New Zealand King Salmon Investments Ltd. · NZX:NZK
New Zealand King Salmon Investments — FY2022 Earnings Presentation
40 slides from New Zealand King Salmon Investments's earnings presentation, Apr 13, 2022
Slide 1: FY22 Results and Equity Raising Presentation
FY22 Results and Equity Raising Presentation
Slide 2: Presenters
PRESENTERS Grant Rosewarne Ben Rodgers Grant Lovell John Ryder Chief Executive Officer / Chief Financial Officer General Manager Chair Managing Director Aquaculture F Y 2 2 I NV ES TOR P RES E NTAT ION 2
Slide 3: Disclaimer
DISCLAIMER Disclaimer This presentation has been prepared by New Zealand King Salmon Investments Limited (“NZ King Salmon”, “NZKS” or the “Company”) and is dated 13 April 2022. This presentation has been prepared to provide: (i) additional comment on the financial statements of the Company for the 1
Slide 4: Disclaimer: Non-GAAP financial information
DISCLAIMER Non-GAAP financial information Certain financial information included in this presentation is non-GAAP financial information, including: • EBITDA. We calculate EBITDA by adding back (or deducting) depreciation, amortisation, finance expense / (income), and taxation expense to net earnings
Slide 5: Executive Summary
EXECUTIVE SUMMARY • FY22 performance impacted by hangover of the Single Year Class model 1HFY22, mortality event 2HFY22 and write-off of goodwill and impairment of assets • Pro forma EBITDA of $6.7m impacted by the transition from the Single Year class model and mortality event • Covid remained a si
Slide 6: FY22 Operational Highlights
FY22 OPERATIONAL HIGHLIGHTS FY PRO-FORMA OPERATING EBITDA FY22 REVENUE OF 7,382 $174.5 30.0 25.0 MILLION 20.0 METRIC TONNES HARVESTED 15.0 DURING FY22 26.2 25.2 25.1 10.0 5.0 10.0 6.7 0.0 F18 F19 F20 F21 F22 (Jun) (Jun) (Jun) (7 mths to Jan) (Jan) EUROPE FY PRO-FORMA NPAT 3% JAPAN 20.0 NORTH 6% AMER
Slide 7: FY22 Performance
01 FY22 PERFORMANCE F Y 2 2 I NV ES TOR P RES E NTAT ION 7
Slide 8: Sales Performance and Brand Achievements
SALES PERFORMANCE AND BRAND ACHIEVEMENTS Continuing to target branded premium markets Sales performance • North American market continues to be a standout performer, with Ōra King foodservice and North America (MT) Domestic Market (MT) Regal branded retail both continuing to grow • New Zealand Foods
Slide 9: Aquaculture Summary: Significant Mortality to End FY22
AQUACULTURE SUMMARY SIGNIFICANT MORTALITY TO END FY22 Several significant challenges for Aquaculture in FY22 bookended by issues in the Pelorus FY22 Summer Temperatures1 • NZ King Salmon transitioned out of the Single Year Class farming model. The 20.0 FY22 FY23 Single Year Class farming model adver
Slide 10: Fish Performance, Health Initiatives and Summer Mortality
FISH PERFORMANCE HEALTH INITIATIVES AND SUMMER MORTALITY Fish performance continues to be a key focus for the business and changes to the farming model are required to ensure sustainability over the long term1 • Warm waters during the summer period continue to heavily impact mortality • Performance
Slide 11: FY22 Results
02 F Y 2 2 R E S U LT S F Y 2 2 I NV ES TOR P RES E NTAT ION 11
Slide 12: FY22 Headline Financial Performance
FY22 HEADLINE FINANCIAL PERFORMANCE Group Financial Performance Pro forma1 GAAP FY22 FY212 % chg FY22 FY212 % chg Volume Sold (t) 7,672 4,109 87% 7,672 4,109 87% Revenue 174,530 95,239 83% 174,530 95,239 83% Gross Margin 21,563 20,381 6% 12,743 14,153 (10%) Gross Margin % 12% 21% 7% 15% EBITDA (Incl
Slide 13: Pro Forma EBITDA Comparison
PROFORMA1 EBITDA COMPARISON (FY21 RESTATED TO 12 MONTHS2) $6.6 6.7 • Revenue increased due to sales volume of 7,672MT, a 20% increase on sales volumes compared to prior 12 month period2 • Stock movement was negative due to the disposal of excess frozen whole fish built up in FY21 due to Covid disrup
Slide 14: Balance Sheet - Recapitalisation Required
BALANCE SHEET- RECAPITALISATION REQUIRED Group Financial Position In light of recent trading impacts, NZ King Salmon is raising equity to repay all Jan-22 Jan-21 NZ$000s Audited Audited outstanding debt to recapitalise and strengthen its balance sheet Current Assets Cash and equivalents 2,913 3,479
Slide 15: Strategy Update & Outlook
03 S T R AT E G Y U P D AT E & OUTLOOK F YFY22 2 2 INVESTOR INVESTO PRESENTATION R P RES E NTAT ION 15
Slide 16: Fish Health
FISH HEALTH Effective management of fish health remains an ongoing challenge, and we continue to build our understanding in this area Adverse health outcomes are rarely straightforward. They generally involve a number of factors such as stress, disease, environmental conditions and husbandry acting
Slide 17: Mortality Risk Mitigation
MORTALITY RISK MITIGATION Mortality remains the key risk to any farming model and managing this Temperature and mortality at warm water1 and cool risk is key water2 farms Although almost always multifactorial in nature, mortality at NZKS is heavily 20.0 50.0% linked to warmer water temperatures duri
Slide 18: Change to Aquaculture Model to Reduce Mortality Risk
CHANGE TO AQUACULTURE MODEL TO REDUCE MORTALITY RISK NZ King Salmon continuously seeks improvement in its production model Historical Mortality Biomass Percentage1 to minimise summer mortality Warm water Warm water • In response to the FY22 and early FY23 mortality event, NZKS will transition its Ye
Slide 19: Farming Model Infographic
FARMING MODEL INFOGRAPHIC F Y 2 2 I NV ES TOR P RES E NTAT ION 19
Slide 20: FY23 Outlook (EBITDA Guidance)
FY23 OUTLOOK (EBITDA GUIDANCE) A TRANSITORY YEAR TO THE REVISED FARMING MODEL $15 FY23 Guidance $10 $5 $6.7 $m - ($5) ($8) – ($12) ($10) ($15) FY22 EBITDA Revenue Feed Other Aqua Processing Other FY22 Early FX Close out FY23 EBITDA Guidance • Revenue1 impacted by the reduced harvest from the recent
Slide 21: Transitioning to a More Predictable Business
TRANSITIONING TO A MORE PREDICTABLE BUSINESS SUSTAINABLE PRO FORMA EBITDA RANGE $15M – $19M $45 Sustainable Earnings $40 $35 $30 $25 $m $20 $15 $10 $15 – $19 $5 $6.7 $0 FY22 EBITDA Revenue Mortalities Feed Freight Processing Corporate Other FY22 Early FX Sustainable Close out earnings FY23 will be a
Slide 22: Blue Endeavour Update
BLUE ENDEAVOUR UPDATE • Blue Endeavour hearings recommence for 2 days on 26 and 27 of April 2022 • Consent outcome is due mid-year • Blue Endeavour remains an important medium- term project to deliver growth to NZ King Salmon • Blue Endeavour will allow the utilisation of Pelorus licenses as nursery
Slide 23: Equity Raising
04 EQUITY RAISING F Y 2 2 I NV ES TOR P RES E NTAT ION 23
Slide 24: Strengthening Balance Sheet and Mitigating Ongoing Challenges
STRENGTHENING BALANCE SHEET AND MITIGATING ONGOING CHALLENGES • NZ King Salmon is taking pre-emptive action to ensure it remains well capitalised during the current period of uncertainty with sufficient liquidity to maintain flexibility as earnings return: Overview of actions − NZ King Salmon is tod
Slide 25: Sources & Uses and Pro Forma Gearing
SOURCES & USES AND PRO FORMA GEARING Sources and uses of funds Sources of funds (NZ$m) Uses of funds (NZ$m) Rights offer $60.1m Repayment of debt (31 January 2022) $42.8m Total $60.1m Transaction costs $2.7m Excess cash / liquidity $14.6m Total $60.1m Pro forma gearing Current as at 31 January 2022
Slide 26: Equity Raise Details
EQUITY RAISE DETAILS • NZ$60.1 million equity raising (Equity Raising) in the form of a 2.85 for 1 rights offer (Rights Offer) Offer size and structure • Approximately 401 million new ordinary shares (New Shares) will be issued under the Equity Raising • Under the Offer, Eligible Shareholders may ap
Slide 27: Timetable
TIMETABLE Offer timetable Announcement of Equity Raising Wednesday, 13 April 2022 Record date for the Rights Offer 7.00pm NZST Tuesday, 26 April 2022 Rights Offer opens Wednesday, 27 April 2022 Offer Document despatched to Eligible Shareholders Wednesday, 27 April 2022 Rights Offer closes 5.00pm NZS
Slide 28: Key Risks
05 KEY RISKS F Y 2 1H22 2 I NHALF V E S YEAR T O R RESULTS P RES E NTAT ION 28
Slide 29: Key Risks
KEY RISKS This section outlines the key risks that NZKS has identified which are relevant to investors in the equity raise. These risks may affect the future operating and financial performance of NZKS and the NZKS share price. Like any investment, there are risks associated with an investment in NZ
Slide 30: Risks
RISKS • Fish mortality, as evidenced historically and forecast into FY23, has a significant impact on the profitability and financial stability of NZKS as only the fish that survive to the point of harvest are able to be sold. Every year, a number of fish will die prior to harvest due to a range of
Slide 31: Risks
RISKS • NZKS products are sold to a number of export markets and there is a risk that regulatory change in specific markets will impair NZKS’s access to these markets, significantly impacting sales levels and profitability. This may be a closure of the market, or introduction of new rules that impac
Slide 32: Risks
RISKS • NZKS produces ready-to-eat products which are consumed in a raw state, such as cold smoked salmon, sushi and sashimi. There is a risk NZKS products could contain harmful bacteria or other organisms, such as listeria, which is unique in that it is a food borne pathogen which can grow below 4°
Slide 33: Risks
RISKS • In addition to its shareholders, NZKS has a number of external stakeholders, including iwi, as its business operates in public water space. It is crucial that NZKS maintains positive relationships with its external stakeholders to support positive outcomes for future consent applications to
Slide 34: Appendices
06 APPENDICES F Y 2 2 I NV ES TOR P RES E NTAT ION 34
Slide 35: Existing Sea Farm Resource Consents and Expiry
EXISTING SEA FARM RESOURCE CONSENTS AND EXPIRY • Five licenses are due for expiry or renewal at the end of 2024, all of which represent Farms Region Expiry date warmer, low flow licenses at lower producing sites • Crail Bay has not been farmed for around 10 years and is currently being transitioned
Slide 36: Appendix – FY22 Reconciliation Between GAAP Results and Pro Forma Financials
APPENDIX – FY22 RECONCILIATION BETWEEN GAAP RESULTS AND PRO FORMA FINANCIALS Pro Forma FY22 Statutory Fair Value IFRS 16 Lease Operating Financial FX Close-outs Adjustments Adjustments Financial NZD 000s Statements Information Revenue 174,530 174,530 Cost of goods (177,774) 52,050 (1,968) (127,692)
Slide 37: Appendix – FY21 Reconciliation Between GAAP Results and Pro Forma Financials
APPENDIX – FY21 RECONCILIATION BETWEEN GAAP RESULTS AND PRO FORMA FINANCIALS Pro Forma FY21 (7 months) Statutory Fair Value IFRS 16 Lease Operating Financial FX Close-outs Adjustments Adjustments Financial NZD 000s Statements Information Revenue 95,239 95,239 Cost of goods (98,820) 36,562 (984) (63,
Slide 38: Understanding Our GAAP Results
UNDERSTANDING OUR GAAP RESULTS The impact of NZ IAS-41 Agriculture, NZ IAS-2 Inventory and NZ IFRS-16 Leases Our GAAP results are impacted by Fair Value gains or losses arising from the application of NZ IAS-41 Agriculture, NZ IAS-2 Inventory and the classification of leases under NZ IFRS-16. The im
Slide 39: Appendix – Glossary of Terms
APPENDIX – GLOSSARY OF TERMS 1H22 Financial results for the 6 months from 1 February 2021 to 31 July 2021 2H22 Financial results for the 6 months from 1 August 2021 to 31 January 2022 FY22 Financial results for the 12 months from 1 February 2021 to 31 January 2022 FY21 Financial results for the 7 mo
Slide 40: Foreign Selling Restrictions
FOREIGN SELLING RESTRICTIONS This document does not constitute an offer of rights ("Rights") or new ordinary shares ("New Shares") of the Company in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and the Rights and New Shares may no
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