RCL Foods Limited · JSE:RCL
RCL Foods — FY2016 Earnings Presentation
52 slides from RCL Foods's earnings presentation, Aug 31, 2016
Slide 1: Results for the year ended 30 June 2016
RESULTS FOR THE YEAR ENDED 30 JUNE 2016 INVESTOR PRESENTATION: 31 AUGUST 2016
Slide 2: Miles Dally, CEO
0 MILES DALLY CEO
Slide 3: Performance and financial highlights
Salient features | Strategic overview | Financial review | Operational reviews | Prospects RESULTS FOR THE YEAR ENDED 30 JUNE 2016 PERFORMANCE HIGHLIGHTS FINANCIAL HIGHLIGHTS Major strides in transformation into “ONE RCL FY16 FY16 FOODS” with first full year of operating under new structure and lead
Slide 4: Becoming ONE RCL Foods
Salient features | Strategic overview | Financial review | Operational reviews | Prospects BECOMING ONE RCL FOODS FIRST YEAR WITH WINNING MINDS SYNERGIES AND NEW STRUCTURE AND HEARTS OPPORTUNITIES AROUND OVER 500 000 TONS 700 000 MORE THAN 20 20 000 400 000 OF FLOUR AND MAIZE TONS OF SUGAR WELL KNOW
Slide 5: Moving towards a more balanced portfolio
Salient features | Strategic overview | Financial review | Operational reviews | Prospects MOVING TOWARDS A MORE BALANCED PORTFOLIO RELATIVE SHARE OF EBITDA (PRE-IAS 39) 16% 21% Significant progress against strategic thrusts are moving us closer to a stronger, more diversified business that 14% F15
Slide 6: Main performance drivers
Salient features | Strategic overview | Financial review | Operational reviews | Prospects MAIN PERFORMANCE DRIVERS REVENUE & PRE-IAS 39 EBITDA GROWTH (Excl. Chicken & Sugar) Groceries achieved strong results driven by a sound pricing strategy, effective marketing and REVENUE 13.1% promotional activ
Slide 7: 1. Grow through strong brands
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 1. GROW THROUGH STRONG BRANDS NOLA MAYONNAISE KEY ACHIEVEMENTS VOLUME SHARE 41.8% Strong brand performance resulted in Groceries category 33.8 % cluster growing 10.1% in a declining market (-0.4%) Nola gained
Slide 8: 2. Partner with strategic customers
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 2. PARTNER WITH STRATEGIC CUSTOMERS KEY ACHIEVEMENTS FOODSOLUTIONS NEW RANGE R80m new revenue from FoodSolutions NEW CUSTOMERS through increased relevance and basket EXISTING CUSTOMERS extension to existing an
Slide 9: 3. Extend our leading value chain
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 3. EXTEND OUR LEADING VALUE CHAIN KEY ACHIEVEMENTS R1bn CAPEX investment which included the following significant initiatives: R325m route-to-market expansion R150m integrating systems investment R127m UHT Mag
Slide 10: 4. Expand into Africa
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 4. EXPAND INTO AFRICA KEY ACHIEVEMENTS 33.5% stake in Ugandan chicken producer HMH Rainbow Limited (HMH) in East Africa Exercised Zam Chick and Zamhatch put options Senn Foods delivered pleasing results despit
Slide 11: 5. Inspire great people
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 5. INSPIRE GREAT PEOPLE KEY ACHIEVEMENTS Solid platform created for "ONE RCL FOODS" from a people perspective Corporate brand and “OUR PASSION” rolled out to nearly 20 000 employees Prepared the foundation for
Slide 12: 6. Drive sustainable business
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 6. DRIVE SUSTAINABLE BUSINESS KEY ACHIEVEMENTS Our understanding of sustainable business is about securing the future and achieving a competitive advantage New business models driven through circular economy w
Slide 13: Key deliverables for 2017
Salient features | Strategic overview | Financial review | Operational reviews | Prospects KEY DELIVERABLES FOR 2017 Another model for Chicken Group route-to-market opportunities Millbake turnaround and future Sharper strategic customer focus per category Continuous investment behind brands and syst
Slide 14: Rob Field, CFO
0 ROB FIELD CFO fe LQ PAZ —
Slide 15: Financial summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects FINANCIAL SUMMARY 12 MONTHS ENDED 30 JUNE 2016 Statutory 30 JUNE 2016 30 JUNE 2015 % VAR Revenue Rm 25 025.2 23 428.2 6.8 EBITDA Rm 1 766.5 2 224.0 (20.6) EBITDA margin % 7.1 9.5 (2.4) EBIT Rm 378.2 1 452.4 (7
Slide 16: Operating environment
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING ENVIRONMENT South African economic environment • Severe drought impacted negatively on prices of soft commodity inputs • Rand continued the downward trend against the dollar into the current financia
Slide 17: Results waterfall
Salient features | Strategic overview | Financial review | Operational reviews | Prospects RESULTS WATERFALL RECONCILIATION WATERFALL OF EBITDA TO HEADLINE EARNINGS FOR THE 12 MONTHS ENDED 30 JUNE (Rm) 1 847.1 (80.6) 1 766.5 (1 388.3)* 2016 849.7 587.2* 51.6 (326.8) (15.7) 65.9 109.3 EBITDA IAS 39 S
Slide 18: Key financial issues
Salient features | Strategic overview | Financial review | Operational reviews | Prospects KEY FINANCIAL ISSUES SEGMENTAL REPORTING • RCL FOODS is reporting on its new segments of Consumer, Sugar & Milling and Logistics for the first full year MILLING IMPAIRMENT • A non-cash impairment loss of R642.
Slide 19: Key financial issues
Salient features | Strategic overview | Financial review | Operational reviews | Prospects KEY FINANCIAL ISSUES IAS 39 ADJUSMENT • Relates to the Group’s commodity procurement strategy • Reduced EBITDA by R80.6m (2015: R106.2m profit) • Largely attributed to long foreign exchange positions entered i
Slide 20: Operating results summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY SEGMENTAL ANALYSIS REVENUE (Rm) 30 JUNE 2016 30 JUNE 2015 % VAR Consumer 13 301.3 12 084.2 10.1 Sugar & Milling 14 914.8 14 121.5 5.6 Logistics 1 986.9 1 883.7 5.5 Sales between segme
Slide 21: Operating results summary: EBITDA
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY SEGMENTAL ANALYSIS - EBITDA EBITDA (Rm) – PRE-IAS 39 30 JUNE 2016 30 JUNE 2015 % VAR Consumer 701.7 868.8 (19.2) Sugar & Milling 830.1 1 047.2 (20.7) Logistics 260.7 206.2 26.4 Unallo
Slide 22: EBITDA excluding Chicken and Sugar
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY EBITDA – PRE IAS 39 (Rm) EXCLUDING CHICKEN AND SUGAR 1 847.1 158.1 235.4 1 453.6 2016 EBITDA excl. Chicken EBITDA CHICKEN SUGAR EBITDA EXCL. CHICKEN AND SUGAR and Sugar increased by 1
Slide 23: Segmental contribution to EBITDA
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY SEGMENTAL CONTRIBUTION TO EBITDA – PRE IAS 39 (Rm) H1 AND H2 SPLIT H1 H2 Total 2016 2015 2 117.8 1 847.1 1 022.4 830.1 744.4 868.8 1 047.2 701.7 1, 388.3 1 102.7 519.3 1 095.4 260.7 5
Slide 24: Cash flow summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects CASH FLOW SUMMARY SUMMARISED CASH INFORMATION Rm 30 JUNE 2016 30 JUNE 2015 % VAR Opening balance* 870.5 1 472.7 (40.9) Operating profit adjusted for non-cash flow items 1 321.8 1 914.8 (31.0) Working capital c
Slide 25: Working capital
Salient features | Strategic overview | Financial review | Operational reviews | Prospects WORKING CAPITAL WORKING CAPITAL MOVEMENT (Rm) 30 JUNE 2016 30 JUNE 2015 Net 118.6 151.4 Trade receivables (465.6) (68.0) Inventories (179.2) (603.9) Biological assets 273.5 267.4 Trade payables 489.9 555.9 WOR
Slide 26: Debt package
Salient features | Strategic overview | Financial review | Operational reviews | Prospects DEBT PACKAGE TERM VALUE (Rm) YEAR 1 YEAR 2 YEAR 3 (FEB 18) YEAR 4 (FEB 19) 1 355 5 year 400 847 4 year 250 3 year – RCF 498 Total 3 350 Hedged % 77% 77% 53% 53% 1043.5 FINANCE COSTS (Rm) 557.3 Hedged (fixed ra
Slide 27: Debt covenants
Salient features | Strategic overview | Financial review | Operational reviews | Prospects DEBT COVENANTS COVENANT REQUIRED STATUS Senior leverage ratio (Net senior debt*/pre-IAS39 HEBITDA) <3.0 1.8 Repricing (a step-up margin of 0.25% is triggered if the senior leverage ratio breaches 2.7) <2.7 1.8
Slide 28: Capital expenditure
Salient features | Strategic overview | Financial review | Operational reviews | Prospects CAPITAL EXPENDITURE CAPITAL EXPENDITURE BY SEGMENT 2.9% EXPANSION CAPITAL EXPENDITURE 20.2% Capital expenditure (excluding intangibles) was R1 012.7m (2015: R756.6m) 49.8% 2016 561.0m 280.1m Significant spend
Slide 29: Scott Pitman, MD: Consumer Division
SCOTT PITMAN MD CONSUMER DIVISION
Slide 30: Operational review: Consumer
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CONSUMER REVENUE (Rm) 30 JUNE 2016 30 JUNE 2015 % VAR Consumer 13 301.3 12 084.2 10.1 HEADLINES Sugar & Milling 14 914.8 14 121.5 5.6 Logistics 1 986.9 1 883.7 5.5 • A diversified Consumer
Slide 31: Operational review: Consumer
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CONSUMER REVENUE (Rm) 30 JUNE 2016 30 JUNE 2015 % VAR Chicken 7 905.0 7 616.4 3.8 Groceries 4 512.9 3 925.8 14.9 Sales between business units (110.8) (95.0) 16.7 HEADLINES Cost recoveries –
Slide 32: Operational review: Chicken
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CHICKEN IMPORT-TOTAL CHICKEN (EXCL MDM) TONS PER MONTH CHICKEN - MAINSTREAM The chicken industry is in an unprecedented crisis. Dumped leg quarters continue to flood the market with no reli
Slide 33: Operational review: Chicken added value
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CHICKEN CHICKEN – ADDED VALUE RETAIL Despite lively Rainbow Simply Chicken innovation (some depicted alongside), higher price increases to cover feed cost growths have resulted in Rainbow’s
Slide 34: Operational review: Groceries
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES 10.1% GROCERIES 41.8% 33.8% RCL FOODS -0.4% Groceries had an exceptional year due to brilliant Groceries* ask’d Food Basket basics implementation and the beginnings of some innova
Slide 35: Operational review: Groceries
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES YUM YUM VOLUME SHARE 27.1% 29.7% GROCERY 29.5% 12MMA 2015 12MMA 2016 Source:Aztec Similar efforts have meant Yum Yum Peanut Butter was able to hold market share in a TOTAL RCL FOO
Slide 36: Operational review: Groceries, Beverage
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES BEVERAGE The Beverage business unit has performed well ahead of expectation Our smooth offering has showed excellent growth of 39% and as a result we are producing a more profitab
Slide 37: Operational review: Groceries, Pie
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES PIE The Pie business unit has undergone an extensive brand renovation, focused on delivering a better quality offering to the consumer Furthermore, “Mighty Fine”, which is an exci
Slide 38: Operational review: Groceries, Speciality
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES SPECIALITY RCL FOODS is the largest supplier of food to Woolworths and seeks to be their “Most admired supplier” Exciting innovation has driven good growth across most Woolworths
Slide 39: John du Plessis, MD: Sugar & Milling Division
JOHN DU PLESSIS MD SUGAR & MILLING DIVISION
Slide 40: Operational review: Sugar & Milling
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR & MILLING REVENUE (Rm) 30 JUNE 2016 30 JUNE 2015 % VAR HEADLINES Consumer 13 310.3 12 084.2 10.1 • Severe drought has adverse Sugar & Milling 14 914.8 14 121.5 5.6 effect on Sugar and
Slide 41: Operational review: Sugar & Milling
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR & MILLING REVENUE (Rm) 30 JUNE 2016 30 JUNE 2015 % VAR Animal Feed 5 996.9 5 383.5 11.4 HEADLINES Millbake 3 765.3 3 392.9 11.0 • Animal feed result adversely Sugar 5 275.2 5 423.8 (2
Slide 42: Operational review: Animal Feed
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: ANIMAL FEED YELLOW MAIZE PRICE 53.7% increase in average price per ton from previous year EBITDA decline by R12.2m (3.7%) to R322.4m as a result 4500 of lower internal volumes 4000 3500 The
Slide 43: Operational review: Millbake
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: MILLBAKE SAFEX WHEAT PRICE 18.0% increase in average price per to from previous year 5500 5300 5100 EBITDA decline by R31.5m (10.4%) to R272.3m 4900 4700 4500 4300 The Milling and Baking bu
Slide 44: Operational review: Sugar
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR EBITDA of R235.4m was down 42.5% on the comparative period, with the associated margin dropping from 7.6% to 4.5% While the decline in sugar imports as a result of the increase in the
Slide 45: Operational review: Sugar, Massingir
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR MANUFACTURERS SHARE Due to the outlook of limited sugar availability in the country, the Sugar industry reduced its exports in order to ensure sufficient sugar for the domestic market
Slide 46: Chris Creed, MD: Logistics Division
CHRIS CREED MD LOGISTICS DIVISION
Slide 47: Operational review: Logistics
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: LOGISTICS REVENUE (Rm) 30 JUNE 2016 30 JUNE 2015 % VAR Consumer 13 301.3 12 084.2 10.1 HEADLINES Sugar & Milling 14 914.8 14 121.5 5.6 • Reasonable revenue growth coupled Logistics 1 986.9
Slide 48: Operational review: Logistics
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: LOGISTICS Sound EBITDA delivery off reasonable revenue growth 26.4% EBITDA growth off the back of sound cost control and simplification of the customer network 5.5% revenue growth notwithst
Slide 49: Operational review: Logistics route-to-market
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: LOGISTICS Route-to-market investment on track PE Coega commissioned in July 2015 Peninsula on line January 2016 Thekwini due September 2016 PE COEGA PENINSULA Operational Performance Volume
Slide 50: Operational review: Logistics group initiatives
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: LOGISTICS Group route-to-market initiatives progressing One RCL FOODS sales and merchandising structure implemented Ambient distribution solution for Groceries business unit implemented SAP
Slide 51: Prospects
FOODS PROSPECTS
Slide 52: Prospects
Salient features | Strategic overview | Financial review | Operational reviews | Prospects PROSPECTS Local poultry industry is in a crisis and the Board is forced to relook at all options Headwinds of low economic growth, a volatile currency, high commodity input costs and drought impacts are real a