Slide 1: Scales Corporation Limited Annual Results Presentation
SCALES CORPORATION LIMITED YOUR DIVERSIFIED AGRIBUSINESS PORTFOLIO Annual Results Presentation For the twelve months ended 31 Dec 2015 25 February 2016
Slide 2: Agenda
AGENDA • Summary Highlights • Financial Performance • Divisional Overview • Capital Management • Strategy • Outlook • Appendices Scales – 2015 Full Year Results February 2016 2
Slide 3: 2015 Highlights
1 2015 HIGHLIGHTS
Slide 4: Financial Highlights for 2015
HIGHLIGHTS Financial Highlights for 2015 1 Record Underlying EBITDA of $61.4m, 49% ahead of IPO Forecast and 54% ahead of 2014. 2 Record Underlying NPAT of $35.7m, 71% ahead of IPO Forecast and 80% ahead of 2014 (Statutory NPAT of $38.9m). 3 More than $300m Revenue for the first time in Scales histo
Slide 5: Operational Highlights for 2015
HIGHLIGHTS We’re Growing: Operational Highlights for 2015 1 Coldstorage Capacity Increased by 19% to 721,600m3: Due to Auckland Coldstore + 2 coldstore leases in Christchurch. Mr Apple own-grown apple volumes up 15% to 3.15m 2 TCEs: Meeting our 2018 production target 3 years early. Own-grown premium
Slide 6: Scales by the Numbers
SCALES BY THE NUMBERS UNDERLYING EBITDA Half a billion >6.1M $61.4m apples picked from Mr Apple’s orchards litres of juice concentrate made by Profruit 49% above PFI 1.17M 21,125 cubic 20,220MT twenty foot container sold by petfood metres meat, fish, vegetables, dairy and FMCG ingredients manufactur
Slide 7: Selling to the World
SELLING TO THE WORLD Scales is an export-led company with complementary domestic service-based operations 2015 Revenues by Region 2014 Revenues by Region New Zealand Asia 32% New Zealand 15% Asia 33% 23% Total Total Revenues Revenues $263m $301m Europe Other Other Europe 29% 8% 9% 21% North America
Slide 8: Financials
2 FINANCIALS
Slide 9: 4-Year Performance Trend
4-YEAR PERFORMANCE TREND* Our 2015 Result was made possible by careful investments made over the past 5 years • We’ve been investing in our assets, people, and culture. • The financial impact is continuing to be demonstrated in our results. • We are continuing to invest in our growth that we will re
Slide 10: Summary Financial Performance
SUMMARY FINANCIAL PERFORMANCE Significantly ahead of IPO forecast and 2014 results • Revenue $301.4m, up 14% on 2014. • Underlying EBITDA $61.4m up 54% on 2014. • Underlying NPAT $35.6m up 80% on 2014. • Net Profit from Continuing Operations $38.9m up 115% on 2014. Income Statement 2015 2014 $ Milli
Slide 11: Divisional EBITDA
DIVISIONAL EBITDA All operating divisions exceeded 2014 actual, and 2015 IPO forecast, results • Horticulture and Food Ingredients divisions substantially exceeded prior year and forecast results. • Storage & Logistics continues to be highly consistent and predictable. Earnings 10% ahead of IPO fore
Slide 12: Divisional EBITDA Trend
DIVISIONAL EBITDA TREND Strong growth in Horticulture and Food Ingredients supported by consistent and predictable contributions from Storage & Logistics Trends in Underlying Divisional EBITDA ($m) Horticulture Storage & Logistics Food Ingredients 5% CAGR 11% $7.6m $40.0m $16.3m CAGR 57% CAGR $14.0m
Slide 13: Balance Sheet
BALANCE SHEET An investment in Scales is an investment in productive land, buildings and supporting assets • Scales’ balance sheet is heavily weighted towards an investment in land, buildings and plant & equipment (collectively $188m in 2015). Key elements include: ~710 ha. orchards owned by the G
Slide 14: Balance Sheet (Continued)
BALANCE SHEET (CONTINUED) Excellent financial position with material headroom in covenants • At 31 December 2015, Net Debt was $16.2m. This brings our average net debt for the year down to $32.5m. • Considerable headroom on all covenants. Balance Sheet (continued) 2015 2014 $ Millions Actual PFI Var
Slide 15: Divisional Performance & Outlook
DIVISIONAL PERFORMANCE & OUTLOOK 3
Slide 16: Horticulture – Financial Performance
HORTICULTURE – FINANCIAL PERFORMANCE Outstanding result made possible through historical investment • Record revenue of $178m (12% above both 2014 results and IPO forecast). • Record Underlying Divisional EBITDA of $40m (67% above 2014 results and 66% above IPO forecast). • Large investment in orcha
Slide 17: Horticulture – Strategy
HORTICULTURE – STRATEGY Our horticulture strategy focuses on optimising varieties and market mix • We are redeveloping lower returning orchards into high quality premium varieties for today and tomorrow, tailoring varieties to each region and balancing supply and demand to optimise returns: During
Slide 18: Horticulture – Own-Grown Volumes
HORTICULTURE – OWN-GROWN VOLUMES We achieved a material increase in premium volumes during 2015… • Total volumes (3.155m TCEs) up 15% on 2014 and 16% ahead of IPO forecasts. • Growth concentrated in premium varieties where volumes were up by 418,000 TCEs (40%): Volumes of NZ Queens, highly sought
Slide 19: Horticulture – Volume Growth
HORTICULTURE – VOLUME GROWTH …and expect to achieve further growth in premium volumes as orchard redevelopment matures… • 314 ha of orchard was redeveloped into premium apple varieties between 2008 and 2015. This equates to 30% of our planted orchard (1,042 ha). • After 3 years we start to get fruit
Slide 20: Horticulture – Prices
HORTICULTURE – PRICES …and this matters because premium varieties achieve a price that is, on average, 55% higher than traditional varieties • Premium apple variety pricing ($37.8 / TCE) achieved a 15% uplift over 2014 ($32.8 / TCE), whilst traditional apple prices ($24.4 / TCE in 2015) were consist
Slide 21: Horticulture – Other KPI's
HORTICULTURE – OTHER KPI’S Sea freight and USD rates achieved are stand-out KPIs against generally solid performance • KPIs were, in the main, better than or in line with the IPO forecast and 2014 results. Favourable and unfavourable variances were: NZD:USD rates improved early in the season. Sh
Slide 22: S&L – Financial Performance
S&L – FINANCIAL PERFORMANCE Another strong result from a consistent and predictable division • Revenues of $95.6m, 6% ahead of 2014 and 2% above IPO forecast. • EBITDA of $16.3m, 32% ahead of 2014 and 10% above IPO forecast. • Coldstores EBITDA ahead of the IPO forecast and 2014 results: EBITDA (e
Slide 23: S&L – Strategy
S&L – STRATEGY Our Storage & Logistics strategy focuses on network expansion and organic opportunities • To remain relevant for our customers we need to provide a comprehensive, nationwide service, touching all key production regions. Coldstorage. We provide New Zealand’s broadest independent cold
Slide 24: S&L – KPI's
S&L – KPI’S Performance measures generally as predicted • Key Performance Indicators in line with expectations: Total coldstore space was 3% higher than the IPO forecast due to two coldstore leases signed in Christchurch. These leases are for a short initial period but with multiple rights of rene
Slide 25: Food Ingredients – Financial Performance
FOOD INGREDIENTS – FINANCIAL PERFORMANCE Another exceptional performance from two highly effective teams • Food Ingredients followed on from a solid 2014 result to deliver a strong performance in 2015: Meateor sold 20,220 MT of petfood ingredients, 34% higher than our IPO forecast and 23% ahead of
Slide 26: Capital Management
4 CAPITAL MANAGEMENT
Slide 27: Performance Against Benchmarks
PERFORMANCE AGAINST BENCHMARKS Return on Capital Employed and EBITDA Margins • We monitor the Return on Capital Employed (ROCE) and EBITDA Margins for each division and the group. • We target a long-run ROCE of 15% and EBITDA Margin of 13%. • The group surpassed all investment targets during 2015. C
Slide 28: Capital Expenditure
CAPITAL EXPENDITURE Investing in Growth • Operational capital expenditure at $4.5m was slightly lower than 2014 results ($4.6m) and slightly higher than our IPO forecast ($4.0m). • $11.3m investment in future growth, to continue to improve our market position and earnings potential. Investments duri
Slide 29: Strategy
5 STRATEGY
Slide 30: Update on Strategic Objectives
UPDATE ON STRATEGIC OBJECTIVES Meeting or Exceeding our Objectives • In our 2014 Annual Report we outlined a number of Near Term (<2 years) and Medium Term (2-5 years) objectives. We intend to assess ourselves against these objectives, and to create new objectives where targets have been met. We
Slide 31: Outlook
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Slide 32: What We Know About 2016
WHAT WE KNOW ABOUT 2016 • Market dynamics and factors remain supportive: Horticulture: — Whilst picking has yet to begin, current orchard performance and fruit quality indicates another strong crop. Potentially as high as 2015. — Size and varietal mix are expected to be favourable. — The market dy
Slide 33: Appendices
7 APPENDICES
Slide 34: Reconciliation to Statutory Accounts
RECONCILIATION TO STATUTORY ACCOUNTS Reconciliation of Underlying EBITDA to Net Profit • The table to the right reconciles 2015 2014 Underlying EBITDA and Underlying Net #039;000 Actual PFI Actual Profit to Net Profit as Reported in our Underlying EBITDA 61,405 41,248 39,849 Financial Statements RECONC
Slide 35: Disclaimer
DISCLAIMER The information in this presentation has been prepared by Scales Corporation Limited with due care and attention. However, neither Scales Corporation Limited nor any of its directors, employees, shareholders nor any other person shall have any liability whatsoever to any person for any lo