58: RSA Protein Price Comparison

    Additional Information RSA PROTEIN PRICE COMPARISON Cents per kilogram 11 000 10 000 9 000 8 000 7 000 6 000 5 000 4 000 3 000 2 000 1 000 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Jun-21 Jun-17 Jun-18 Jun-19 Jun-20 Aug-20 Feb-18 Feb-19 Feb-20 Feb-21 Feb-22 Aug-17 Aug-18 Aug-19 Aug-21 Oct-17 Oct-18 Oct-19

  59. Slide 59: RSA Poultry Market Share

    Additional Information RSA POULTRY MARKET SHARE 21% 28% 4% 5% 8% 18% 7% 9% Astral RCL Country Bird Daybreak Sovereign Grainfields Chubby Chick Other Local broiler production ≈ 21.2 million birds per week (1H2022) Source: Own Estimates 59

  60. Slide 60: RSA Poultry Market Share Including Imports

    Additional Information RSA POULTRY MARKET SHARE INCLUDING TOTAL POULTRY IMPORTS 24% 21% 14% 16% 7% 3% 5% 4% 6% Astral RCL Country Bird Daybreak Sovereign Grainfields Chubby Chick Other Imports Avg. poultry imports ≈ 6.6 million birds per week (6 months ending March 2022) Source: SAPA & Own Estimates

  61. Slide 61: Total Poultry Imports

    Additional Information TOTAL POULTRY IMPORTS Tons 600 000 500 000 400 000 300 000 200 000 100 000 F2020 F2021 F2022 0 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep F2020 40 409 86 676 128 331 170 449 216 314 257 443 296 901 338 461 371 969 405 599 442 892 490 501 F2021 44 514 85 247 123 398 153 29

  62. Slide 62: Total Poultry Imports – Country of Origin

    Additional Information TOTAL POULTRY IMPORTS COUNTRY OF ORIGIN ▪ 2021 ▪ 2022 March YTD Other 2,7% Other 3,5% US 15,5% US 15,6% Argentina Argentina 6,6% 5,5% EU 1,7% EU 8,8% Brazil Brazil 66,6% 73,5% 432 307 Tons 119 706 Tons Source: SAPA 62

  63. Slide 63: Total Poultry Imports – Country of Origin

    Additional Information TOTAL POULTRY IMPORTS COUNTRY OF ORIGIN Country (tons) 2020 2021 2022 YTD Brazil 270 100 287 880 88 026 United States 79 492 67 308 18 521 Poland 4 321 - - Argentina 29 530 23 715 7 939 Ireland 35 128 852 - Denmark 16 562 100 - Spain 28 000 37 077 2 061 Thailand 4 035 4 576 36

  64. Slide 64: Contact Details

    Financial Overview CONTACT DETAILS Chris Schutte Chief Executive Officer Tel : +27 (0) 12 667 5468 email: Chris.Schutte@astralfoods.com Daan Ferreira Chief Financial Officer Tel : +27 (0) 12 667 5468 email: Daan.Ferreira@astralfoods.com www.astralfoods.com

Astral Foods — H1 2022 Earnings Presentation on 6ix