Murray River Organics Pty — FY2019 Earnings Presentation
55 slides from Murray River Organics Pty's earnings presentation, Aug 30, 2019
Slide 1: FY19 Investor Presentation
FY19 Investor Presentation 30 August 2019
Slide 2: Disclaimer
Disclaimer This presentation (Presentation) has been prepared by Murray River Organics Group Limited (ACN 614 651 473) (Company). Any references to "Murray River Organics" or "Group" in this Presentation refer to the Company and its controlled entities. The information in this Presentation contains
Slide 3: Contents
Contents FY19 Highlights Resetting the Strategy Brand Relaunch Financial Performance Summary and Outlook Appendix 1: Market Overview Appendix 2: Business Overview Appendix 2: Detailed Achievements
Slide 4: FY19 Company Overview
FY19 Company Overview Grower, processor & distributor of organic dried vine fruit & ‘better-for-you’ products $60.1 m 4,895 ha of land2 over 12 farms in revenue1 Sunraysia region 68% 2,081 m $60.1 t dried vine fruit retail sales1 Revenue FY19 harvest 24% 67% Australian dried vine land available for
Slide 5: FY19 Highlights
FY19 Highlights Transformative year 1, solid foundation for the turnaround $M FY19 FY18 CHANGE +$10.7m turnaround underlying EBITDA-S Revenue 60.1 68.5 -12% Gross materials margin1 13.6 6.3 117% 2.5 x Gross Material Margin1 Gross material margin % 22.7% 9.2% 14% improvement to 22.7% Operating costs
Slide 6: FY19 Highlights: Significant Achievements
FY19 Highlights Significant Achievements Delivered a major transformational turnaround in FY19, restructuring and resetting MRG for future sustainable growth: • Achieved a $10.7m turnaround in EBITDA-S, 2.5x improvement in Gross Material Margin and a major reset of all teams, operating model, system
Slide 7: Transformation program highlights – new product launches
FY19 Highlights Transformation program highlights – new product launches Launched 15 new SKUs over the last 6 months and established a new marketing capability to accelerate new branded product development. New launches include: • Gobble Mini’s and Flavoured Mini’s launched with ranging in specialit
Slide 8: Transformation program highlights – new ranging
FY19 Highlights Transformation program highlights – new ranging Ranged 22 new product lines from the Pacific Organics brand stable with Metcash 8
Slide 9: Key achievements in first 12 months of our turnaround
FY19 Highlights - key achievements in first 12 months of our turnaround Initial phase of transformation program completed…key foundations in place People Capital Customer Farms Operations • Reset leadership structure and • Reset the balance sheet with • Launched new MRG branding • Secured hemp licen
Slide 10: Transformation program accelerating
FY19 Highlights Transformation program accelerating Previous goals Progress Focus for years 2 - 3 Progress Key Metric ✓ Reset operating cost base in Dandenong – >90% Fill Rate ✓ Reconfigure warehouse footprint Project Muscat Operations • Implement Warehouse Management ✓ Improve efficiency and fulfil
Slide 11: Resetting the strategy to realise our vision
Resetting the strategy to realise our vision
Slide 12: Our vision and our purpose
our vision Leader in organic and better for you our purpose brands and ingredients. We make organic and better for you products by farming and sourcing world class ingredients, because we believe everybody deserves sustainable and clean food.
Slide 13: Our strategy
Note: check our strategy pic? Mildura is red and flat 1 2 3 4 5 Leverage our Build a global Develop market leading, Disrupt the food Drive process agricultural organic & better for purpose-driven organic market via strong excellence to footprint & flexible you ingredients brands with exceptional rel
Slide 14: Brand relaunch
Brand relaunch M. Mur — Riv WO, ore a! = ey, i e 7 - . a4 at: €t “ « >? ir } oe 4. a.
Slide 15: Murray River Organics brand
Murray + | ;| River _ - a : — ~ : a " JGae x iF ee fa ~~, a ° > . 4
Slide 16: We believe size matters
Title we believe size matters.
Slide 17: We choose organic
we choose organic. We vote for the world we want with the choices we make, we choose organic. We believe everybody has the right to access healthy and tasty, nutritious, clean food. Better for you and the planet.
Slide 18: We believe size matters
we believe size matters. Being big isn’t necessarily a bad thing. Bigger means we can make a better impact. As Australia’s largest producer of organic dried vine fruit we endeavour to use our size and scale for good. 18
Slide 19: We put nature first
we put nature first. We believe nature has the power to provide. We endeavour to work with her not against. By harnessing her power we are able to keep our environmental footprint small and our ingredient lists clean.
Slide 20: Our door is always open
our door is always open. We have nothing to hide. Being organic ensures we can guarantee quality and traceability at every point of our vertically integrated ecosystem, offering our customers assurance that the highest environmental and organic standards are consistently met. 20
Slide 21: We innovate to regenerate
we innovate to regenerate. We are constantly striving to do better by people and planet. Innovation is driven to improve taste, nutrition and the natural environment moving towards a sustainable future for everyone.
Slide 22: We're stronger together
we’re stronger together. We strive to understand the land where each of our products are grown. Working with our farmers and growers to champion the organic movement. Global or local we are stronger together. 22
Slide 23: Our strategy
Note: check our strategy pic? Mildura is red and flat 1 2 3 4 5 Leverage our Build a global Develop market leading, Disrupt the food Drive process agricultural organic & better for purpose-driven organic market via strong excellence to footprint & flexible you ingredients brands with exceptional rel
Slide 24: Leveraging our agricultural footprint
Leveraging our agricultural footprint 24
Slide 25: Leverage our agricultural footprint
Leverage our agricultural footprint Over $59M invested across 4,895 ha in farming properties (owned & leased) Nangiloc Nangiloc 3,0423,042 ha total ha total area area Colignan 1,085 ha Owned Properties: Nangiloc Organic certification obtained in Jan 2019 for development land - Conventional wine grap
Slide 26: Largest DVF grower in Australia with significant capacity
Leverage our agricultural footprint MRG is the largest DVF grower in Australia with significant capacity Colignan 681 57 Nangiloc 96 2327 Gol Gol 95 15 Yatpool 198 128 Merbein 114 0 Fifth Street 79 31 Hectares planted Hectares available to be planted 26
Slide 27: Theoretical organic dried vine fruit yields
Leverage our agricultural footprint Theoretical organic dried vine fruit yields * Based on June 2019 estimates from DFA and in consultation with industry specialists, assuming normal growing conditions and excluding other extreme factors that may impact yields. 27
Slide 28: Project Magnum
Leverage our agricultural footprint – Project Magnum Opportunity to extend organic supply into a range of crops at Nangiloc property Nangiloc is our 2,300 ha arable, vacant & organic accredited …& we have developed a short-list of crops which we could property… potentially plant Aerial view of Nangi
Slide 29: Financial Performance
Financial Performance
Slide 30: Financial Performance: organics position across categories
Financial Performance Building on strong organics position across a range categories Farmed Strategic sourcing Dried vine fruit (DVF) DVF: Grower Dried vine fruit (DVF) Raisins Supplied 8% Raisins Sultanas Sultana Currants Currants DVF Farmed Sourced Key categories 16% Products Nuts Fresh Produce 63
Slide 31: Achieved a $10.7m EBITDA-S turnaround
Financial Performance Achieved a $10.7m EBITDA-S turnaround $’000 FY19 FY18 Change % Sales • Sales impacted by cash constraints pre October 2018 Net sales revenue 60,072 68,539 (8,467) -12.4% capital raise Reported loss after tax (12,036) (59,607) 47,571 79.8% • Rebuilt retail sales and marketing te
Slide 32: Reduced costs, better buying and pricing
Financial Performance Reduced costs, better buying & pricing = $10.7m improvement in EBITDA-S • Gross material margin more than doubled (9.2% to 22.7%) and operating costs reduced by 17% • Gross material margin uplift driven by improved strategic sourcing and new pricing architecture • Exit of non-p
Slide 33: Balance Sheet
Balance Sheet Restructured Balance Sheet $'000 Jun-19 Jun-18 Change New funding in place Increased working capital needs reflects the Trade and other receivables 10,518 6,729 3,789 annual stock harvest of DVF (owned and Inventories 22,269 16,194 6,075 3rd party) and impact on supplier terms of prolo
Slide 34: Cash flows
Cash flows Investment in working capital to deliver business turnaround plan & grow $’000 Jun-19 Jun-18 Change Trade receivables – increase in May/June sales and Underlying EBITDA-S (3,568) (14,280) 10,712 timing of receipts from major customers Dec/(Inc) in trade & other receivables (3,731) 1,142 (
Slide 35: Summary and Outlook
Raat digs ah,” rere were? " peceee ats and Outlook ¥ q a a ae & " : ee ; % M Murray "Oe OB. gd be ie 4 Fite _~O- Organics 4 ia ‘¥e i? Se ae clk
Slide 36: Summary and Outlook
Summary and Outlook A transformative year Highlights: • $10.7m turnaround in underlying EBITDA-S performance • Reset strategy, business model and operating model • Significant margin improvement was achieved in the value-add business which will be further accelerated with new product innovation Outl
Slide 37: Appendix 1: Market overview
Appendix 1: Market overview
Slide 38: Global Organics Market
Global Organics Market Internationally the organics market is $100b+ and continues to grow The global organics market is estimated to be $100b+… …with no major market currently at maturity Global organics market 2017, US$ billions Growth of organic consumption per capita, % CAGR (2012-17)1 Legend Do
Slide 39: Addressable Organics Market
Addressable Organics Market Domestically, the addressable organic market is large and growing fast Our addressable market is a subset of the broader organics market and is worth ~$300 – 400m… …and is forecast to grow to $600m – $1.1b by 2025 Addressable Australian organic market (2017E) Growth of ad
Slide 40: Addressable Market Size and Growth by Category
Addressable Market Size & Growth by Category Strong market growth for nuts, seeds, dried vine fruit & rice Indicative future outlook 1 Present Market Potential Uplift Drivers of future outlook (2018F-23F) AUD AUD (Multiple of ’18 size) ► Increased popularity of Asian cuisine Decreasing growth outloo
Slide 41: Global Raisin Market
Global Raisin Market Raisin pricing for Australian crop has strengthened and is currently at parity with USA 41 Source: IEGVU Agri database (as at 1/8/19, 1/2/19 and 1/11/18)
Slide 42: Dried Vine Fruit Market
Dried Vine Fruit Market MRO is the largest Dried Vine Fruit Grower in Australia AUSTRALIAN DRIED VINE FRUIT PRODUCTION MARKET 3 DVF GROWERS IN AUSTRALIA: Domestic Production of Domestic Plantation of Dried Vine Dried Grapes Fruit1 Total DVF growers have reduced Kt Thousand Ha by 74% from over 1200 i
Slide 43: Appendix 2: Business overview
Appendix 2: Business overview
Slide 44: Business Model
Business Model Leveraging supply to grow a value-added products business Sunraysia growers Organic and supply of dried vine Conventional products fruit sourced locally & internationally SUNRAYSIA MOURQUONG DANDENONG Farming Processing Value Add Dried Vine Fruit Dried Vine Fruit Packaging/Mixing Faci
Slide 45: Strategic Sourcing
Strategic Sourcing Establishing a strong global network of sourcing partners Volume by Region FY19 Established Sourcing Partners 1% Nuts 7% Dried Fruit 13% Seeds 15% Nuts Dried Fruit Maple Syrup Nuts Pulses 27% Dried Fruit Coconut Seeds 38% Rice Rice Ancient Grains Oats Dried Fruit North America Sou
Slide 46: Customer Export and Growth
Customer Export and Growth Broad local customer base and strong focus on growing exports FY19 Revenue Existing Export Destinations 1 EMEA Wholesale Germany & Industrial Netherlands 8% Italy Export 11% National Retail 68% Fresh Asia Pacific Fruit 13% Japan China Vietnam North America Taiwan United St
Slide 47: Appendix 3: Detailed Achievements
Appendix 3: Detailed Achievements
Slide 48: Detailed achievements – People
Detailed achievements – People Significant investment in safety and enhanced team capability • Recruited new executive team with extensive agri- business, FMCG and turnaround experience. • Recruited new sales & marketing team with extensive FMCG/Retail/Wholesale experience and capability • Recruited
Slide 49: Detailed achievements – Domestic Customers
Detailed achievements – Domestic Customers Building momentum with Retailers • Building strong relationships with major retailers in Australia • Established strong marketing and innovation capability to accelerate new product development • Ranged our Premium Australian Clusters with two major Austral
Slide 50: Detailed achievements – International Customers
Detailed achievements – International Customers Launched ‘Taking Sunraysia to Asia” Program • Reset our focus on export as key growth platform • Improved international customer relationships • Restored confidence in our reliability with supply • Secured ranging positions for Premium Australian Clust
Slide 51: Gobble and Premium Australian Clusters ranging in Asia
Detailed Achievements - International Customers Gobble and Premium Australian Clusters ranging in China and South East Asia China Japan Taiwan & South Korea Vietnam • Gobble and Premium Australian • Costco Japan ranging our Premium • Gobble and Premium Australian • Gobble & Premium Clusters ranging
Slide 52: Detailed achievements – Farms
Detailed achievements – Farms Project Yield, three-year farm turnaround program launch – Colignan • Major capital programs at farms with the replacement of Colignan end of life irrigation system • Significant improvements with farm operations, however 18% lower DVF yield from previous season’s harve
Slide 53: Detailed achievements – Operations
Detailed achievements – Operations Our Dandenong manufacturing has achieved significant operational improvements • Significant improvement in customer Fill Rates and productivity • Developed "Nut-Free" capability for formulated product for allergy sufferers • Development of Gobble Mini snack packs f
Slide 54: Improved manufacturing efficiency at Mourquong Operations
Detailed achievements – Operations Improved manufacturing efficiency, safety and quality at Mourquong Operations • Developed and implemented new quality and processing procedures to improve quality and service delivery • Established S&OP across operations • Completed Project Optima including commiss
Slide 55: Valentina Tripp, CEO and Albert Zago, CFO
Valentina Tripp Albert Zago Chief Executive Officer Chief Financial Officer 0414 550 337 0407 554 529 vtripp@murrayriverorganics.com.au albert@murrayriverorganics.com.au