Slide 1: Scales Corporation Limited Annual Results Presentation
SCALES CORPORATION LIMITED GROWING YOUR DIVERSIFIED AGRIBUSINESS Annual Results Presentation For the twelve months ended 31 December 2017 28 February 2018
Slide 2: Agenda
AGENDA 1. 2017 Highlights 2. Financial Performance 3. Divisional Performance & Outlook 4. Capital Management 5. Outlook 6. Strategy 7. Appendices Scales – 2017 Full Year Results February 2018 2
Slide 3: 2017 Highlights
2017 HIGHLIGHTS
Slide 4: Scales by the Numbers
SCALES BY THE NUMBERS Revenue Underlying EBITDA Underlying Net Profit $399.1m $62.0m $32.7m 7% increase 9% decrease 15% decrease ROCE EPS Dividends declared 22.6 cents 19.0 cents 16% per share per share (2016: 21%) (2016: 27.4 cents per share) (2016: 14.5 cents per share) 4
Slide 5: Strategic and Operating Highlights
STRATEGIC AND OPERATING HIGHLIGHTS Mr Apple export volumes of 3.5m TCEs consistent with 2016 1 record volumes, like-for-like production only 5% less than 2016. OceanAir acquired in August 2017, adding new locations and 2 expertise in the freight forwarding and logistics business. Continued developme
Slide 6: Financials
FINANCIALS
Slide 7: Group Financial Performance
GROUP FINANCIAL PERFORMANCE • Revenue $399.1m, up 7% on 2016: Income Statement Solid revenue growth from Storage & 2017 2016 Logistics and Food Ingredients divisions. $ Millions Actual Growth % Actual Growth % Horticulture revenue in line with 2016 Revenue 399.1 7% 373.9 24% following successful
Slide 8: Historic and Divisional Trends
HISTORIC AND DIVISIONAL TRENDS • Underlying EBITDA and NPAT have increased at CAGRs of 10% and 13% respectively. • Underlying divisional EBITDAs have also increased at CAGRs of between 8% and 14%. Underlying EBITDA Underlying NPAT $67.9m $38.6m CAGR 10% $61.4m $62.0m $34.8m $32.7m CAGR 13% $42.8m $3
Slide 9: Balance Sheet
BALANCE SHEET Maintaining a strong balance sheet • Scales’ balance sheet continues to reflect its Balance Sheet investment in land, buildings, equipment and trees: 2017 2016 731 ha. orchards owned by the Group (further 417 ha. $ Millions Actual Actual leased). Current Assets (excluding Cash) 322
Slide 10: Balance Sheet (Continued)
BALANCE SHEET (CONTINUED) Maintaining a strong balance sheet • At 31 December 2017, Net Debt was $40.8m. Balance Sheet (continued) The increase in Net Debt on 2016 was due to 2017 2016 movements in working capital. $ Millions Actual Actual • Average net debt for the year was $54.8m, or 0.9x EBITDA.
Slide 11: Divisional Performance & Outlook
DIVISIONAL PERFORMANCE & OUTLOOK
Slide 12: Horticulture – Financial Performance
HORTICULTURE – FINANCIAL PERFORMANCE A strong performance despite a challenging growing season • Revenue of $228m (1% below 2016 revenue). • Gross profit down 8% on 2016, impacted by additional on-orchard expenses and additional labour. • Underlying divisional EBITDA of $38.9m (14% below 2016 result
Slide 13: Horticulture – Own-Grown Volumes
HORTICULTURE – OWN-GROWN VOLUMES Premium and traditional volumes at a similar level to 2016 • Total own grown export volumes of 3.5m TCEs in line with 2016 (supported by approximately 200,000 TCEs from Longview orchards). • Growth in premium volumes affected by the inclement weather conditions: St
Slide 14: Horticulture – Prices
HORTICULTURE – PRICES Recognition by customers and consumers of the superior quality of the Mr Apple brand • Compared to the record 2016 prices achieved, our 2017 apple prices were affected by an overall softening of prices in the market. Apple Prices by Variety 2017 2016 NZD / TCE, FOB Actual Growt
Slide 15: Horticulture – Other KPIs
HORTICULTURE – OTHER KPIs • Both internal and external grower volumes maintained notwithstanding higher than average rainfall and the impact from ex-Cyclone Cook. On a like-for-like basis, Mr Apple export volumes were down by ~5%, favourably comparable to the broader industry. • Exchange rates bro
Slide 16: Horticulture – Strategy
HORTICULTURE – STRATEGY Asia & the Middle East remain the key focus for Mr Apple • During 2017 Mr Apple picked over half a billion apples. The Horticulture division sold apples to more than 160 customers in over 40 countries. • Asia & Middle East are the key focus for the Horticulture division, acco
Slide 17: S&L – Financial Performance
S&L – FINANCIAL PERFORMANCE Strong uplift from Storage & Logistics with EBITDA up 18% on 2016 • Revenues of $126.0m, 16% ahead of 2016 reflecting strong growth from the Coldstorage and Logistics businesses. • EBITDA of $19.1m, 18% ahead of 2016. • Strong growth from the Coldstore division: Industr
Slide 18: S&L – Financial Performance (Cont'd)
S&L – FINANCIAL PERFORMANCE (CONT’D) Ongoing improvements from Scales Logistics • Excellent performance from Scales Logistics, EBITDA up 46% on 2016 results, reflecting: Strong increases in underlying activity: TEUs shipped and airfreight tonnes handled both significantly ahead of 2016 with growth
Slide 19: S&L – KPIs
S&L – KPIS • A 5% increase in the total available refrigerated coldstore space with additional leased area in Christchurch secured for current and expected future demand. • Scales Logistics (including airfreight division Balance Cargo) achieved excellent growth : Increased revenue from: — Scales L
Slide 20: S&L – Strategy and Outlook
S&L – STRATEGY AND OUTLOOK Storage & Logistics benefits from a long-term view and appropriate levels of investment • The outlook for 2018 is positive: The Coldstore business expects to consolidate returns from new and existing customers requiring additional storage. The year commenced with higher
Slide 21: Food Ingredients – Financial Performance
FOOD INGREDIENTS – FINANCIAL PERFORMANCE Record sales volumes from Meateor • Meateor continues its steady growth in securing and selling petfood ingredient volumes. During 2017, 27,663 MT of petfood ingredients were sold by Meateor up 20% on 2016, delivering a corresponding increase in divisional re
Slide 22: Capital Management
CAPITAL MANAGEMENT
Slide 23: Performance Against Benchmarks
PERFORMANCE AGAINST BENCHMARKS Return on Capital Employed and EBITDA Margins targets exceeded • We monitor Return on Capital Employed (ROCE) and EBITDA Margins for each division and the group, targeting a long-run combined ROCE of 15% and EBITDA Margin of 13%. • Group capital employed increased by $
Slide 24: Capital Expenditure
CAPITAL EXPENDITURE Strategic investment • Operational capital expenditure of $7.4m was slightly higher than 2016 whilst $6.0m was invested in growth projects, positioning us strategically for future earnings growth. • Investments during 2017 included: Capital Expenditure Horticulture: 2017 2016 A
Slide 25: Outlook
OUTLOOK
Slide 26: What We Know About 2018
WHAT WE KNOW ABOUT 2018 A positive outlook • Market dynamics remain supportive: Horticulture: — Apple harvesting is underway, having commenced 7-10 days ahead of last year, notwithstanding the wet weather experienced by the region. Early crop indications are positive. — Gross production is expecte
Slide 27: Strategy
STRATEGY
Slide 28: Refreshing Our Strategy
REFRESHING OUR STRATEGY A greater focus on pure Agri-Business • We have refreshed our group investment / growth strategy, adopting a greater focus on pure agri-businesses. • We will focus on opportunities that play well to our strengths: Fully-vertically integrated. Export-led. Add value from
Slide 29: Refreshing Our Strategy (Cont'd)
REFRESHING OUR STRATEGY (CONT’D) Agri-Business encompasses the following primary industries The Primary Sector accounts for: 79.2% of New Zealand’s Innovative Processed Agriculture Dairy, Meat & Wool, Animal merchandise exports Food products, Arable products, Poultry and eggs 15% Fisheries / Apicult
Slide 30: Appendices
APPENDICES
Slide 31: Reconciliation to Statutory Accounts
RECONCILIATION TO STATUTORY ACCOUNTS • This table reconciles Underlying Reconciliation of Underlying EBITDA to Net Profit EBITDA and Underlying Net Profit 2017 2016 to Net Profit as Reported in our #039;000 Actual Actual Financial Statements. Underlying EBITDA 62,007 67,856 RECONCILIATION TO GAAP INFOR
Slide 32: 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