Rcl Foods Limited · JSE:RCL
Rcl Foods — H1 2019 Earnings Presentation
41 slides from Rcl Foods's earnings presentation, Mar 4, 2019
Slide 1: Investor Presentation: Results for the six months ended December 2018
INVESTOR PRESENTATION: 4 MARCH 2019 RESULTS FOR THE SIX MONTHS ENDED DECEMBER 2018
Slide 2: Miles Dally, Chief Executive Officer
MILES DALLY CHIEF EXECUTIVE OFFICER
Slide 3: Headlines – Results for the six months ended December 2018
Salient features | Strategic overview | Financial review | Operational reviews | Prospects HEADLINES – RESULTS FOR THE SIX MONTHS ENDED DECEMBER 2018 PERFORMANCE HEADLINES Revenue up 3.5% driven by volume growth amidst a softened pricing environment REVENUE R13.3bn 3.5% EBITDA down 9.9% due to press
Slide 4: Focus on sustainable quality of earnings
Salient features | Strategic overview | Financial review | Operational reviews | Prospects FOCUS ON SUSTAINABLE QUALITY OF EARNINGS Double digit growth in Groceries and MillBake offset by pressures experienced in the agricultural categories EBITDA & GROWTH PER CATEGORY CLUSTER AS AT DECEMBER Market
Slide 5: 6 months to December 2018 results
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 6 MONTHS TO DECEMBER 2018 RESULTS EBITDA MARGIN ROIC Groceries*: Continued growth driven by market share SUMMARY SUMMARY gains in key categories, improved volumes and gross margins MillBake: Turn-around progre
Slide 6: Key deliverables: sustainable quality of earnings
Salient features | Strategic overview | Financial review | Operational reviews | Prospects KEY DELIVERABLES: SUSTAINABLE QUALITY OF EARNINGS Continue with volume and market share growth in Groceries Conclude service agreements for Remgro’s Spreads business Continue Logistics recovery with new busine
Slide 7: Rob Field, Chief Financial Officer
ROB FIELD CHIEF FINANCIAL OFFICER
Slide 8: Financial summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects FINANCIAL SUMMARY EBITDA down 9.9%. HEADLINE EARNINGS down 26.3%. Cash generated by operations up R797.2m INCOME STATEMENT JUNE DEC 2018 2018 JUNE DEC 2017 2017 % VAR Revenue* Rm 13 265.4 12 817.3 3.5 EBITDA R
Slide 9: Operating environment
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING ENVIRONMENT Oversupplied chicken and sugar markets due to the impact of imports Record high fuel prices and a 0.25% increase in interest rates placed pressure on consumers’ disposable income Despite
Slide 10: Operating results summary (Rm)
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY (Rm) EBITDA DOWN 9.9% DUE TO DECLINES IN CHICKEN & SUGAR 9.9% 20.9% 1 201.0 8.8 144.8 1 192.2 UNDERLYING EBITDA DOWN 20.9% Refer slide 6 of the Appendices for 44.4 147.2 detail on und
Slide 11: Headline earnings waterfall (Rm)
Salient features | Strategic overview | Financial review | Operational reviews | Prospects HEADLINE EARNINGS WATERFALL (Rm) DEC 2018 1 082.2 390.1 139.1 175.4 46.9 93.6 154.5 10.3 475.1 9.9% 26.3% EBITDA Depreciation, Net finance costs Taxation Share of profits Minority interest Headline adj - Headl
Slide 12: Operating results summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY SEGMENTAL ANALYSIS – REVENUE AND EBITDA REVENUE (Rm) DEC 2018 DEC 2017* % VAR Consumer 6 738.3 6 687.6 0.8 Sugar & Milling 7 548.2 7 062.1 6.9 Logistics 1 076.5 1 006.5 7.0 Sales betw
Slide 13: Operating results summary – ex Sugar
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY – ex Sugar Sugar result severely impacted by market conditions. Group EBITDA ex Sugar up 2.9%. EBITDA DEC 2018 DEC 2017 % VAR Consumer Rm 624.1 594.2 5.0 Sugar & Milling (Ex Sugar) Rm
Slide 14: Cash flow summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects CASH FLOW SUMMARY CASH UP R494.0m (344.3%) DESPITE R502m DEBT REPAYMENT, DRIVEN BY LOWER WORKING CAPITAL REQUIREMENTS CASH CONVERSION RATIO IMPROVES TO 64% FROM -8% IN PRIOR YEAR DUE TO WORKING CAPITAL IMPACT
Slide 15: Working capital
Salient features | Strategic overview | Financial review | Operational reviews | Prospects WORKING CAPITAL SOUND MANAGEMENT OF DEBTORS AND HIGHER CREDITORS AT PERIOD END DRIVE IMPROVED WORKING CAPITAL POSITION WORKING CAPITAL (Rm) DEC 2018 DEC 2017 % VAR NET WORKING CAPITAL AS A % OF REVENUE Trade a
Slide 16: Capital expenditure
Salient features | Strategic overview | Financial review | Operational reviews | Prospects CAPITAL EXPENDITURE TOTAL CAPEX UP R216.2m EXPANSION (Rm) REPLACEMENT (Rm) Capital expenditure (including intangibles) was R534.0m 333.7 (Dec 2017: R317.8m) 200.3 Major spend items in the current period includ
Slide 17: Debt package
Salient features | Strategic overview | Financial review | Operational reviews | Prospects DEBT PACKAGE DEBT PACKAGE RESTRUCTURED IN DECEMBER 2018 AT LOWER INTEREST RATES INTEREST RATE OF 3M JIBAR + MARGIN OF 1.5% TO 1.55% OVER 5 YEAR TERM TERM VALUE (Rm) YEAR 1 (DEC 19)* YEAR 2 (DEC 20) YEAR 3 (DEC
Slide 18: Debt covenants
Salient features | Strategic overview | Financial review | Operational reviews | Prospects DEBT COVENANTS RCL FOODS WELL WITHIN COVENANTS AT DECEMBER 2018 Required covenant ratios were revised on restructuring of the debt package in December 2018 COVENANT REQUIRED DEC 2018 Senior leverage ratio (Net
Slide 19: Return on invested capital (ROIC) at December
Salient features | Strategic overview | Financial review | Operational reviews | Prospects RETURN ON INVESTED CAPITAL (ROIC) AT DECEMBER GROUP ROIC IMPROVES TO 7.1% DRIVEN BY LOWER WORKING CAPITAL Reported Group Consumer Sugar & Milling Logistics* NOPAT 42.0% NOPAT 33.2% NOPAT 21.9% NOPAT 1.0% NOPAT
Slide 20: Scott Pitman, Managing Director Consumer Division
SCOTT PITMAN MANAGING DIRECTOR CONSUMER DIVISION
Slide 21: Operational review: Consumer
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CONSUMER Revenue up 0.8%, EBITDA result up 5.0% REVENUE (Rm) DEC 2018 DEC 2017* % VAR Consumer 6 738.3 6 687.6 0.8 Sugar & Milling 7 548.2 7 062.1 6.9 Logistics 1 076.5 1 006.5 7.0 Sales be
Slide 22: Operational review: Consumer
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CONSUMER Excellent performance from Groceries delivering consistent growth with market conditions challenging the Chicken business unit once again REVENUE (Rm) DEC 2018 DEC 2017 % VAR HEADL
Slide 23: Material adjustments to derive underlying result
Salient features | Strategic overview | Financial review | Operational reviews | Prospects MATERIAL ADJUSTMENTS TO DERIVE UNDERLYING RESULT Underlying EBITDA result of R485.0m, down 17.2% on prior year GROCERIES (Rm) DEC 2018 DEC 2017 % VAR HEADLINES EBITDA 373.8 304.1 22.9 • Underlying EBITDA remov
Slide 24: Operational review: Groceries
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES SHARE & MARGIN Groceries delivered another strong result with EBITDA up 22.9% to “Yum Yum Original smooth “We could become best friends” “Ok, so there are no surprises here at 1st
Slide 25: Operational review: Groceries – Innovation
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES INNOVATION Consumers have responded favourably to new ranges launched in the Pet Food category although competitors have responded aggressively through price We will continue to b
Slide 26: Operational review: Groceries – Key initiatives
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES KEY INITIATIVES The Pies business unit has delivered strong volume growth off an already high base. Capacity investment has been approved which will enable further penetration and
Slide 27: Operational review: Chicken
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CHICKEN ADDED-VALUE FOODSOLUTIONS This channel represents the foundation of our Chicken business and remains key to the success of the revised business model The Quick Service Restaurant (Q
Slide 28: Operational review: Chicken
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CHICKEN CHICKEN MAINSTREAM IMPORTS - LEG QUARTERS – TONS PER MONTH 40 000 After nine months of relative stability, due mainly to a reduction in 37 500 Rainbow’s production, the market has r
Slide 29: John du Plessis, Managing Director Sugar & Milling Division
JOHN DU PLESSIS MANAGING DIRECTOR SUGAR & MILLING DIVISION
Slide 30: Operational review: Sugar & Milling
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR & MILLING Revenue up 6.9%, EBITDA result down 28.5% REVENUE (Rm) DEC 2018 DEC 2017* % VAR Consumer 6 738.3 6 687.6 0.8 Sugar & Milling 7 548.2 7 062.1 6.9 Logistics 1 076.5 1 006.5 7.
Slide 31: Operational review: Sugar & Milling
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR & MILLING Sugar feels the brunt of industry and market turmoil REVENUE (Rm) DEC 2018 DEC 2017* % VAR Animal Feed 2 734.1 2 294.2 19.2 HEADLINES MillBake 1 948.2 1 849.6 5.3 • Revised
Slide 32: Operational review: Animal Feed
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: ANIMAL FEED YELLOW MAIZE PRICE (R/ton) 3500 Volumes recover as key customers return, although internal 3300 H1 F18 H1 F19 3100 AVG Price 20.1% AVG Price volumes remain relatively flat 2900
Slide 33: Operational review: MillBake
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: MILLBAKE SAFEX WHEAT PRICE (R/ton) H1 F18 H1 F19 Pleasing improvement in Baking performance as revised 4900 AVG Price AVG Price strategy is implemented 4700 (6m) R4 226.0 1.3% (6m) R4 279.7
Slide 34: Operational review: Sugar
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR An extremely challenging first half, driven by sales mix and industry dynamics Promulgated tariff is effective at combatting dumped imports Health Promotion Levy, depressed economic s
Slide 35: Chris Creed, Managing Director Logistics Division
CHRIS CREED MANAGING DIRECTOR LOGISTICS DIVISION
Slide 36: Operational review: Logistics
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: LOGISTICS Logistics margin eroded by cost pressures REVENUE (Rm) DEC 2018 DEC 2017* % VAR HEADLINES • Pleasing revenue performance in line with our Consumer 6 738.3 6 687.6 0.8 mitigation s
Slide 37: Pleasing revenue performance in line with mitigation strategy
Salient features | Strategic overview | Financial review | Operational reviews | Prospects PLEASING REVENUE PERFORMANCE IN LINE WITH MITIGATION STRATEGY Good progress has been made on the mitigation strategy to offset the impact of the Chicken restructure, with revenue growing 7.0% on the prior year
Slide 38: Cost pressures erode Logistics margin
Salient features | Strategic overview | Financial review | Operational reviews | Prospects COST PRESSURES ERODE LOGISTICS MARGIN EBITDA declined 16.3% as a result of the cost SIGNIFICANT FUEL PRICE INCREASES MATERIALLY IMPACT RESULTS pressures faced during the period under review Inland diesel price
Slide 39: Vector Going Beyond
Salient features | Strategic overview | Financial review | Operational reviews | Prospects VECTOR GOING BEYOND Logistics has recently repositioned its brand to “Vector Going Beyond”. Leveraging our deep-rooted history as a respected logistics brand, “Going Beyond” speaks to who Vector is and who we
Slide 40: Prospects
PROSPECTS
Slide 41: Prospects
Salient features | Strategic overview | Financial review | Operational reviews | Prospects PROSPECTS Trading conditions are expected to remain challenging due to South Africa’s poor economic outlook, though we are well positioned due to our strong balance sheet and cash flow generation In a highly c