Inghams Group Ltd. · ASX:ING
Inghams — FY2023 Earnings Presentation
36 slides from Inghams's earnings presentation, Aug 17, 2023
Slide 1: 2023 Annual Results Presentation
Inghams Group Limited 2023 ANNUAL RESULTS PRESENTATION 17 AUGUST 2023
Slide 2: Acknowledgement of Country
ACKNOWLEDGEMENT OF COUNTRY We acknowledge the Gadigal people of the Eora nation, on whose land we meet today. We pay our respects to their Elders past, present and emerging, and to all Aboriginal and Torres Strait Islander Peoples here today. Artist: Kelly Taylor www.ktaboriginalfineart.store 2
Slide 3: Executive Summary
EXECUTIVE SUMMARY § FY23 results demonstrate the breadth and momentum of our operational recovery - Recovery underpinned by the progressive return to operational stability - Revenue increased 12.2%, NPAT increased 72.1% and Underlying EBITDA pre AASB 16 increased 35.8% on PCP - Strong 2H earnings ru
Slide 4: FY23 Financial Summary
FY23 FINANCIAL SUMMARY RESULTS DEMONSTRATE THE MOMENTUM OF THE RECOVERY REVENUE CORE POULTRY VOLUME $3,044.0M 463.5KT +12.2% on PCP -0.4% on PCP EBITDA NET PROFIT AFTER TAX UNDERLYING PRE AASB 16 STATUTORY UNDERLYING $183.6M $60.4M $71.1M +35.8% on PCP +72.1% on PCP +67.7% on PCP LEVERAGE RATIO 1 FU
Slide 5: Business & FY23 Overview
BUSINESS & FY23 OVERVIEW ANDREW REEVES CEO & MANAGING DIRECTOR
Slide 6: Highly Diversified Australia & New Zealand Network
HIGHLY DIVERSIFIED AUSTRALIA & NEW ZEALAND NETWORK LARGEST POULTRY COMPANY ACROSS AUSTRALIA AND NEW ZEALAND § Unmatched geographically diverse network § Biosecurity import barrier § Inghams is uniquely placed to deliver continuity and diversity of supply to meet customers’ needs 1 § Ability to fully
Slide 7: Vertically Integrated Operating Model
VERTICALLY INTEGRATED OPERATING MODEL OPTIMISING VALUE FROM OUR OPERATING MODEL THROUGH INTEGRATED PLANNING AND OPERATIONAL EXCELLENCE § Enables Inghams to create value and realise efficiencies across a highly complex and large-scale supply chain § Balance and operational excellence are key to margi
Slide 8: Poultry Is an Attractive & Growing Sector
POULTRY IS AN ATTRACTIVE & GROWING SECTOR INGHAMS CORE POULTRY VOLUMES HAVE GROWN AT 2.8% PER ANNUM SINCE FY19 § Affordable – significant consumer price advantage over other meat proteins § Healthy – a lean and versatile protein that continually finds favour with consumers that is aligned to the mac
Slide 9: Profitability on a Strong Recovery Path
PROFITABILITY ON A STRONG RECOVERY PATH EBITDA PRE AASB 16 INCREASED 35.8% ON FY22 AS 2H EARNINGS REBOUND TO HISTORICAL LEVELS +35.8% FY19: $208.6M FY20: $179.7M FY21: $209.6M FY22: $135.2M FY23: $183.6M Omicron (3Q FY22) $109.6M $108.9M $99.0M $100.7M $99.7M +19.9% $100.1M 14.2 $91.7M 22.0 15.4 $88
Slide 10: FY23 Core Poultry Net Selling Prices
FY23 CORE POULTRY NET SELLING PRICES IMPLEMENTED PRICE INCREASES ACROSS ALL CHANNELS AND CUSTOMERS § NSP growth reflects implementation of price increases in response to input cost pressures, and tighter poultry supply / demand conditions § Group core poultry NSP increased 12.8% versus PCP (+6.0% on
Slide 11: Observations Across Our Channels
OBSERVATIONS ACROSS OUR CHANNELS CHANNEL MIX CHANGES REFLECT REBALANCING OF DEMAND WHILE CORE POULTRY VOLUME DECLINED SLIGHTLY BY 0.4% § Australian volume declined 0.6% (-2.5kt) due to lower bird numbers resulting from a decline in farming performance in 1H23 § New Zealand volume grew 0.8% (+0.5kt),
Slide 12: Financial Results
FINANCIAL RESULTS GARY MALLETT CHIEF FINANCIAL OFFICER
Slide 13: Profit & Loss
PROFIT & LOSS PRICE INCREASES AND OPERATIONAL RECOVERY OFFSET SMALL VOLUME DECLINE § Volume: marginal decline in core poultry volume of 0.4% $M FY23 FY22 Variance % § External Feed volumes declined 43.6kt due to the Core Poultry volumes (kt) 463.5 465.5 (2.0) (0.4) planned closure of Wanneroo Feedmi
Slide 14: Balance Sheet
BALANCE SHEET EARNINGS RECOVERY DELIVERS IMPROVEMENT IN LEVERAGE § Biologicals: increased $24.2M (+17.8%) as the higher cost of feed $M Jun-23 Jun-22 Variance cycles through the asset class Inventories/Biologicals 388.2 384.0 4.2 § Inventories: declined $20.0M due to a decline of $33.4M in Feed inve
Slide 15: Cashflow
CASHFLOW HIGHER NET SELLING PRICES AND FEED COSTS DRIVING INCREASE IN WORKING CAPITAL $M FY23 FY22 Variance § Cash conversion ratio: declined to 90.4% due to an Statutory EBITDA 418.5 370.4 48.1 increase in working capital of $44.7M Non-cash items (8.7) (5.0) (3.7) § Non-cash items: includes reversa
Slide 16: Capital Management Outcomes
CAPITAL MANAGEMENT OUTCOMES FULLY FRANKED FINAL DIVIDEND OF 10.0 CPS DRIVING FULL YEAR PAYOUT RATIO OF 75.8% Cashflow from Cashflow from strategic Cashflow from Cashflow from operations of $371.9M, broadly flat vs PCP operations activities interest and tax due to higher EBITDA offset by an increase
Slide 17: External Feed Market Observations
EXTERNAL FEED MARKET OBSERVATIONS PRICES TO REMAIN ELEVATED DUE TO STRONG GLOBAL GRAIN DEMAND & TRADE UNCERTAINTIES Long term wheat & soymeal pricing (to 28 July 2024)1,2 $A per metric tonne FY23 P&L 800 Whea t ($A) CME Soy ($A) § Delivered internal feed cost contains cereal grains, protein 700 meal
Slide 18: Segment Performance
SEGMENT PERFORMANCE ANDREW REEVES CEO & MANAGING DIRECTOR
Slide 19: Australia
AUSTRALIA PRICE GROWTH AND OPERATIONAL PERFORMANCE RECOVERY PROVIDE OFFSET TO COST INFLATION § Core poultry volume declined 0.6% driven mainly by lower bird $M FY23 FY22 Variance % numbers processed as a result of a small reduction in fertility levels Core Poultry volumes (kt) 398.1 400.6 (2.5) (0.6
Slide 20: New Zealand
NEW ZEALAND 2H PERFORMANCE TURNAROUND OFFSETS 1H OPERATIONAL CHALLENGES § Operating environment improved significantly in 2H following $M FY23 FY22 Variance % challenges during 1H due to shortages in both labour and CO2 Core Poultry volumes (kt) 65.4 64.9 0.5 0.8 − Improvements in labour availabilit
Slide 21: Acquisition of Bromley Park Hatcheries (NZ)
ACQUISITION OF BROMLEY PARK HATCHERIES (NZ) APPROVALS RECEIVED FROM COMMERCE COMMISSION & OVERSEAS INVESTMENT OFFICE § Inghams acquiring the Bromley Park Hatcheries business for NZ$8.6M1 § Acquisition encompasses the working capital and fixed assets associated with the business § 3rd party lessor to
Slide 22: New Zealand SPCA Certification
NEW ZEALAND SPCA CERTIFICATION LEADING THE MARKET IN ANIMAL WELFARE WITH 100% SPCA CERTIFICATION § Inghams has become the first NZ poultry company to achieve 100% SPCA1 certification across its broiler operations - Strong point of differentiation in an increasingly relevant customer and consumer att
Slide 23: Operations Update
OPERATIONS UPDATE ANDREW REEVES CEO & MANAGING DIRECTOR
Slide 24: Northern New South Wales Breeder Triangle
NORTHERN NEW SOUTH WALES BREEDER TRIANGLE DELIVERING CURRENT & FUTURE NETWORK CAPACITY AND OPERATIONAL RESILIENCE § Located in the Casino area in Northern NSW, the ‘triangle’ will service the Queensland market (~3hrs from Brisbane) - Close to existing Inghams owned breeder farms, enabling sharing of
Slide 25: Investing in the Business
INVESTING IN THE BUSINESS INVESTING IN ENHANCING NETWORK CAPACITY, CAPABILITY AND EFFICIENCY § Investing in automation - Implementing higher levels of automation is a key element of our network analysis and planning - Acquisition of four waterjet cutters ($30M) and four modern leg deboning machines
Slide 26: ESG
ESG INGHAMS IS A LEADER IN ANIMAL WELFARE, SUSTAINABILITY, FOOD QUALITY AND SAFETY Key FY23 outcomes Improvement in LTIFR1 A or AA rated Global 9.3% reduction in to 2.4 (FY22: 2.8) Food Safety Initiative Diverted 86% of absolute GHG scope 1 British Retail generated waste from Improvement in TRIFR2 &
Slide 27: Summary
SUMMARY MOMENTUM OF RECOVERY ESTABLISHES PLATFORM FOR EARNINGS GROWTH § Poultry remains an attractive and growing sector with significant consumer price and sustainability advantages over red meat and seafood alternatives – poultry is a strategic focus area for our key customers, reaffirming our str
Slide 28: Appendix
APPENDIX
Slide 29: AASB 16 Lease Impact
AASB 16 LEASE IMPACT Balance Sheet: BALANCE SHEET $M FY23 AU NZ FY22 § Land and Buildings: Inghams has a large leased property portfolio. Land & Buildings 811.5 701.1 110.4 835.5 Average term remaining on the portfolio is 12.5 years Growers 446.0 303.2 142.8 461.9 § Contract Growers: classified as r
Slide 30: AASB 16 Composition
AASB 16 COMPOSITION IMPACT REDUCING OVER TIME AS CONTRACT GROWERS TRANSITION TO VARIABLE CONTRACTS, WITH STEP-DOWN EXPECTED IN FY24 Grower Contract Movements Right of Use Assets ($M) Lease Liabilities ($M) 50% $1, 600 $1, 600 Land & Buil dings / Other Growers Land & Buil dings / Other Growers 42.1%
Slide 31: Profit & Loss Reconciliation
PROFIT & LOSS RECONCILIATION FY23 UNDERLYING FY22 UNDERLYING EXCLUDED FY23 AASB 16 PROFIT & LOSS ($M) FY23 (PRE AASB 16) (PRE AASB 16) FROM UNDERLYING UNDERLYING LEASES (REPORTED) (REPORTED) Core Poultry volume (kt) 463.5 463.5 463.5 465.5 By-Products volume (kt) 113.7 113.7 113.7 111.0 Total Poultr
Slide 32: EBITDA & NPAT Reconciliation
EBITDA & NPAT RECONCILIATION $M FY23 FY22 Var % Significant Items excluded from underlying results: EBITDA 418.5 370.4 48.1 13.0 § Business Transformation: costs relating to program pre- Restructuring 1.5 3.4 (1.9) (55.9) implementation, design and costs associated with Reversal of lease impairment
Slide 33: Segment Reconciliation
SEGMENT RECONCILIATION GROUP AUSTRALIA NEW ZEALAND $M FY23 FY22 Var FY23 FY22 Var FY23 FY22 Var EBITDA 418.5 370.4 48.1 357.0 312.2 44.8 61.5 58.2 3.3 Restructuring 1.5 3.4 (1.9) 0.5 3.4 (2.9) 1.0 0.0 1.0 Reversal of lease impairment 0.0 (3.1) 3.1 0.0 (3.1) 3.1 0.0 0.0 0.0 Business Transformation 16
Slide 34: Return on Invested Capital (Pre AASB 16) (ROIC)
RETURN ON INVESTED CAPITAL (PRE AASB 16) (ROIC) ACHIEVED ROIC OF 19.0% FOR FY23 § Achieved ROIC of 19.0% for the year, versus 13.7% in PCP $M FY23 FY22 § ROIC defined as: Return On Invested Capital (ROIC) - Underlying Net Operating Profit after Tax pre AASB 16 divided Underlying NPAT pre AASB 16 83.
Slide 35: Definitions
DEFINITIONS CERTAIN NON-IFRS INFORMATION IS REFERRED TO IN THIS PRESENTATION AND ARE DEFINED BELOW § Average Capital Invested: Net assets plus net debt plus tax balance plus net liabilities of AASB 16; average calculated over two financial year end periods § Business Transformation: business process
Slide 36: Important Notice and Disclaimer
IMPORTANT NOTICE AND DISCLAIMER The material in this presentation is general background information about the activities of Inghams Group Limited (Inghams) and its subsidiaries (Inghams Group), and is current at the date of this presentation, unless otherwise noted. It is information given in summar