Sanford Limited · NZX:SAN
Sanford — FY2022 Earnings Presentation
50 slides from Sanford's earnings presentation, November 2022
Slide 1: FY22 Results Briefing
FY22 RESULTS BRIEFING For the 12 months ended 30 September 2022
Slide 2: Disclaimer
DISCLAIMER Important Notice This presentation contains not only a review of operations and information about Sanford Limited (the Company), but also contains some forward-looking statements about the Company and the environment in which it operates. This disclaimer applies to this presentation and a
Slide 3: Agenda Today
AGENDA TODAY 1. Summary 2. FY22 Results 3. Update by Division 4. Strategic Transition 5. Questions 6. Conclusion 3
Slide 4: 1. Summary
1. SUMMARY SANFORD
Slide 5: Key Messages
KEY MESSAGES • Returning to growth • Strong outcome in both Wildcatch and Salmon • Mussels remain challenging • Good performance in volume and margin in all international markets • Challenges throughout the year that have required a response while continuing to meet our goals • Resumption of dividen
Slide 6: FY22 Results Snapshot
FY22 RESULTS SNAPSHOT Positive gains on prior Covid-impacted period Catch/Harvest Volume Sales Volume Revenue Adjusted EBIT1 109.4k GWT 104.7k GWT $531.9M $40.2M -2.2% - 7.7% +8.6% +72.5% EBIT GW kg Adjusted EBITDA1 NPAT EPS Final Dividend 38₵ $68.3M $55.8M 60CPS 10CPS + 17₵ /kg + 29.8% up 3.4 times
Slide 7: Significant earnings improvement, arresting Covid decline
SIGNIFICANT EARNINGS IMPROVEMENT, ARRESTING COVID DECLINE Adjusted EBIT by Financial Year 80 64.7 64.8 60 -41% Adjusted EBIT $m 40.2 40 38.3 -39% 73% 23.3 20 0 FY18 FY19 FY20 FY21 FY22 7
Slide 8: FY22 Results Summary: Trading conditions
FY22 RESULTS SUMMARY Trading conditions • Demand has lifted and in-market prices have improved and now stabilised • Increased costs across most of the business, including fuel, feed, freight and payroll • Covid impact diminishing with most markets now open for business • Labour shortages continue hi
Slide 9: FY22 Results Summary: Achievements
FY22 RESULTS SUMMARY Achievements during FY22 ✓ Improved profit performance ✓ Price improvement and increased margins ✓ Prudent capital management – reduced debt levels and improved operating cashflows ✓ Investment in growth initiatives aligned to strategic plan ✓ Growth of Big Glory Bay branded pro
Slide 10: Debt and Inventory Reduction
DEBT AND INVENTORY REDUCTION Net Debt ($m) 200 Inventory ($m) 184 80 179 75 180 70 160 145 138 59 140 60 120 48 50 $m 100 $m 40 35 80 30 60 40 20 20 10 - Sep-19 Sep-20 Sep-21 Sep-22 - Sept 19 Sep-20 Sep-21 Sep-22 Net debt and inventory levels moderating towards pre-Covid levels 10
Slide 11: ESG Embedded in Strategy
ENVIRONMENTAL, SOCIAL, GOVERNANCE (ESG) EMBEDDED IN STRATEGY ESG Framework • Our whole of business Sustainability approach has five pillars. • Those pillars remain embedded within our refreshed strategy • The five pillars represent • Healthy oceans and ecosystems • Achieving operational excellence •
Slide 12: ESG - FY22 Highlights
ESG - FY22 HIGHLIGHTS1 Climate • Progress on efficiency projects for our emissions intensive assets e.g. propellor replacements, engine mode controls • 7.6% reduction in scope 1 &2 carbon emissions2 Ocean and Environment • Consistent and sustained reduction in fisheries interactions with seabirds an
Slide 13: 2. FY22 Results
2. FY22 RESULTS SANFORD
Slide 14: EBIT performance driven by Wildcatch recovery and growth in Salmon
EBIT PERFORMANCE DRIVEN BY WILDCATCH RECOVERY AND CONTINUED GROWTH IN SALMON Key drivers of Adjusted EBIT change 50 0.4 45 3.9 6.7 40 35 20.1 30 $m 25 20 40.2 15 10 23.3 5 Adj FY21 EBIT Wildcatch Salmon Mussels Group Adj FY22 EBIT 14
Slide 15: EBIT growth driven by pricing across all divisions
EBIT GROWTH DRIVEN BY PRICING ACROSS ALL DIVISIONS, OFFSET BY COST PRESSURE AND SUPPLY CONSTRAINTS IN MUSSELS Key drivers of Adjusted EBIT change Wildcatch Drivers +$20.1m Salmon Drivers +$3.9m Mussels Drivers -$0.4m 50 0.4 1.1 0.7 45 3.5 6.7 40 35 21.4 30 $m 25 1.3 20 40.2 15 23.3 10 5 15 Adj FY21
Slide 16: Balance Sheet and Cash Flow
BALANCE SHEET AND CASH FLOW Improvement in all key balance sheet measures – operating cash up Gearing1 Net Debt Net Debt / Adjusted EBITDA 18.9% $145.5M -18.5% 2.1x Sept 21 3.4x Sep 21 22.3% Total Equity Return on Average Total Equity $665M +4.9% 8.6% Sept 21 2.6% Operating Cashflow Free Cashflow2 O
Slide 17: Seafood Inventory Continues to Normalise
SEAFOOD INVENTORY CONTINUES TO NORMALISE Inventory Quantity (PWT) Inventory value1 YOY decrease -33% YOY decrease -18% 14.0 80 $74.8 12.2 $72.2 70 $6.3 12.0 0.5 $6.4 10.5 10.4 $58.9 2.8 0.5 0.3 60 10.0 $20.2 1.4 8.5 $6.0 $50.1 $30.2 $48.1 50 $0.9 (tonnes 000's) 0.1 6.9 $13.4 $0.7 8.0 4.1 1.6 $9.4 0.
Slide 18: Growth in Revenue Across Key Markets – China Gains
GROWTH IN REVENUE ACROSS KEY MARKETS – CHINA GAINS Geographic Distribution of Revenue - FY20 to FY22 50% • Diverse footprint allows us 45% 44% to move sales around as markets 41% 40% change 37% 35% • Growth year-on-year sales across the key geographic regions % of Revenue 30% 25% • China sales grew
Slide 19: 3. Update by Division
3. UPDATE BY DIVISION 19
Slide 20: Salmon FY22
SALMON SALMON FY22 Strong pricing and ongoing growth in Big Glory Bay driving improved revenue and profit contribution Sales Volumes +1% Revenue +18% Profit Contribution +21% 1 79 6.0 80.0 30.0 6.00 5.1 5.1 67 $5.60 $4.91 23 5.00 60.0 $4.47 3.6 49 51 20 19 4.0 3.5 20.0 4.00 GWT (000's) 18 $3.73 $m 4
Slide 21: Salmon FY22: Pricing and Inventory
SALMON SALMON FY22 Continuing Strong growth in pricing in excess of Pre-Covid levels GWT AND AVERAGE PRICING TREND INVENTORY GWT $18.00 2.0 1.0 $16.29 $16.27 0.9 $14.36 $14.27 $14.23$15.51 $16.00 $14.07 $14.29 $13.97 $14.53 $13.66 $13.70 $13.80 0.8 $13.11 $13.22 $14.00 0.7 0.7 NZD PRICE / GW KG1 $12
Slide 22: Greenshell Mussels FY22
MUSSELS GREENSHELL MUSSELS FY22 Profit impacted by operational constraints and climatic conditions Sales Volumes -4.4% Revenue +6% Profit Contribution -49% 1 40.0 37 0.75 34 36 36 140.0 29.0 35.0 121 120.0 $0.65 108 106 24.0 30.0 100 100.0 $0.53 23 0.50 GWT (000's) 25.0 19.0 18 80.0 20.0 $m $m 14.0
Slide 23: Greenshell Mussels FY22: Pricing and Inventory
MUSSELS GREENSHELL MUSSELS FY22 Sales constrained by processing constraints but pricing improving Low inventory reflects strong demand for product available GWT AND AVERAGE PRICING TREND INVENTORY GWT $4.00 14 14 $3.50 $3.54 12.4 12.8 $3.37 11.7 $3.50 $3.19 $3.25 $3.18 12 12 $3.07 $3.10 $3.10 $2.71
Slide 24: Wildcatch FY22
FRESH FROZEN WILDCATCH FY22 Strong pricing driving increased revenue and improved profitability 1.20 Sales Volumes -10% Revenue +9% Profit Contribution +62% 2 80.0 78 1 400.0 1 60.0 1 71 368 60 1.00 66 64 350.0 302 52 $0.76 $0.82 60.0 300.0 279 277 45.0 0.80 GWT (000's) 250.0 32 $m 0.60 28 $m 40.0 2
Slide 25: Wildcatch FY22: Pricing and Inventory
FRESH FROZEN WILDCATCH FY22 Strong pricing growth across FY22. Inventory continues to be managed in line or below pre-Covid levels GWT AND AVERAGE PRICING TREND INVENTORY GWT (000's) $6.00 $5.64 30 18 $5.40 16.4 $4.86 $4.73 $4.68 $4.76 16 15.1 $5.00 $4.25 25 14.3 $4.50 $4.53 14 12.6 13.0 $3.73 $4.66
Slide 26: 4. Strategic Transition
4. STRATEGIC TRANSITION 26
Slide 27: FY22 Business Planning Framework – Strategy on a Page
FY22 BUSINESS PLANNING FRAMEWORK – STRATEGY ON A PAGE
Slide 28: Four Strategic Priorities
FOUR STRATEGIC PRIORITIES S T R AT EG I C P R I O R I T I ES 1. Grow Salmon 2. Grow Mussels 3. Sustain Deepwater (Wildcatch) 4. Turnaround Inshore (Wildcatch) 28
Slide 29: Grow Salmon: FY22
GROW SALMON What have we done in FY22: • Continued price improvement. Average price increase for Q4 up 17.8% compared to Q4 2021 • Continued growth of BGB brand reaching 42.7% of our volume vs 25.1% in FY21 • Maintained volume despite higher-than-average summer temperatures • Automation – introduced
Slide 30: Big Glory Bay farm site layout
30 . NEW GROWER FARM 1 GROWER FARM 1 4 Bs BIG GLORY BAY NEW GROWER GROWER FARM 2 FARM 2 SMOLT FARM No change in site until May 2023 s — Existing Site locations — New Site locations +++ Pens with oxygen support Il Feeding Barge SANFORD
Slide 31: Grow Salmon: FY23
GROW SALMON What are we doing in FY23: • Split main growing farm in Big Glory Bay and introduce modern oxygenation equipment to de-risk site • Gain consent and start building a RAS Hatchery (facilitating increased growth) • Launch portion control pack into Foodstuffs • Explore further utilisation of
Slide 32: Grow Mussels: FY22
GROW MUSSELS What have we done in FY22: • Focussed on getting people into our plants through increasing pay rates and providing accommodation (Havelock), plus streamlining, outsourcing and using contract manufacturing • Operational improvements at our mussel hatchery, SPATNZ to increase spat reliabi
Slide 33: Grow Mussels: FY23
GROW MUSSELS What are we doing in FY23: • Diversify revenue sources through continuing growth in mussel powders and oils at our Bioactives plant • Design and initiation of packaging automation • Expand our SPATNZ mussel hatchery • Investment in on-water infrastructure • Take advantage of higher pric
Slide 34: Marine Extracts
MARINE EXTRACTS • New marine extracts Centre of Innovation build completed in September, commissioning currently underway • New ingredients brand soft launched in the market, “Sanford Bioactives”, including trademarked ingredients • Further product diversification a key pillar for growth • Strong pa
Slide 35: Sustain Deepwater (Wildcatch): FY22
SUSTAIN DEEPWATER (WILDCATCH) What have we done in FY22: • Major surveys (inspections, maintenance and upgrades) on five wildcatch vessels • Continued growth of retail pack white fish in the USA • Invested in development of skills and capabilities for critical at sea positions • Scampi performing st
Slide 36: Sustain Deepwater (Wildcatch): FY23
SUSTAIN DEEPWATER (WILDCATCH) What are we doing in FY23 : • Further major surveys on four wildcatch vessels • Contract the building of one new scampi vessel (delaying two) – spreading capital and de-risking implementation • Evolution of USA market model with continuation of move to more direct custo
Slide 37: Turnaround Inshore (Wildcatch) - Context
TURNAROUND INSHORE (WILDCATCH) - CONTEXT • Underperforming business that requires focus • Inshore is the fresh component of the deepwater segment • Processing factory located in downtown Auckland – Wynyard Quarter opposite Head Office • Dedicated inshore fleet that includes four vessels • Provides f
Slide 38: Capital Expenditure – FY22
CAPITAL EXPENDITURE – FY22 FY22 capital expenditure of $54m within target for the year Sancore capitalised spend of $5.7m takes this asset to $8.9m Spend in FY22 and beyond aligned to strategic growth priorities for salmon and mussels and integrity capital to support the wild catch fleet FY FY
Slide 39: Capital Expenditure FY23
CAPITAL EXPENDITURE FY23 • Maintaining fleet a necessity and requires FY23 investment Integrity / Business ~$44m support • Scampi investment limited initially to the Includes: Vessel surveys & equipment deposit and progress payments of one vessel Mussel farming IT equipment in FY23, however, two mor
Slide 40: Capital Expenditure (FY23-FY27)
CAPITAL EXPENDITURE (FY23-FY27) 5-year capex estimate range ($m) • The FY22 strategic update presented to the market Division Initiative Min - Max in June 22 included a 5-year capex range between Mussels Growth 25 31 Mussels Integrity 23 29 $300m - $395m Total Mussels 48 60 • This has been streamlin
Slide 41: New Divisional Structure
NEW DIVISIONAL STRUCTURE • A new business unit structure will be introduced in FY23 that is designed to build greater efficiency, effectiveness and profitability • This new structure more closely aligns with our strategic goals • Will drive increased accountability and P&L and balance sheet ownershi
Slide 42: FY23 Outlook
FY23 OUTLOOK Positives Challenges Higher export prices and demand to continue Staffing shortages, particularly in processing across all Sanford Bioactives plant commissioned and will deliver divisions, will continue in 2023 increased revenue and profits Increased costs, including feed, fuel,
Slide 43: 5. Questions?
SS SANFORD 5. QUESTIONS?
Slide 44: 6. Conclusion
6. CONCLUSION
Slide 45: Conclusion
CONCLUSION • Returning to growth with the unwinding of Covid impacts in market but remaining challenging on supply side – labour, fuel, freight and feed • Continued strong performance in salmon, wildcatch driving growth and opportunities remain in mussels • Addressing our priorities • Challenges hav
Slide 46: FY22 Integrated Report
FY22 INTEGRATED REPORT Sanford’s FY22 integrated report is available at https://www.sanford.co.nz/investors/ The report outlines Sanford's Business Excellence Framework – this enables each part of the business to map out its role in helping to deliver on our goals We strive to inform in a tran
Slide 47: 7. Appendices
7. APPENDICES
Slide 48: SanCore Status
SANCORE STATUS Status: Successful deployment of the Innova system (primary processing) in Havelock, Bluff, Timaru and all 6 of our deepwater vessels. Design and build complete for the D365 system (finance and supply chain). Completion of Crew Pay and CatchCast (Quota Management Solution) appli
Slide 49: FY22 Financial Results - GAAP to Non GAAP
FY22 FINANCIAL RESULTS - GAAP TO NON GAAP FY22 FY21 Non-GAAP Profit measures $m $m Sanford’s standard profit measure prepared under New Zealand GAAP is net profit. Sanford have used non-GAAP measures when discussing financial performance in this Reported net profit (GAAP) 55.8 16.2 document. The Dir
Slide 50: Thank You
THANK YOU