Rainbow Chicken Limited · JSE:RBO
Rainbow Chicken — FY2010 Earnings Presentation
40 slides from Rainbow Chicken's earnings presentation, March 2010
Slide 1: Year End Results March 2010
RAINBOW Year End Results March 2010
Slide 2: Statutory highlights
2010 1 Statutory Revenue +2.1% Feed cost +1.4% highlights 6,811 6,953 2,723 2,762 5,995 4,730 2,038 4,104 1,356 1,432 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Operating profit +22.6 % Dividends per share +11.8% 780,0 654,1 577.8 76,0 519,7 68,0 68,0 68,0 423,8 57,0 2006 2007 2008 2009 2010
Slide 3: Overview: Acceptable results in difficult trading environment
Overview Acceptable results in difficult trading environment 2 • Consumers under pressure by virtue of the recession and significant job losses • Local chicken industry in an oversupply situation • Feed cost still significantly higher than historical levels • Chicken realisations lower than prior ye
Slide 4: Strategic framework
3 Strategic Vision framework Rainbow Chicken will be at the heart of every meal. We will achieve this by creating innovative solutions and strong brands. Key to our success is consistent, profitable, sustainable demand. The single reason Our partners in Excellence gives us Investing The right team w
Slide 5: Progress summary
4 Progress Vision summary Rainbow Chicken will be at the heart of every meal. We will achieve this by creating innovative solutions and strong brands. Key to our success is consistent, profitable, sustainable demand. • Relevant • Rainbow • Focus on process • World first • Good to great innovation in
Slide 6: Results summary
Results Statutory 2009 2010 % 5 summary Revenue Rm 6811,4 6952,8 +2.1 Headline EBITDA Rm 575,8 671,5 +16.6 Headline EBIT Rm 425,2 514,1 +20.9 Headline EBIT % 6.2 7.4 +1.2 Effective tax rate % 28.1 33.4 -5.3 Headline earnings Rm 318,8 351,5 +10.3 Cash generated by operations Rm 594,5 525,9 -11.5 Net
Slide 7: Yellow maize (local)
Yellow Record crop and surplus projected this year 6 maize (local) SAFEX YM (nearby) 2,500 2,250 + 32.4% 2,000 - 2.5% 1,750 - 24.1% 1,500 1,250 2008 2009 2010 1,000
Slide 8: Soya (international)
Soya • Price increased early in the year due to severe drought in 7 (international) Argentina affecting prior year crop • Subsequent decline largely due to forecast of record crop for 2010 CBOT Soya meal ($/ton) 450.0 400.0 + 1.3% + 14.5% 350.0 + 50.6% 300.0 250.0 200.0 2008 2009 2010 150.0
Slide 9: Exchange rate (US dollar)
8 Exchange Volatility remains although the rate has been more range bound rate (US dollar) R/US$ exchange rate 11 10 +23.9% 9 + 0.8% - 11.6% 8 7 2008 2009 2010 6
Slide 10: Feed cost
Feed cost Feed cost in 2010 remained high relative to historic levels 9 Feed cost Rm +1.4% 3,000 +33.6% 2,500 +42.3% 2,000 Feed raw material prices 1,500 • Peaked at historically high 1,000 levels during 2009 financial year • Remained volatile 500 throughout 2010 • With exception of soya, raw materi
Slide 11: Feed cost vs sales realisation
10 Feed cost vs Significant feed cost increases not recovered in realisations sales realisation Feed Cost Sales Realisations growth % Growth 50 45 +42 40 +34 35 30 25 20 +14 +15 15 10 +8 +6 +6 5 +3 +2 +1 0 -5 -3 -5 -10 -15 2005 2006 2007 2008 2009 2010
Slide 12: Feed cost vs adjusted HEBIT
11 Feed Cost Profit impacted by significant feed cost increases, but less so in vs adjusted 2010 HEBIT pre IAS39 Feed cost Adjusted HEBIT pre IAS 39 Rm 3,000 +R685.0m +R39.4m 2,500 +R606.0m 2,000 1,500 1,000 +R68.5m -R185.0m -R92.1m 500 - 2006 2007 2008 2009 2010
Slide 13: Financial review: Revenue
12 Financial Chicken revenue review • Average price realisation decreased by 2,7% Revenue • Volumes 5,1% higher Other revenue reduced due to lower feed prices and volumes sold external to Rainbow Revenue (Rm) + 2.1% 6811,4 6952,8 5955,3 1382,9 1367,3 1335,6 4730,4 5428,5 5585,5 924,1 Total 4101,5 46
Slide 14: Financial review: Underlying operational profit
13 Financial • Adverse impact of higher feed costs and more recently lower review chicken realisations Underlying • Lower effective tax rates in 2007 and 2009 due to SIP operational allowance profit Adjusted HEBITDA pre IAS39 Adjusted headline earnings pre IAS39 Effective 33,6 16,7 Tax rate 33,4 Mar
Slide 15: Financial review: Cash flow
Financial Strong cash generation 14 review Rm Cash flow Tax 700.0 2010 664.3 reflection 600.0 528.1 539.1 500.0 400.0 300.0 200.0 100.0 28.1 14.0 - Tax (100.0) OB WC Int CAPEX Other OP Div CB (95.5) (200.0) (138.4) (210.2) (300.0) (251.4) 2009 Rm 573.0 509.9 528.1 OB – opening balance 500.0 WC – wor
Slide 16: Financial review: Cash generated
Financial Higher trade receivables due to additional trading week 15 review compared to March 2009 Cash generated Cash generated by operations 821,5 Rm 680,1 *203,8 617,2 594,5 525,9 * Adjusted for impact of additional trading week 2006 2007 2008 2009 2010
Slide 17: Financial review: Capital expenditure
Financial Capex spend well managed in current economic environment 16 review Capital expenditure Capex and depreciation 157,4 149,2 136,4 118,2 Dep 109,7 Rm 315,5 293,1 251,4 234,4 214,1 Capex Spend Rm 2006 2007 2008 2009 2010
Slide 18: Financial review: Net working capital
Financial Last three years impacted by higher feed cost environment 17 review Net working capital Net working capital (excluding cash) as % of revenue 11.3 10.4 9.0 4.7 4.8 2006 2007 2008 2009 2010
Slide 19: Financial review: Dividends
Financial Total dividend is 76,0 cents per share (+11.8%) 18 review Dividends Dividends per share Dividend cover 76,0 68,0 2.7 Dividend 48,0 per share 44,0 2.5 (cents) 2.4 2.5 Final 2.0 Interim 28,0 1.6 1.6 24,0 68,0 Board’s intention to restore dividend cover 2009 2010 2006 2007 2008 2009 2010 rang
Slide 20: Financial review: Profit history
Financial Reporting the financial effects of only certain procurement 19 review instruments in terms of IAS39 introduces volatility to statutory Profit results history Pre IAS39 14,1 14,2 Adjusted 13,0 Post IAS39 headline 13,9 EBIT margin 12,6 12,4 (%) 7.4 774,0 8,1 7,9 7,2 739,6 6.7 671,1 656,9 5,9
Slide 21: Marketing Highlights: What is added value for Rainbow?
20 2010 Moving Rainbow to sustained, profitable demand Marketing Highlights What is added value for Rainbow? Any product that gives us a sustained, profitable demand eg: 1. FoodSolutions 2. Retail added value brands 3. Woolworths
Slide 22: Contribution of added value has grown
21 2010 Moving Rainbow to sustained, profitable demand Marketing Highlights Our company turnover contribution of added value has grown dramatically in total….. 2004 2004 2010 Added value 30 46 Mainstream 70 chicken 54 And in retail/wholesale only… 2004 2004 2010 4 Added value 21 Mainstream 96 chicke
Slide 23: Retail/Wholesale has experienced exceptional growth
22 2010 Moving Rainbow to sustained, profitable demand Marketing Highlights •Retail/Wholesale has experienced exceptional growth • Nielsen reports overall grocery markets growing by - 1% for 12 months ending Feb. • Rainbow Polony and Viennas grew by 28% • Rainbow Crumbed products grew by 74%
Slide 24: The three consumer moments of truth
23 2010 Moving Rainbow to sustained, profitable demand Marketing Highlights • The Sales Force in Retail/Wholesale is key in a demand led business Why is Sales so important? The three consumer moments of truth! 1. She sees advertising The Second Moment 2. She makes her choice in-store of Truth 3. She
Slide 25: The Five Brilliant Basics
24 2010 Moving Rainbow to sustained, profitable demand Marketing Highlights To win the 2 nd Moment of Truth we need a Great Sales Force • A Great Sales Force is underpinned by Brilliant Basics! • The Five Brilliant Basics 1. On Shelf Availability (OSA) 2. Right price every SKU, every day F09-F11 Foc
Slide 26: FoodSolutions growth slower but steady
25 2010 Moving Rainbow to sustained, profitable demand Marketing Highlights •FoodSolutions growth has been slower but steady • There are some growth areas but overall growth was low single figures. Feed cost savings were passed on to these customers • a significantly better year is expected in F11
Slide 27: F11 added value expansion plans are aggressive
26 2010 F11 added value expansion plans are aggressive Marketing Highlights • Just launched is the new Rainbow ‘Spice Flavas range • And a new range of Farmer Brown added value fresh
Slide 28: Marketing summary
27 2010 Moving Rainbow to sustained profitable demand Marketing Highlights In summary:- • We have significantly exceeded growth expectations of retail/wholesale added value products. • Rainbow needs to expand manufacturing capacity in this area • Other added value sectors have seen slowed growth but
Slide 29: Conclusion: Prospects
28 Conclusion Prospects Summary • Maize and soya prices are likely to remain at lower levels with excellent crops expected locally and in Argentina • Exchange rate is expected to remain volatile • Feed prices expected to decline but remain higher than historical levels • Chicken prices expected to r
Slide 30: Questions
Questions RAINBOW,
Slide 31: Appendix
Appendix RAINBOW,
Slide 32: Infrastructure: South Africa's largest processor and marketer of chicken
Infrastructure South Africa’s largest processor and marketer of chicken 31 Windhoek Northern Province Botswana Mpumalanga Pretoria Rustenburg Carolina North Gauteng Swaziland West KwaZulu Namibia Free Natal State Pietermaritzburg Hammarsdale Lesoth Northern o Durban Cape Eastern Cape Western Cape Wo
Slide 33: Complex business chain
Complex Integrated supply chain from “farm to fork” 32 business chain GP OPERATION AGRICULTURE PROCESSING Grandparent Grandparent farms Parent Parent farms Broiler Broiler farms chicks chicks chicks Broilers Processing Rearing Laying Hatching Rearing Laying Hatching Growing 3 plants + FP 22 wks 40 w
Slide 34: Rainbow's past 1991-2003
Rainbow’s 33 past 1991 - 1998 1999 - 2003 1991 - 1998 Business in trouble • Revenue was growing, but so were losses. Revenue 3,7 • The business had lost its way, and required (Rbn) 3,0 recapitalisation. 2,5 2,2 2,2 2,3 1,9 2,1 1,5 1,5 1,6 1,7 1999 - 2003 0,5 Fixing the basics 91 92 93 94 95 96 97 98
Slide 35: Rainbow's past 2004-2009
Rainbow’s 34 2004 - 2009 Past 1991 - 1998 1999 - 2003 2004 - 2009 Transformation to consumer 6,8 6,0 focused business Revenue 4,7 Focused on: 4,0 4,1 (Rbn) 3,7 3,8 3,0 • Clarifying our strategic 2,5 framework 2,1 2,2 2,2 2,3 1,9 • Restructuring the company 1,5 1,5 1,6 1,7 and board 0,5 • Vector acqu
Slide 36: Industry Perspective: per capita consumption
Industry Estimated per capita consumption of broiler meat in Kilograms 35 Perspective per capita 30,0 30,8 29,6 25,8 23,1 21,7 21,1 19,7 20,1 19,4 19,7 18,6 18,9 17,6 17,8 16,2 14,4 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 Continues to reflect growing trend Source: SAPA
Slide 37: Industry Perspective: broiler production per week
36 Industry Average broiler production per week (in millions) excluding Perspective imports 17,8 16,8 14,6 13,8 12,9 11,8 11,8 11,9 11,1 11,0 10,5 9,8 9,8 9,2 8,5 8,0 7,5 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 Source: SAPA
Slide 38: Industry Perspective: production by producer
37 Industry Average broiler production per week by producer Perspective Million boilers per week as at March 2010 • 16,5m broilers produced per week • 1,3m tons per annum 4,4 3,8 • Astral = Earlybird Farms + County Fair 3,5 • Others = approximately 44 smaller producers producing less than 200k broil
Slide 39: Industry Perspective: protein price relativity
38 Industry Protein price relativity maintained Perspective R / kg Beef, Pork and Poultry prices 25 24 23 22 21 Beef abattoir 20 selling prices 19 18 Pork abattoir 17 contract 16 prices 15 14 13 Broiler producer 12 price 11 10 9 2005 2006 2007 2008 2009 Source: SAPA Calendar Year
Slide 40: Industry Perspective: total poultry imports
39 Industry Total poultry imports (‘000 tons) Perspective For 12 months ending 31st March • Imports have increased by 22% YTD • Chicken driving this growth with 29% increase versus the previous year. 289 Origin of poultry imports 279 84 Apr 2009 - Mar 2010 98 251 Total 101 Argentina 9% 225 Australia
Rainbow Chicken (RCL Foods) — FY2010 Earnings Presentation on 6ix