Australian Dairy Nutritionals Limited · ASX:AHF
Australian Dairy Nutritionals — Investor Presentation (September 2018)
40 slides from Australian Dairy Nutritionals's investor presentation, Sep 20, 2018
Slide 1: Australian Dairy Farms Group
Australian Dairy Farms Group 20 September 2018 ASX Code: AHF AHF Investor Presentation AHF provides the attached investor presentation for the information of Securityholders regarding the longer-term strategy of the Group in the dairy formula and nutritionals market segments. The directors are confi
Slide 2: AHF will become a vertically integrated producer of dairy products and nutritionals
“ AHF will become a vertically integrated, producer of dairy products and diverse nutritionals including organic infant formula from Australian Organic Milk ” Australian Dairy Farms Group 1 Australian Dairy Farms, the new fresh future
Slide 3: Disclaimer
Disclaimer Commercial in Confidence This Presentation contains general information only and is, or is based upon, information which has been released to ASX. This document is not an invitation, offer or recommendation (express or implied) to apply for or purchase or take any other action in respect
Slide 4: Presenters
Presenters Peter Skene Chris Flahey CEO & Managing Director Sales & Marketing Director • Peter Skene was appointed CEO and Managing Director of • Chris has extensive knowledge, experience and relationships Australian Dairy Farms Group in July 2016 with the domestic and global formula markets • Peter
Slide 5: Executive Summary
Executive Summary 1. Australian Dairy Farms Group (AHF) is transitioning from a producer and contract packer of low value dairy products, to a premium differentiated branded business 2. AHF is entering the formula / nutritionals market through the acquisition of Flahey's Nutritionals and plans to ex
Slide 6: History of Australian Dairy Farms
History of Australian Dairy Farms October 2017 April 2016 Aussie Farms Direct discontinued fresh March 2018 August 2018 Completed acquisition milk contract. Plan Announced plans to Entering the formula of Camperdown Dairy to increase convert farms to market with the June 2015 Company (CDC) productio
Slide 7: Overview of Australian Dairy Farms
Overview of Australian Dairy Farms ASX Code AHF Stapled Security Price (03/09/18) $0.155 Stapled Securities on Issue 245.8 million VictorianSouth West Dairy Region Market Capitalisation A$38.1 million GoldenTriangleof the South West Victoria DairyRegion VerticalIntegration AHFFarms–Transitioning to
Slide 8: Organic Dairy Farms
Organic Dairy Farms Our farms • Australian Dairy Farms (AHF) Group currently owns 7 farms producing 20 million litres of milk1 • AHF owned farms are in the process of converting to organic milk production • AHF is Australia’s largest single farm entity converting to organic milk production • Austral
Slide 9: Current Processing Facilities
Current Processing Facilities Our processing facility • Camperdown Dairy Company (CDC) has been a fully certified organic dairy manufacturer of butter for the last 5 years • CDC has recently expanded the organic certification to include yoghurts and milks • The company has, in the main, been using i
Slide 10: Strategy Overview
Strategy Overview • Transitioning from contract packer to brand owner • Converting conventional dairy farms into Australia’s largest single entity organic dairy enterprise • Moving from highly competitive low value products to high value, high growth markets • Entering the formula / nutritionals mar
Slide 11: Strategy
Strategy • Acquisition of Flahey's Nutritionals provides platform for a premium differentiated branded business • Flahey's Nutritionals recently launched into the Australian Certified Organic market via a specialised ultra premium product currently ranged in major branded retailers within the Pharma
Slide 12: Strategy – Planning for the Future
Strategy – Planning for the Future Spray Drying and Tinning Facility Proposed Camperdown Dairy Park • AHF have completed a feasibility study of a new wet blend spray drying plant and pharmaceutical‐ grade tinning and labelling facility • Based on 10 acres of commercial and industrial zoned land in C
Slide 13: Proposed Infant Formula Spray Dryer
Proposed Infant Formula Spray Dryer Outputs: Drying Plant Process • Organic skim milk powder • Organic whole milk powder • Full range of organic infant formula • Other dairy nutritionals Australian Dairy Farms Group 12 Australian Dairy Farms, the new fresh future
Slide 14: Proposed Pharma Grade Infant Formula / Nutritionals Tinning Plant
Proposed Pharma Grade Infant Formula / Nutritionals Tinning Plant Outputs: • Consumer packs of organic infant formula • “Tummy health” infant formula • Consumer packs of various milk powder • Other nutritionals • Capacity of 10 million cans per year based on 5 days per week on 2 shifts Australian Da
Slide 15: Strategy – Brands (illustrative only)
Strategy – Brands (illustrative only ‐ we don’t wish to share with competitors at this point) Australian Dairy Farms Group 14 Australian Dairy Farms, the new fresh future
Slide 16: Growing Branded Products
Growing Branded Products Australian Dairy Farm Group is transitioning from a conventional basic producer of low value products, to a premium differentiated branded business 2015 2018 2021 (f) Own Brand Contract Packing Own Brand Contract Packing Own Brand Contract Packing Australian Dairy Farms Grou
Slide 17: Shift to Branded Products and Nutritionals
Shift to Branded Products and Nutritionals Australian Dairy Farms are moving up the value chain to high value speciality products Indicative Projected Category Value Splits 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2015 2016 2017 2018 2019 (f) 2020 (f) 2021 (f) Bottled milk Yoghurt / Kefir Butter
Slide 18: Infant Formula / Nutritionals Pipeline
Infant Formula / Nutritionals Pipeline Current Product Product Description Product Range 1 SKU: Paediatric formula Certified organic ultra premium nutritional • Currently ranged in major branded Flahey’s future formula retailers within the pharmacy market in Australia Product Pipeline Product Descri
Slide 19: Moved From Farms Focus To Consumer Products
Moved From Farms Focus To Consumer Products Expanding product capabilities 2014 ‐ 2016 2016 ‐ 2017 2018 2019 2020 Farms producing Milk O,C Milk O,C Milk O,C Milk O,C Bulk raw milk Butter O,C Butter O,C Butter O,C Butter O,C Yoghurt O,C Yoghurt O,C Yoghurt O,C Yoghurt O,C Kefir C Kefir C Kefir C Paed
Slide 20: Capital Raising
Capital Raising Australian Dairy Farms Group 19 Australian Dairy Farms, the new fresh future
Slide 21: Capital Raising Overview
Capital Raising Overview 1. AHF is seeking up to A$5 share purchase plan (Offer) 2. The price of the Offer will be $0.13 which represents a discount of 20% to the 5 day VWAP 3. Use of Funds: • The purchase of the Flahey's Nutritionals company • For the launch of new Infant formula and other nutritio
Slide 22: Indicative Timetable
Indicative Timetable • An indicative timetable for the capital raising is provided below Announcement of Share Purchase Plan Tuesday, 18 September 2018 Record date Dispatch of SPP Offer booklet Monday, 24 September 2018 Close of SPP Monday 15, October 2018 Allot SPP shares Thursday, 18 October 2018
Slide 23: Fully Integrated
Fully Integrated Turnover Infant Vertical Market Cap Market Cap / Organic Branded FY18 Formula Integration (A$m) Turnover (A$m) Bellamy’s Australia × 1,171.7 320.0 3.7x The A2 Milk Company × × 8,604.3 922.7 9.3x Wattle Health × 295.8 1.6 150.0x Bubs Australia 295.8 18.4 16.1x
Slide 24: Appendix
Appendix Australian Dairy Farms Group 23 Australian Dairy Farms, the new fresh future
Slide 25: Organic Dairy Market
Organic Dairy Market Market The domestic dairy industry revenue is expected to grow at an annualised rate of 8.5% to reach a market value of $2.6 Billion. The market for organic infant formula in Australia and New Zealand is expected to grow from $230m in 2017, to $546m by 2023. (source: AAP) Price
Slide 26: Organic Dairy Market Opportunity
Organic Dairy Market Opportunity Top Perceived ‘Free From’ Benefits of Organic Food* Australia’s Top 12 Perceived Benefits* of Organic Food 83% CHEMICAL FREE 46% CRUELTY 75% ADDITIVE FREE PERCEIVED FREE BENEFITS 57% 58% NON HORMONE & GMO ANTIBIOTIC FREE THE TOP PERCEIVED BENEFITS OF ORGANIC FOOD 1.
Slide 27: Organic Dairy Market (Cont)
Organic Dairy Market (Cont) Challenges Numerous challenges have developed in the domestic dairy market, including supermarket milk price wars and falling domestic milk prices due to plummeting global dairy trade prices. Market Opportunities: • Retailers and restaurants are stocking an increasing num
Slide 28: Organic Baby Formula Market Sales
The last 10 years ‐ Organic Baby Formula Market Sales – (Growing at 20% per year in last 5 years) Global organic baby formula retail sales value (constant price) in millions CAGR USD1,000 5 year:20% 10year:15% 850 800 758 697 38% Other 600 576 52% 57% 6% EarthsBest 414 400 16% Bellamy’s 355 62% 286
Slide 29: Australian/NZ Organic Infant formula – next 5 years
Australian /NZ Organic Infant formula – next 5 years From USD $169 Mill in 2017 to USD $400 Mill Source: ‘Market Research Future’ ‐ Global Organic Infant Formula Report Australian Dairy Farms Group 28 Australian Dairy Farms, the new fresh future
Slide 30: Infant formula sales in China are growing
Infant formula sales in China are growing at 9% PA ORGANIC infant formula sales in China are growing at 46% PA Source: Citi Infant formula report Australian Dairy Farms Group 29 Australian Dairy Farms, the new fresh future
Slide 31: Bellamy's Australia & The A2 Milk Company
Bellamy's Australia & The A2 Milk Company Total Sales ($ million) 350 1000 900 300 800 Baby 250 Formula 700 Sales 600 Baby 200 Formula 500 Sales 150 400 100 300 200 50 100 0 0 2014 2015 2016 2017 2018 2014 2015 2016 2017 Bellamys sales include all food sales, approx. 98% A2 sales includes fresh milk
Slide 32: Australian Dairy Farms Group
Australian Dairy Farms Group 31 Australian Dairy Farms, the new fresh future
Slide 33: Key Terms of Acquisition Transaction
Key Terms of Acquisition Transaction Total consideration $1.5 Million, made up of: • $400,000 Cash and 6,875,000 AHF Stapled Securities in 3 tranches based on key milestones and retention of key Executive over a 3 year period; • Includes stock necessary for ongoing trade; • Includes intellectual pro
Slide 34: Financials
Financials Australian Dairy Farms Group 33 Australian Dairy Farms, the new fresh future
Slide 35: Sales
Sales Sales Normalised excluding Aussie Farmers Direct 2016 2017 2018 20,000,000 Total sales $9,844,465 $23,605,437 $19,521,974 18,000,000 Aussie Farmers Direct (AFD) $1,649,760 $6,604,801 $1,810,525 16,000,000 Cream sales from AFD $98,986 $396,288 $108,632 14,000,000 Normalised $8,095,719 $16,604,3
Slide 36: Balance Sheet and Asset Distribution
Balance Sheet and Asset Distribution 30 June 2018 Debt Facility: Total Current Assets $5,536,914 • Banker: CBA Non‐Current Assets • $10m Facility with a further $4.55m approved for the acquisition of Biological assets (Cows) $5,205,774 Yaringa farm Intangible assets $6,643,045 • 3 year duration to A
Slide 37: Key risks
Key risks This section discusses some of the key risks associated with an investment in the Group and participation in the Offer. The risks set out below are not set out in any particular order and are not an exhaustive list of all risks involved in an investment in the Group. Limited track The Grou
Slide 38: Key risks (cont.)
Key risks (cont.) Environmental risks The agricultural and dairy farming industry are largely dependent on the natural outside environmental and weather conditions, including heat, cold, rain and sunshine, all of which directly impact animal health and welfare and productivity. Failure to successful
Slide 39: Key risks (cont.)
Key risks (cont.) Additional The Group’s capital requirements depend on numerous factors. Depending on the Group’s ability to generate income from its operations, the Group may require further financing in the future. requirements for Any additional equity financing will dilute security holdings. De
Slide 40: Further Details
Further Details For additional company information or media enquiry matters please contact: Peter Skene Group CEO/ Director Australian Dairy Farms Limited Email: shareholders@adfl.com.au About Australian Dairy Farms Group Disclaimer – Forward Looking Statements Australian Dairy Farms Group (AHF) was
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