Tiger Brands Limited · JSE:TBS
Tiger Brands — FY2010 Earnings Presentation
69 slides from Tiger Brands's earnings presentation, November 2010
Slide 1: Tiger Brands Limited Financial Results Investor Presentation 2010
Tiger Brands Limited Financial Results Investor Presentation 2010 1 Group results and declaration of capital reduction and final dividend for the year ended September 2010
Slide 2: Agenda
AGENDA Corporate Strategy A Context for Performance Salient Features Financial Analysis S Segmental t lPPerformance f Outlook 2
Slide 3: Corporate Strategy
CORPORATE STRATEGY Peter Matlare Chief Executive Officer 3
Slide 4: A corporate strategy to address current and future challenges
A corporate strategy to address current and future challenges VISION MISSION To be the most admired branded To deliver revenue growth that is 3% greater than SA GDP plus FMCG company in emerging markets inflation and achieve our blended operating margin of 15%, thereby achieving hi i reall earnings
Slide 5: Context for Performance: Economic Trends
Context for Performance : Economic Trends Household consumption has not fully South Africa: Economic Statistics 8.0% recovered….. 7.1% 5.7% 6.0% 4.4% 5.0% 5.3% 4.3% 4 0% 4.0% 3 7% 3.7% 4.3% 3.0% 4.3% 3.4% 3.7% 2.0% 2.7% 0.0% ‐2.0% ‐1.8% ‐3.1% ‐4.0% 2009 2010 2011 2012 2013 CPI Inflation Rate SA GDP
Slide 6: Context for Performance: Economic Trends
Context for Performance : Economic Trends ¾ Jobs lost between the second and third quarters of 2010 was as high as 86 000 (cumulatively over a million) ¾ While the recession is technically over, SA is experiencing jobless growth and consumer spending remains constrained. Source: SA Reserve Bank / Ne
Slide 7: Competitive Landscape
Competitive Landscape ¾ Business performance was impacted by the following: • Strong rand • A proliferation of imports • An increase in Dealer Owned Brands • Significant cost push from utilities (Eskom) • Continuous improvement initiatives ¾ A number of tactical initiatives were undertaken to ensure
Slide 8: Context for Performance: Market Trends
Context for Performance : Market Trends ¾ Total Category volume (those categories in which Tiger Brands participates) show recovery in the 3 months ending September 2010. ¾ However in the 12 months to September 2010 market volumes declined ¾ Consumer down‐trading patterns evident in recessionary env
Slide 9: Excellent Brand Performance
Excellent Brand Performance Tiger’s brands recognized in top awards (Sunday Times Top Brands Survey 2010) Essential foods category Canned foods category Sports/Energy drinks category Tastic takes1st place 1st 2nd for 11 years running 3rd 3rd 9
Slide 10: Driving expansion into Africa
Driving expansion into Africa ¾ Tiger’s entry into Nigeria was done with great deliberation after considering various entry strategies; • The acquisition of Deli Foods represents Phase 1 of our entry into the Nigerian market, this provides Tiger with new product IP and market insights • We continue
Slide 11: Salient Features: A Tough Year for Tiger Brands
Salient Features : A Tough Year for Tiger Brands FMCG Operations ¾ Turnover ‐2% ¾ Operating income ‐1% ¾ Strong cash flow generation ¾ We will continue to deploy our balance sheet proactively for further acquisitions ¾ We continue to evaluate the option of share‐buy backs 11
Slide 12: HEPS (cents)
HEPS (cents) 1500 1,489.5 1480 1460 1440 +6% 1420 1,407.4 1400 1,393.0 1380 1360 ‐1% 1340 F 2009 F 2010 F 2010 (excl BEE) F 2009 F 2010 F 2010 (excl BEE) 12
Slide 13: Total Distributions – cents per share
Total Distributions – cents per share 800 746 704 700 600 500 400 +6% 300 200 100 0 F 2009 F 2010 F 2009 F 2010 13
Slide 14: Financial Analysis
FINANCIAL ANALYSIS Michael Fleming Chief Financial Officer 14
Slide 15: Income Statement for the year ended September
Income Statement for the year ended September % Rm 2010 2009 Change Continuing operations Turnover 19,316 20,430 (5%) FMCG 19,316 19,700 (2%) Oceana ‐ 730 Operating Income 3,015 3,133 (4%) FMCG 3,015 3,055 (1%) Oceana ‐ 78 Income from investments 19 31 (39%) Net financing costs (82) (255) 68% Income
Slide 16: Income Statement for the year ended September
Income Statement for the year ended September % Rm 2010 2009 Change Continuing i i operations i Profit after taxation before abnormal items 2,328 2,172 7% Abnormal items (188) 344 Tax on abnormal items 36 ( ) (37) Profit after taxation 2,176 2,479 (12%) Discontinued Operations – Sea Harvest ‐ 55 Net
Slide 17: Turnover by operating segment
Turnover by operating segment September September % Rm 2010 2009 Change FMCG 19,316 19,700 (2%) D Domestic i Food F d 15 715 15,715 15 922 15,922 (1%) Grains 8,085 8,793 (8%) ‐ Milling and baking 5,849 6,267 (7%) ‐ Other grains 2,236 2,527 (11%) G Groceries i 3 16 3,167 26 2 2,652 19% Snacks & Treat
Slide 18: Contribution to Turnover (FMCG)
Contribution to Turnover (FMCG) 2010 2009 Intergroup Intergroup Exports & Exports & sales sales International International ‐1% ‐1% Out of Home 10% 10% HPC 1% Out of Home HPC 9% Grains 1% 10% VAMP 7% 42% Grains Beverages VAMP 7% 45% 6% Beverages Snacks & 5% Treats Snacks & 9% Groceries Treats Grocer
Slide 19: Operating Income before abnormal items
Operating Income before abnormal items Operating Income % % Operating Margins Rm 2010 2009 Change 2010 2009 FMCG 3 015 3,015 3 055 3,055 (1%) 15 6% 15.6% 15 5% 15.5% Domestic Food 2,681 2,408 11% 17.1% 15.1% Grains 1,678 1,414 19% 20.7% 16.1% Milling and Baking 1,364 1,158 18% 23.3% 18.5% Other Ot e
Slide 20: Contribution to EBIT (FMCG)
Contribution to EBIT (FMCG) 2010 2009 Exports & Exports & International International 1% 7% Other Other ‐1% Out of HPC HPC ‐5% Home 2% 15% Out of Home 16% 1% Grains VAMP 5% VAMP 4% 46% Beverages 4% Grains Beverages3% Snacks & 55% Snacks & Treats Treats 8% Groceries Groceries 9% 15% 15% 20
Slide 21: Abnormal Items for the year ended September
Abnormal Items for the year ended September Rm 2010 2009 Continuing operations Empowerment transaction costs – BEE Phase II ((188)) ((12)) Profit/(loss) on sale of property, plant & equipment, and impairment charges on ‐ (12) intangibles Profit on sale of investments 1 230 Costs relating to the unsu
Slide 22: HEPS excluding once-off empowerment transaction costs
HEPS excluding once‐off empowerment transaction costs as at Sept % Rm 2010 2009 Change Group Headline earnings 2,203 2,210 0% BEE Phase II empowerment transaction costs after tax 153 ‐ ‐ Headline earnings excluding once‐off empowerment costs 2,356 2,210 7% HEPS (cents) excluding once off empowerment
Slide 23: Group Balance Sheet at September
Group Balance Sheet at September Rm 2010 2009 Assets Fixed assets and Intangibles 4,572 3,872 Investments 1,717 1,510 Current Assets 5,774 5,731 Cash 921 506 12,984 11,619 Equity and Liabilities Ordinary Shareholders Equity 8,316 6,984 Non controlling Interests Non‐controlling 285 301 Long‐term Borr
Slide 24: Key Statistics as at September
Key Statistics as at September 2010 2009 Continuing operations Net Cash/(Debt) (Rm) 42 (378) N t Debt/Equity Net D bt/E it % / N/A 5% Working capital per R1 turnover (cents) 20.7 19.4 Net interest cover (times) 36.9 12.4 Operating income margin % (FMCG) 15.6% 15.5% Effective tax rate before abnormal
Slide 25: Cashflow for the year ended September
Cashflow for the year ended September Rm 2010 2009 Cash Operating Profit 3,493 3,566 Working capital requirements (113) (425) Cash generated from operations 3,380 3,141 Net financing costs (82) (247) Di id d received Dividends i d 149 87 Taxation paid (821) (1,033) Cash available from operations 2,6
Slide 26: Capital Expenditure & Commitments
Capital Expenditure & Commitments ‐ for year to September Rm 2010 2009 Continuing operations Capital expenditure (R million) 634 561 ‐ Replacement R l 363 321 ‐ Expansion 271 240 p Capital commitments ((R million)) 817 1,006 ‐ Contracted 547 337 ‐ Approved 270 669 26
Slide 27: Summary - Finance
SUMMARY ‐ FINANCE Tiger Brands is well positioned for future growth ¾ Tiger’s portfolio performance is characteristic of having moved through a recessionary period ¾ Balancing volume, margin and market share has been a key focus ¾ Strong Rand has had a major impact on the Deciduous fruit export busi
Slide 28: Grains
GRAINS Thabi Segoale Business Executive 28
Slide 29: Grains Key Performance Highlights
Grains Key Performance Highlights ¾ Net Sales ‐8% ¾ EBIT +19% ¾ Operating margin 20 7% 20.7% Key performance drivers Key market dynamics ¾ Favourable procurement positions ¾ Volatile raw material prices: ¾ Brand investment underpins • Wheat: stable prices to July 2010 but continued demand significan
Slide 30: Maize & Wheat Milling
Maize & Wheat Milling Strong performance achieved ¾ Excellent procurement positions ¾ Improvement in channel & pack size mix despite marginal volume declines ¾ Strong volume growth on value added products: • Consumer baking premixes • Ace Instant ¾ Improved extractions ¾ New Hennenman Mill on track
Slide 31: Albany Bakeries
Albany Bakeries Albany diversifies product portfolio ¾ Growth in Albany volumes: • Launch of 100% Smooth Wholegrain • Increased penetration ¾ Favourable product mix shift ¾ Albany PMB bakery successfully commissioned ¾ Board approves upgrade of Albany Durban bakery ¾ Albany broadens product basket N
Slide 32: Tastic Rice
Tastic Rice Tastic leads category recovery ¾ Rice market recovers on price deflation • 2010 : 12mm = +1,7% vs 2009 : 12mm = ‐7% ¾ Tastic market share grows ¾ Stable rice costs supports positive outlook for category Tastic is voted the No.1 brand!* * Essential Foods Category – 2010 Sunday Times Marki
Slide 33: Breakfast Cereals
Breakfast Cereals Innovation & brand investment drives growth Innovations launched in 2010 … ¾ Business performance driven by: • Newly launched innovation products • Affordable offerings • Increased penetration ¾ No. 1 volume market share position retained ¾ Value growth achieved ¾ Accelerated innov
Slide 34: Summary: Grains
SUMMARY : GRAINS Investment story on track ¾ Successful FY 2010 ¾ Stable platform to support growth ¾ Key strategic priorities • Consolidating our capability platform • Broadening our product basket • Expanding our market universe 34
Slide 35: Consumer Brands
CONSUMER BRANDS Neil Brimacombe Executive Director 35
Slide 36: Groceries
Groceries Particularly challenging year for the Groceries division Volumes under pressure Performance Challenges ¾ Net Sales +19% ¾ Volumes ¾ EBIT ‐5% ¾ Price premiums exceeded in H1 ¾ Retail House brand agenda Performance Drivers ¾ Cheap Imported alternatives ¾ Mayonnaise ¾ Margins ¾ Pasta ¾ Signif
Slide 37: Market Share
Market Share Mixed Share Performance – some share recovery evident in the short term In the shorter term key markets starting to show signs of recovery 12mm 6mm 3mm Volume Share ((%)) 2009 2010 2009 2010 2010 Baked Beans 69.5% 65.7% 68.6% 66.8% 69.0% Tomato Sauce 74.3% 72.3% 74.7% 71.7% 71.9% Jam 62
Slide 38: Crosse & Blackwell Acquisition
Crosse & Blackwell Acquisition Consolidation – building a strong platform for sustained growth ¾ Particularly successful integration into Groceries ¾ Excellent platform for future growth • Distribution • Cost C / Effi Efficiencies i i • Innovation ¾ Acquisition targets met 38
Slide 39: Sustained Brand Investment
Sustained Brand Investment All brand equity measures remain exceptional KOO ACTIVATION ALL GOLD ACTIVATION FATTIS & MONI’S ACTIVATION 39
Slide 40: Groceries Brand Accolades
Groceries Brand Accolades ‐ our brands still preferred by the consumers All Gold Brand • Number 1 brand - The Beeld Survey • 3rd Brand in Canned Food Category - Sunday Times Top Brand Survey KOO • 1st in i CCanned dFFood dCCategory t - Sunday Times Top Brand Survey • 2nd Favorite Brand - Sunday Time
Slide 41: Snacks & Treats
Snacks & Treats Challenging Times For Discretionary Categories Performance ¾ Net Sales ‐1% ¾ EBIT ‐17% Macro economic level Internal Challenges ¾ Confectionary market suffering volume ¾ Poor service levels driven by fire in the declines Gums & Jellies plant ¾ Strong ZAR sees cheap imports ¾ Chocolat
Slide 42: Competing in tough times
Competing in tough times Key Management Initiatives ¾ Continue to optimise growth in healthier snacking by expanding Jungle offering ¾ H1 share gains in profitable growing Gums & Jellies sector ¾ Smaller pack sizes to respond to affordability need ¾ Significant efforts to reduce business costs ¾ Exp
Slide 43: Continued Brand Investment
Continued Brand Investment In-Store Activation Consumer Promotions Smaller Pack Sizes 43
Slide 44: Out of Home
Out of Home Margins improve but volumes remain under pressure Volumes under pressure ¾ Net Sales +3% ¾ EBIT +69% Performance Drivers Performance Challenges ¾ Closure of PPM Business ¾ Independent restaurants closure ¾ Successful integration of Crosse & ¾ Exchange rate and cheap imported alternatives
Slide 45: Value Added Meat Products
Value Added Meat Products Strong margins and volumes continue to recover E ll t Operating Excellent O ti Profit P fit Growth G th ¾ Net Sales ‐2% ¾ EBIT +30% Performance Drivers Performance Challenges ¾ Enterprise brand ¾ Consumer downgrading ¾ Procurement / Margins i ¾ Key markets under pressure ¾
Slide 46: Value Added Meat Products
Value Added Meat Products Continued investment in the core ¾ Brand investment +21% ¾ Compelling consumer innovation ¾ Market shares +3pp (Nielsen: Aug ’10 12mma) 46
Slide 47: Beverages
Beverages Continued focus results in excellent progress ¾ N t Sales Net S l +3% 3% ¾ EBIT +25% ¾ Operating Margin 10.4% Performance Drivers Performance Inhibitors ¾ Core brand volume growth ¾ Weak demand during Q1 ¾ Factory efficiencies ¾ Sector pricing (DFB’s) (DFB s) ¾ Excellent cost management ¾
Slide 48: Beverages
Beverages Driving growth by investing in the core brands Key Initiatives for 2010: Leverage of Energade sponsorships ¾ Flighting of the Oros mother brand TVC ¾ Hall’ss Smooth TVC Hall ¾ Roses sampling Energade Cricket Stadium Advertising Oros M O Mother th bbrand d TV campaign Roses Outdoor Halls TV
Slide 49: Beverages
Beverages Exciting the consumer with relevant innovation Innovation launched in 2010 ¾ Oros Ice Tea ¾ Energade Champs ¾ p 7 Smoothie new variants Super ¾ Super 7 PSD Oros Ice Tea Energade Champs S Super 7 SSmoothie thi Taxi T i rankk activation ti ti S Super 7 SSmoothie thi new variants i t 49 49
Slide 50: Langeberg & Ashton Foods
Langeberg & Ashton Foods Markets begin to recover but strong rand hurts ¾ Volumes (Core) +10% 10% ¾ Net Sales ‐7% ¾ Operating loss ‐R84.6m Key Challenges Outlook ¾ Sustained strongg Rand ¾ Improved p global g markets for canned and ¾ Depressed market pricing puree products ¾ Packaging cost push ¾ Ex
Slide 51: HPC
HPC Brenda Koornneef Business Executive 51
Slide 52: HPC
HPC HPC a focus for future growth Ch ll Challenges Invest for f growth h ¾ Declining markets in first half year ¾ Investment in integrated HPC division to ¾ Aggressive competitive environment deliver growth in F2011 ¾ Operational challenges in Personal • Management structure Care • Customer & Field
Slide 53: Home Care
Home Care Improving performance despite soft Top‐line ¾ Net Sales ‐7% ¾ EBIT Flat Challenges g ¾ Markets decline in 2010, but start recovery in second half year. ¾ Pest volume market remains in decline (‐7.7% 12mm) ¾ Competitive set increasingly aggressive ¾ Retailers l launch l h DOB b brands d Imp
Slide 54: Home Care
Home Care Innovation and Brand activation supports market share growth Innovation JEYES goes ATL Brand Activation 54
Slide 55: Personal Care
Personal Care Market dynamics & Operational challenges ¾ Net Sales ‐12% ¾ EBIT ‐14% Challenges ¾ Market contraction impacts performance but improves in the short term (packages): ‐1% (12mma) +4% (3mma) ¾ Strong multinational competitive activity ¾ Service levels hamper growth but corrected Q4 Perfor
Slide 56: Personal Care
Personal Care Personal Care remains a Growth Vector ¾ Ingram’s positioned for growth • Additional Addi i l marketing k i iinvestment • Current range receives pack upgrade • Launch of non‐camphor creams assists performance ¾ Personal Care innovation gains traction • Lemon Lite re‐launch • Line extens
Slide 57: Baby Care
Baby Care Big Baby continues to grow Total Baby ¾ Net Sales +5% ¾ EBIT +1% Achievements ¾ Leading position in jarred Baby Food continues. Challenges ¾ Purity masterbrand extended to Baby Wellbeing ¾ Market volumes under pressure ¾ Margin expansion – Growth of Baby ¾ Investment in Field Sales & Merch
Slide 58: Baby Care
Baby Care Innovation drives profitable growth Recent Launches Planned launches F2011 58
Slide 59: Tiger Brands International
Tiger Brands International Peter Matlare Chief Executive Officer 59
Slide 60: Tiger Brands International: Background
Tiger Brands International: Background Our Priority Zones – no changes and focus remains I t International ti l expansion i remains i a key k priority i it Opportunity zones well understood Background g Our engagement g g in the markets has built real competencies p We continue to resource appropria
Slide 61: Tiger Brands International: Exports
Tiger Brands International: Exports Strong growth driven through an effective supply chain ¾ Net sales R370 m +30% ¾ EBIT R54 m +62% Growth Drivers ¾ Efficient supply chain chain, speed to market and product availability ¾ Flexible approach to rapidly meeting complex market needs ¾ Increased marketi
Slide 62: Tiger Brands International: Exports
Tiger Brands International: Exports Investing for future growth ¾ Mozambique M bi growth th achieved hi d through th h product d t education and strong distribution ¾ Zambian formal market growth has created opportunities to improve brand presence ¾ Fattis and Monis presence in Zimbabwe. Continued g
Slide 63: Tiger Brands International: Haco (Kenya)
Tiger Brands International : Haco (Kenya) Delivering on the strategy ¾ Net sales R190 m ‐3% KSHS 2 bn +17% ¾ EBIT R20 m ‐5% KSHS 210 m + 25% Growth drivers ¾ Improved macro environment in East Africa ¾ Expanded distribution throughout East Africa ¾ Capex investment has improved service levels ¾ Focu
Slide 64: Chococam - Cameroon
Cameroon (Chococam) Chococam ‐ Cameroon Investing for future growth F2011 Brand Renovation ¾ Net sales R315 m ‐ 19% FCFA 20 20,5 5 bn ‐ 2% ¾ EBIT R37 m ‐ 15% FCFA 2,4 bn + 5% Growth drivers ¾ Significant continuous improvement savings achieved ¾ Sustainable p platform for future ggrowth: • Re‐alignm
Slide 65: Chococam - Cameroon Outlook
Cameroon (Chococam) Chococam ‐ Cameroon Investing for future growth Outlook ¾ ERP system adoption and maximization ¾ Execution of brand renovation program, a key growth driver ¾ Increased Tiger Bands product portfolio introduction ¾ Capex on key lines to improve productivity ¾ Implementation of revi
Slide 66: Tiger Brands International: Summary
Tiger Brands International: Summary The Emerging Market ‘local player’ ¾ African continent a stepping stone for internationalisation ¾ Emphasis on identified sub‐regions, maintaining focus and creating centers of excellence ¾ Acquisition remains a key theme on the continent and beyond ¾ Continue to
Slide 67: Outlook
Outlook ¾ Management portfolio realignment ¾ Encouraging increase in volumes in recent months ¾ Trading environment likely to remain challenging ¾ Continued to invest in Brands,, People p and Facilities 67
Slide 68: Disclaimer
Disclaimer Certain statements in this presentation may be defined as forward looking statements within the meaning of the United States Securities legislation. Forward‐looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, r
Slide 69: 2010
1 2010