Tiger Brands Limited · JSE:TBS
Tiger Brands — H1 2020 Earnings Presentation
36 slides from Tiger Brands's earnings presentation, May 25, 2020
Slide 1: Group results presentation
UNAUDITED GROUP RESULTS for the six months ended 31 March 2020 Group results presentation 25 May 2020 We nourish and nurture more lives every day
Slide 2: Index
Index Overview Financial & Operational Review Way Forward 2
Slide 3: Disclaimer: Forward-looking statement
Disclaimer Forward-looking statement This document contains forward looking statements that, unless otherwise indicated, reflect the company’s expectations as at 25 May 2020. Actual results may differ materially from the company’s expectations if known and unknown risks or uncertainties affect the b
Slide 4: Overview
UNAUDITED GROUP RESULTS for the six months ended 31 March 2020 Overview We nourish and nurture more lives every day
Slide 5: Headline earnings in line with guidance
Headline earnings in line with guidance Impacted by settlement of trademark dispute in Nigeria partially offset by forex gains Group revenue up 2% to R15.7 billion Gross margins+ down 200bps to 29.4% Group operating income+** down 29% to R1.1 billion | Ex-VAMP, down 27% to R1.4 billion Group operati
Slide 6: Challenges across key categories, even before Covid-19, emphasise imperative on cost
Challenges across key categories, even before Covid-19, emphasise imperative on cost Pricing a challenge > Modest inflation offset by volume declines Category Pricing Cost Category dynamics decisions competitiveness Legal dispute > Insufficient to recover cost push > Promotional intensity persists W
Slide 7: Improved share performance in February & March amplified by pre-Lockdown pantry loading
Improved share performance in February & March amplified by pre-Lockdown pantry loading in March – distorted by Tiger’s bias towards carbohydrates Significant volume sales at low margin Total SA – value share of basket (excl VAMP) 12MM TY vs 12MM LY 3MM vs 3MM LY Key competitor has All Other -0,7 0,
Slide 8: Financial & Operational Review
UNAUDITED GROUP RESULTS for the six months ended 31 March 2020 Financial & Operational Review We nourish and nurture more lives every day
Slide 9: Financial highlights
Financial highlights Highlights > Domestic revenue growth reflects significant recovery in VAMP > Volume performance reflects consumer challenges with price premium restricting recovery of cost increases – margin compression inevitable outcome > Impairments relate primarily to Exports & Internationa
Slide 10: Revenue growth in tough trading conditions
Revenue growth in tough trading conditions Profitability impacted by lower volumes & costs rising ahead of price inflation Revenue (R’m) Pricing and volume (%) Gross Profit (R’m) 2% 16 000 5 4 850 4 4% 4 800 3 4 750 2 4 4 700 15 709 1 15 333 4 650 4 817 0 -1 -2 4 600 -2 4 550 4 617 12 000 -3 4 500 H
Slide 11: Costs rising ahead of price inflation result in negative operating leverage
Costs rising ahead of price inflation result in negative operating leverage with particular challenges in Grains, Groceries, VAMP & Exports Associate income reflects exclusion of Oceana; prior year EPS boosted by capital profit Rm H1 FY20 H1 FY19 % change Revenue 15 708.9 15 333.3 2% Cost of sales (
Slide 12: Impairments recognised in Export businesses, UAC & Personal Care
Impairments recognised in Export businesses, UAC & Personal Care Reflective of challenging outlook exacerbated by Covid-19 led economic headwinds Rm H1 FY20 H1 FY19 Personal Care (36) - Davita (powdered soft drinks & seasoning) (250) - Impairment of intangible assets (286) (106) Impairment of proper
Slide 13: Income from associates impacted by unbundling of investment in Oceana
Income from associates impacted by unbundling of investment in Oceana in the prior year Carozzi’s strong underlying trading performance offset by Chilean Peso weakness against Rand Rm -21% 400 350 300 250 R200m 200 R158m 43 150 10 31 43 100 7- 50 116 108 0 H1 2019 H1 2020 Empresas Carozzi Oceana Gro
Slide 14: Some volume uplift in Q2
Some volume uplift in Q2 Domestic volumes boosted by VAMP recovery Total Price/Mix Volume Forex R15.3bn R15.7bn Grains 1% 4% (3%) - Consumer Brands – Food (Excl. VAMP) - 3% (3%) - HPCB 4% 8% (4%) - Domestic operations (Excl. VAMP) 1% 4% (3%) - VAMP 147% (4%) 151% - Domestic operations 3% 4% (1%) - E
Slide 15: Operating income reflects cost push ahead of price inflation
Operating income reflects cost push ahead of price inflation Particular challenges in Bakeries, Rice, Groceries, Snacks & Treats, Exports FINANCIAL & OPERATIONAL REVIEW 15
Slide 16: Prioritised investment in capacity enhancement & replacement
Prioritised investment in capacity enhancement & replacement Expectations for a slower pace of disbursement due to Covid-19 Category spend (R’m) Capital expenditure (R’m) 31 HPCB Capacity Enhancement R185m 46 Replacement Other R112m 206 Compliance 64 R100m R479m Exports & International Efficiency op
Slide 17: Grains
Grains Category dynamics, significant raw material cost push & consumer weakness result in a spiral of margin compression o Wheat-to-Bread value chain is well managed Rm Revenue & operating income (R’m) • Volumes & premium maintained 8 000 6 697 6 777 • Pressure point remains category pricing 11.8%
Slide 18: Market shares under pressure across the board
Market shares under pressure across the board 45% 41,1% 39,9% 40% 34,3% 34,5% 34,8% 35% 32,3% 32,6% 32,0% 30,9% 30,9% 30% 29,1% 27,4% 25% 20% 15% 12,5% 10,4% 10% 5% 0% Grains Maize Flour Cereals Rice Dry Pasta Bread 6MM LY 6MM TY Source: Nielsen 6mm volume share as at March 2019 FINANCIAL & OPERATIO
Slide 19: Consumer Brands – Food
Consumer Brands – Food Groceries revenue grows marginally, offset by volume declines o All segments characterised by low inflation & some deflation Rm Revenue & operating income (R’m) o Sales impacted by intense price competition & supply constraints in 4 000 2 982 3 014 tomato sauce 3 000 7.8% 5.6%
Slide 20: Market share improves despite supply challenges
Market share improves despite supply challenges 70% 60% 57,7% 54,6% 55,6% 52,7% 50% 40% 37,2% 32,9% 34,4% 32,0% 30% 20% 10% 0% Beans Tomato Sauce Peanut Butter Mayo/Salad Cream 6MM LY 6MM TY Source: Nielsen 6mm volume share as at March 2019 FINANCIAL & OPERATIONAL REVIEW 20
Slide 21: Snacks, Treats & Beverages
Snacks, Treats & Beverages S&T – intense competition impacts overall performance Rm Revenue & operating income (R’m) 1 500 o Lower volumes driven by sugar & chocolate 1 204 1 105 • Competitors respond to Beacon re-launch in pricing 1 000 905 945 13.9% 9.3% 19.7% 17.7% • Supply constraints in white c
Slide 22: Overall market share gains driven by liquid concentrates
Overall market share gains driven by liquid concentrates Benefitting from Oros core offering & innovations 45% 41,0% 40,2% 40% 35% 29,9% 29,0% 30% 28,4% 26,1% 25% 20% 16,3% 15,3% 15% 10% 5% 0% Beverages Liquid Concentrates Sport Drinks Ready To Drink 6MM LY 6MM TY Source: Nielsen 6mm volume share as
Slide 23: Value Added Meat Products (VAMP)
Value Added Meat Products (VAMP) Significant revenue growth o Revenue up 147% to R525 million Rm Revenue & operating loss (R’m) • Normalised distribution & on-shelf availability following re-entry 600 525 400 • Steady month-on-month improvement in sales 213 200 (139.1%) (48.7%) • Volume share gains
Slide 24: Home, Personal & Baby Care (HPCB)
Home, Personal & Baby Care (HPCB) Home Care boosted by exceptional pest performance o Revenue up 14% Rm Revenue & operating income (R’m) o EBIT up 14% 2 000 1 455 1 512 • Benefitting from reduced promotional activity 1 500 20.3% 18.7% • Increased volumes 1 000 500 295 283 o Personal Care impacted by
Slide 25: Healthy market share in Baby & Pest
Healthy market share in Baby & Pest Baby nutrition share reflective of Q1 challenges now resolved 80% 70% 66,4% 67,0% 65,3% 64,6% 60% 50% 40% 30% 20% 10% 7,4% 6,1% 0% Home Care (Pest) Personal Care Baby Nutrition 6MM LY 6MM TY Source: Nielsen 6mm volume share as at March 2019 | Baby nutrition includ
Slide 26: Exports and International
Exports and International Exports impacted by trademark dispute in Nigeria o Settlement in principle reached Rm Revenue & operating income (R’m) o Higher sales to Mozambique offset by poor performances from Rest 2 000 1 609 1 551 of Africa 1 500 9.2% 3.5% o Slow sales adversely impacted profitabilit
Slide 27: Quo Vadis
UNAUDITED GROUP RESULTS for the six months ended 31 March 2020 Quo Vadis We nourish and nurture more lives every day
Slide 28: Navigating the coming storm
Navigating the coming storm Impact of lockdown measures not yet fully felt by our sector Expectations Upside opportunities Risks > Prolonged and deep economic > Shift to in-home consumption likely > As economy opens up, lower downturn to be sustained consumer spend more widely dispersed > Cost push
Slide 29: Covid-19 related costs are likely to be significant
Covid-19 related costs are likely to be significant National Disaster pricing regulation a significant headwind particularly in Bread, Rice, Wheat & Groceries, due to low base in reference period Balance of the H2 (R’m) Apr May (est.) year Total Loss in contributions on lines that were not active 45
Slide 30: Status of Tiger's portfolio
Status of Tiger’s portfolio No one-size-fits-all solution but, there are some common themes Business Geographical Efficiency / Value Exit underway / Unit Innovation footprint Capacity improvement costs options need exploration Bakeries ✓ ✓ Milling – Flour ✓ ✓ Milling - Maize ✓ Jungle ✓ ✓ Sorghum ✓ ✓
Slide 31: Status of Tiger's portfolio
Status of Tiger’s portfolio No one-size-fits-all solution but, there are some common themes Business Geographical Efficiency / Value Exit underway / Unit Innovation/Adjacencies footprint Capacity improvement costs options explored Snacks & Treats ✓ ✓ ✓ Beverages ✓ ✓ Baby ✓ ✓ Home Care ✓ ✓ Personal C
Slide 32: Methodical, category-specific approach adopted with urgency
Methodical, category-specific approach adopted with urgency Clear accountability & control at category level > Less focus on generic, overarching group themes > More focus on specific, measurable improvements > Drive speed & focus Selling price driven model > Costs & efficiency to be delivered now >
Slide 33: Scorecard
Scorecard Key deliverables by financial year-end Structural re-alignment & resultant cost savings executed Conclude VAMP exit Concrete plan for Deciduous Fruit Optimal rationalisation of tail-end brands in Personal Care WAY FORWARD 33
Slide 34: Appendix
UNAUDITED GROUP RESULTS for the six months ended 31 March 2020 APPENDIX We nourish and nurture more lives every day
Slide 35: Additional information
Additional information H1 2020 H1 2019 Working capital per rand of turnover 22.3 21.8 Net working capital days 83.7 99.3 Stock days 85.1 95.3 Debtor days 33,5 37.4 Creditor days (34,9) (33.4) Effective tax rate 31.1% 30.6% 35
Slide 36: Contribution to revenue & operating income
Contribution to revenue & operating income Revenue Operating income before IFRS 2 45% 41% 30% 30% 26% 19% 19% 19% 15% 15% 15% 9% 10% 11%11% 9% 3% 5% 5% 3% 14% 13% 11% 10%10% 9% 8% 7% 6% 6% 3% 2% 2% 1% -19% -23% H1 2020 H1 2019 H1 2020 H1 2019 Milling and Baking Other Grains Groceries Snacks & Treats