Inghams Group Ltd. · ASX:ING
Inghams — UBS Australasia Conference 2019
53 slides from Inghams's conference presentation, Nov 18, 2019
Slide 1: UBS Australasia Conference 18-19 November 2019
For personal use only UBS AUSTRALASIA CONFERENCE 18-19 NOVEMBER 2019
Slide 2: Important Notice and Disclaimer
IMPORTANT NOTICE AND DISCLAIMER For personal use only Disclaimer The material in this presentation is general background information about the activities of Inghams Group Limited (Ingham’s) and its subsidiaries (Ingham’s Group), current at the date of this presentation, unless otherwise noted. It is
Slide 3: We Are Unlocking Our Potential
WE ARE UNLOCKING OUR POTENTIAL For personal use only • Attractive sector • Strong foundations • Clear strategy • Material efficiency and capacity upside • Right team to deliver is in place 2
Slide 4: A Rich History
A RICH HISTORY For personal use only GROWTH 100 YEAR HISTORY RELATIONSHIPS • Stringent biosecurity import • Successive owners have built • Long-term, trusted restrictions a strong and valuable relationships (grocery, business QSR, food service) • Most efficient low-cost protein • Diversified network
Slide 5: Sustained Demand Growth for Poultry
SUSTAINED DEMAND GROWTH FOR POULTRY For personal use only PER CAPITA CONSUMPTION OF MEAT TYPES (KG PER PERSON P.A.) 80kg 70kg 60kg 50kg Chicken meat – kg 40kg 30kg Pig meat – kg Beef and veal – kg 20kg 10kg Lamb and mutton – kg 0kg Source: ABARES. 4
Slide 6: Our National Network Is a Great Asset
OUR NATIONAL NETWORK IS A GREAT ASSET For personal use only • Manage biosecurity risk • Mitigate feed price volatility • Production clusters ensure local supply • Network provides ability to optimise supply nationally Facilities/farms Quarantine Primary processing Farms Further processing Hatcheries
Slide 7: Long-Term Customer Relationships
LONG-TERM CUSTOMER RELATIONSHIPS For personal use only Consistency Certainty of demand of supply 6
Slide 8: Combined Experience from the World's Largest Poultry and Consumer Companies
COMBINED EXPERIENCE FROM THE WORLD’S LARGEST POULTRY AND CONSUMER COMPANIES For personal use only GLOBAL POULTRY COMPANIES 7
Slide 9: Our Growth Has Created Some Challenges
Opportunities OURinitial My GROWTH HAS CREATED priorities SOME CHALLENGES have been… For personal use only OUR SUCCESS IN GROWING OUR FOCUS WAS TO BE A OUR STRUCTURE AND VOLUMES HAS SUPPLIER NOT A STRATEGIC LEADERSHIP NEEDED A STRETCHED OPERATIONS PARTNER IN GROWTH REFRESH 8
Slide 10: The Roadmap to Unlock Our Future
For personal use only THE ROADMAP TO UNLOCK OUR FUTURE 9
Slide 11: The Process
THE PROCESS For personal use only DEFINE OUR ESTABLISH OUR SET OUR RESET OUR BUILD PURPOSE PRINCIPLES STRATEGY STRUCTURE OUR TEAM • “Nourish Our World” • Open • Optimise the core • Horizontal vs • Deep operational vertical expertise • Honest • Innovate to grow • Balanced • International • Collaborat
Slide 12: Our Purpose
OUR PURPOSE For personal use only Gives us meaning in the present and inspiration for creating future value • Physical: Nourishing people with protein and good nutrition • Emotional: Creating meaningful experiences • Community: Nurturing communities our business is part of • Environment: Limiting th
Slide 13: Our Strategic Framework
OUR STRATEGIC FRAMEWORK For personal use only OUR OBJECTIVE To deliver more consistent, predictable and reliable returns STRATEGIC OPTIMISE INNOVATE REINVEST PILLARS THE CORE TO GROW IN THE NEW STRATEGIC ENABLERS Consumer Cost Culture 12
Slide 14: Our Pillars
OUR PILLARS For personal use only OPTIMISE THE CORE INNOVATE TO GROW INVEST IN THE NEW • Deliver asset efficiency with • Manage our core new • Be flexible, disciplined and minimal capital spend product development (NPD) well capitalised to take and portfolio mix to maximise advantage of growth • Imp
Slide 15: Our Enablers
OUR ENABLERS For personal use only CONSUMER Innovation and profitable growth • Become a consumer-centric organisation • Work with customers in new ways – align with and support their growth • Invest in new value-added products and channels COST CULTURE Efficiency and focus CONSUMER Engagement and ca
Slide 16: To Deliver More Consistent, Predictable and Reliable Returns
TO DELIVER MORE CONSISTENT, PREDICTABLE AND RELIABLE RETURNS For personal use only Invest in the new ILLUSTRATIVE Innovate to grow Margin growth funds investment and returns Baseline revenue growth $ Margin Optimise the core expansion Optimise cost base (drive operational excellence) Time 15
Slide 17: How We Win
HOW WE WIN For personal use only RIGHT LEADERSHIP We have assembled a team of leaders who have deep RIGHT STRATEGY experience and know what Fit for growth, to deliver more great looks like consistent, predictable and reliable returns RIGHT ASSETS Well invested assets and significant capacity upside
Slide 18: Unlocking Our Potential: Supply Chain and Network Overview
For personal use only UNLOCKING OUR POTENTIAL SUPPLY CHAIN AND NETWORK OVERVIEW 17
Slide 19: Our Fully Integrated Operating Model
OUR FULLY INTEGRATED OPERATING MODEL For personal use only • Value is created across a highly complex and inter-related supply chain • Cost, capability and complexity creates barriers • Balance and operational excellence are key to margin capture FEED MILLING FURTHER PROCESSING SALES AND MARKETING C
Slide 20: Unlocking Value Across the Supply Chain
UNLOCKING VALUE ACROSS THE SUPPLY CHAIN For personal use only PRIMARY FURTHER NUTRITION FARMING PROCESSING PROCESSING • Maximise genetic • Introduce new • Improve operating • Improve operating potential technology to practices to practices to • Innovate to − Reduce mortality increase yields and incr
Slide 21: Supply Chain and Network Focus Areas
SUPPLY CHAIN AND NETWORK FOCUS AREAS For personal use only Objective: Ensure planning and decision making across the network is co-ordinated to safely deliver high quality products to our customers consistently and reliably at the lowest cost INGHAM'S STRATEGIC FRAMEWORK SHORT TERM PRIORITY INITIATI
Slide 22: We Must Standardise Operations
WE MUST STANDARDISE OPERATIONS For personal use only IMPROVE STEP CHANGE ASSET REALISE CAPACITY THE BASICS EFFICIENCY POTENTIAL • Run processes to specification • Standardise and right size • Identify current bottlenecks staffing • Maintain our assets • Define solutions to increase • Implement best
Slide 23: Unlocking Our Potential: Feed
For personal use only UNLOCKING OUR POTENTIAL FEED 22
Slide 24: Feed Focus Areas
FEED FOCUS AREAS For personal use only Objective: Deliver high quality nutrition to allow our farmers to grow and deliver healthy and consistent birds to our plants at the lowest possible cost INGHAM'S STRATEGIC FRAMEWORK SHORT TERM PRIORITY INITIATIVES To deliver more consistent, predictable and re
Slide 25: Our National Network Mitigates Risk to Delivered Cost
OUR NATIONAL NETWORK MITIGATES RISK TO DELIVERED COST AND CREATES A COMPETITIVE ADVANTAGE For personal use only TOTAL (‘m MT) QLD (‘m MT) % 5 year average 23.2 5 year average 1.0 4% ’18/19E. 17.0 ’18/19E. 0.4 2% ’19/20F – Nov 19 16.5 ’19/20F – Oct 19 0.4 2% WA (‘m MT) % NSW (‘m MT) % 5 year average
Slide 26: Unlocking Our Potential: Farming
For personal use only UNLOCKING OUR POTENTIAL FARMING 25
Slide 27: Farming Focus Areas
FARMING FOCUS AREAS For personal use only Objective: Set the standard for animal welfare and deliver a consistent size and quality bird to our processing plants at the lowest cost INGHAM'S STRATEGIC FRAMEWORK SHORT TERM PRIORITY INITIATIVES To deliver more consistent, predictable and reliable return
Slide 28: Case Study – Hatchcare
CASE STUDY – HATCHCARE For personal use only ✓ Improved living conditions for more animal-friendly production ✓ Feed and water for stronger and healthier day-old chicks ✓ MicroClimer technology for superior and uniform chick quality ✓ Bio-security for healthy chick production ✓ Energy efficiency for
Slide 29: Unlocking Our Potential: Primary Processing
For personal use only UNLOCKING OUR POTENTIAL PRIMARY PROCESSING 28
Slide 30: Primary Processing Focus Areas
PRIMARY PROCESSING FOCUS AREAS For personal use only Objective: Maximise throughput and yield to deliver our products at the lowest unit cost, whilst maintaining the highest standards of employee and food safety and quality INGHAM'S STRATEGIC FRAMEWORK SHORT TERM PRIORITY INITIATIVES To deliver more
Slide 31: Case Study – Delivering Yield Upside
CASE STUDY – DELIVERING YIELD UPSIDE For personal use only • Internal review identified rapid breast deboners Incremental yield +1.0% performing significantly below global standards Incremental breast meat harvested per week 40 tpw • Minor capital required to unlock incremental +1.0% breast yield Re
Slide 32: Case Study – Unlocking Latent Capacity
CASE STUDY – UNLOCKING LATENT CAPACITY For personal use only • Internal review identified spin chillers as the major bottleneck impacting Capital spend (2 plants) plant throughput at Somerville (VIC) and Osborne Park (WA) primary processing facilities ~$14m • New spin chillers will double capacity a
Slide 33: Unlocking Our Potential: Further Processing
For personal use only UNLOCKING OUR POTENTIAL FURTHER PROCESSING 32
Slide 34: Case Study – Turkey Turnaround
CASE STUDY – TURKEY TURNAROUND For personal use only A horizontal view of the business can unlock incremental value Siloed ways of working coupled with short term planning was resulting in sub-optimal TURKEY ACTUAL MARGIN ($) decision making +90% John Alldis introduced a “Back to Basics” program to
Slide 35: Further Processing Focus Areas
FURTHER PROCESSING FOCUS AREAS For personal use only Objective: Maximise throughput and yield to deliver our products at the lowest unit cost, whilst maintaining the highest standards of employee and food safety and quality INGHAM'S STRATEGIC FRAMEWORK SHORT TERM PRIORITY INITIATIVES To deliver more
Slide 36: Case Study – Unlocking Capacity and Efficiency Potential
CASE STUDY – UNLOCKING CAPACITY AND EFFICIENCY POTENTIAL For personal use only INITIAL STEPS TAKEN TO MANAGE SIGNIFICANT EP AVERAGE WEEKLY PRODUCTION VOLUME PRODUCTION GROWTH AT EDINBURGH PARKS (EP) +60% 1. Simplify production scheduling − Reduce changeovers − Longer runs 2. Debottleneck process to
Slide 37: Unlocking Our Potential: Marketing
For personal use only UNLOCKING OUR POTENTIAL MARKETING 36
Slide 38: Marketing Focus Areas
MARKETING FOCUS AREAS For personal use only Objective: Drive growth agenda through consumer-led brand building and innovation INGHAM'S STRATEGIC FRAMEWORK SHORT TERM PRIORITY INITIATIVES To deliver more consistent, predictable and reliable returns 01 Consumer segmentation driving innovation OPTIMISE
Slide 39: Case Study – Rebuilding Our Innovation Model
CASE STUDY – REBUILDING OUR INNOVATION MODEL For personal use only • Informed by consumer needs and segmentation INTERNAL CATEGORY WORKSHOPS • Category workshops identified unmet needs and GATE 1 CATEGORY WORKSHOPS WITH areas for improvement MID LIFE CHECK- THE CUSTOMER LEARNINGS AND RESULTS • Built
Slide 40: Unlocking Our Potential: Sales
CHRIS CROESE For personal use only CHIEF CUSTOMER OFFICER UNLOCKING OUR POTENTIAL SALES 39
Slide 41: Sales Focus Areas
SALES FOCUS AREAS For personal use only Objective: To work with customers to unlock incremental value through best-in-class innovation and account management INGHAM'S STRATEGIC FRAMEWORK SHORT TERM PRIORITY INITIATIVES To deliver more consistent, predictable and reliable returns 01 Stronger collabor
Slide 42: Case Study – From Transactional Supplier to Strategic Partner
CASE STUDY – FROM TRANSACTIONAL SUPPLIER TO STRATEGIC PARTNER For personal use only • Identified opportunities to increase collaboration EXAMPLE FROM TO with key customers across the business • To address this opportunity, we <20% of ING 100% of ING − Clearly defined bilateral expectations Leveragin
Slide 43: Unlocking Our Potential: New Zealand
For personal use only UNLOCKING OUR POTENTIAL NEW ZEALAND 42
Slide 44: New Zealand Focus Areas
NEW ZEALAND FOCUS AREAS For personal use only INGHAM'S STRATEGIC FRAMEWORK SHORT TERM PRIORITY INITIATIVES To deliver more consistent, predictable and reliable returns 01 Complete rebuild of broiler farm infrastructure OPTIMISE INNOVATE REINVEST Continued improvement in operational THE CORE TO GROW
Slide 45: Broiler Farm Infrastructure
BROILER FARM INFRASTRUCTURE For personal use only 44
Slide 46: Operational Efficiency and Performance
OPERATIONAL EFFICIENCY AND PERFORMANCE For personal use only • Productivity improvements being realised, however further opportunities remain • Detailed review of primary plant layout, flow and capacity underway to unlock efficiency improvements • Primary Plant automation with breast deboner • Intro
Slide 47: Summary
JIM LEIGHTON For personal use only CHIEF EXECUTIVE OFFICER & MANAGING DIRECTOR SUMMARY 46
Slide 48: Outlook
OUTLOOK For personal use only • Trading to plan through Q1 FY2020 • EBITDA run rate expected to be lower in the 1H than the 2H of FY2020 reflecting impact of feed prices and Further Processing (as previously discussed) • Adoption of AASB16 will have no economic impact to the group • Initial recognit
Slide 49: Appendix
For personal use only APPENDIX 48
Slide 50: Financial Highlights FY 2019 vs FY 2018
FINANCIAL HIGHLIGHTS FY 2019 VS FY 2018 For personal use only Core Underlying Underlying Underlying Cash Underlying Final Poultry Gross Gross EBITDA EBITDA NPAT NPAT Conv EPS EPS Dividend Volume Profit Profit Ratio 414.9kt $483.8m $480.2m $242.2m $208.6m $126.2m $103.2m 112.7% 34.0 cps 27.8 cps 10.5
Slide 51: Segment Information - Australia
SEGMENT INFORMATION - AUSTRALIA For personal use only $ millions (AUD) Jun-19 Jun-18 Variance % Summary: Australia Australia Core poultry volume and revenue growth excluding ingredients Core Poultry volumes (kt) 351.3 334.5 16.8 5.0 of 5.0% and 7.1% respectively Feed volumes (kt) 302.2 367.4 (65.2
Slide 52: Segment Information – New Zealand
SEGMENT INFORMATION – NEW ZEALAND For personal use only $ millions (AUD) Jun-19 Jun-18 Variance % Summary: New Zealand New Zealand Volume for core poultry in line with prior year, with some Core Poultry volumes (kt) 63.6 63.2 0.4 0.6 growth in 2H Feed volumes (kt) 130.3 137.3 (7.0) (5.1) Free-Ra
Slide 53: For personal use only
For personal use only