Rainbow Chicken Limited · JSE:RBO
Rainbow Chicken — H1 2013 Earnings Presentation
38 slides from Rainbow Chicken's earnings presentation, Feb 20, 2013
Slide 1: Rainbow Chicken Limited (RCL) Interim results
Rainbow Chicken Limited (RCL) Interim results 6 month period ended 31 December 2012 20 February 2013
Slide 2: Introduction
Introduction RCL • This presentation covers the results for the 6 month period to December 2012 • Historic comparatives for 2009 and 2010 relate to published interims being 6 months to September (year-end changed from March to June in 2011). Thus results comparison against these years is less meanin
Slide 3: Interims - statutory highlights
Interims - statutory highlights (Note: 2012 and 2011 to December, 2010 and 2009 to September ) RCL Revenue + 14.9% HEBITDA - 50.4% Rm Rm 4500,6 3917,5 3360,5 3384,4 394,8 318,9 316,0 195,9 2009 2010 2011 2012 2009 2010 2011 2012 Operating margin - 5.7% Headline earnings - 74.1% % Rm 202,1 7.4 7.7 16
Slide 4: Group overview
Group overview RCL • RCL is a consumer focused, branded food business • The Group was restructured 2 years ago to enable further operational focus on the Rainbow and Vector businesses, as well as to provide capacity to pursue growth opportunities • The Group’s growth strategy is focused on compellin
Slide 5: Foodcorp
Foodcorp RCL • On 14 November 2012 RCL announced the acquisition of an effective indirect 64.2% shareholding in New Grocery Foodcorp Holdings Proprietary Limited for a Milling purchase consideration of R1.037 billion. • Competition commission Baking approval is expected in March/April 2013 Specialty
Slide 6: Zam Chick
Zam Chick RCL Our partner Zambeef • RCL concluded an agreement with Zambeef for the purchase of a 49% • Diversified agri business • Zambian based with operations in shareholding in Zam Chick Nigeria and Ghana Ltd for US$14.25 million, as • Listed in Lusaka and London (AIM) announced on SENS on 4 Feb
Slide 7: Rights offer
Rights offer RCL Friday 22 February • Last day to trade Letters of Allocation Monday 25 February • Listing and trading of Rights Offer shares commences Friday 1 March • Rights Offer closes Monday 4 March • Rights Offer shares issued • Results announced on SENS Tuesday 5 March • Results published in
Slide 8: Interim highlights
Interim highlights RCL Statutory Dec 2011 Dec 2012 % Revenue Rm 3 917,5 4 500,6 +14.9 Headline EBITDA Rm 394,8 195,9 -50.4 Headline EBIT Rm 303,9 89,9 -70.4 Effective tax rate % 33,6 33,3 -0.3 Headline earnings Rm 202,1 52,4 -74.1 Headline earnings per share cents 68,7 17,8 -74.1 Interim dividend pe
Slide 9: Segmental analysis for 6 months
Segmental analysis for 6 months RCL • The record levels of imports and high feed raw material input costs remain the major Dec 2011 Dec 2012 % issues plaguing the Revenue Rm 3 917,5 4 500,6 +14.9 industry. As a result Rainbow Rm 3 582,0 4 121,1 +15.1 Rainbow posted a Vector Rm 653,0 741,1 +13.5 marg
Slide 10: Financial review for 6 months: Revenue
Financial review for 6 months RCL Revenue + 14.9% • Group revenue increased by 14.9% to R4.5 billion. 4500,6 Group 741,1 • Intersegment revenue is the 3917,5 Vector reconciling difference to Group 653,0 4121,1 total. Rainbow 3326,7 3360,5 3384,4 3582,0 • Rainbow 5.7% volume and 7.9% average realisat
Slide 11: Financial review for 6 months: HEBITDA
Financial review for 6 months RCL • Group margins severely HEBITDA (pre IAS39) -28.9% impacted by Rainbow’s interim performance • The financial period has been characterised by above inflation cost increases in electricity, gas 9.9% and diesel. 9.3% Margin 9.1% % • Rainbow’s operations continue to r
Slide 12: Financial review: Cash flow
Financial review for 6 months RCL • Increase in working capital Cash flow funding requirements explained by the peak December trading period (similar investment in prior year) ACTUAL CASH FLOW - YTD • Inventories impacted by Rm Vector’s new business and higher feed commodity prices 305.8 impacting b
Slide 13: Financial review: Capex spend
Financial review for 6 months RCL • Increased capex relates to the Capex spend Rustenburg and Bushvalley expansion, conversion of chicken house heating from gas to coal and additional freezing 105,9 and chilling capacity in Dep Worcester Rm 90,9 274,1 • Capital commitments materially 79,7 75,2 lower
Slide 14: Financial review: Headline EBIT
Financial review for 6 months RCL 7.8 Headline 7.3 7.0 7.6 EBIT margin 6.9 (%) 6.8 303,9 297,7 Pre IAS39 243,7 233,8 236,3 228,8 3.8 Post IAS39 170,3 2.0 Headline EBIT 89,9 (Rm) 2009 2010 2011 2012 (Note: 2012 and 2011 to December, 2010 and 2009 to September) 14
Slide 15: Rainbow
Rainbow RCL A flood of imports, continued high feed costs and a worsening exchange rate have put considerable pressure on the results Dec 2011 Dec 2012 Statutory Revenue Rm 3 917,5 4 500,6 Rainbow Rm 3 582,0 4 121,1 Vector Rm 653,0 741,1 Sales between segments: Rm Vector to Rainbow Rm (317,5) (361,6
Slide 16: Rainbow - A flood of imports
Rainbow - A flood of imports RCL Imports continue at record levels • Imports reached record levels in the festive season • The EU is now the major exporter to SA • The industry is starting to make good progress with government in stopping unfair imports Source: Sars import stats Source: Sars import
Slide 17: Rainbow - Continued high feed costs and R/$ worsening
Rainbow - Continued high feed costs and R/$ worsening! RCL Although there is some relief going forward, feed costs remain very high, and the exchange rate is 12% worse than the corresponding 6 month period Yellow maize price (Safex) Soya price (CBOT) Source: Safex Source: CBOT Consequentially, there
Slide 18: Rainbow - Added Value performance is steady
Rainbow - Added Value performance is steady RCL FoodSolutions • Quick Service Restaurants have delivered solid volume growth in tough times for consumers • New store openings have more than offset price increases needed to cover feed cost growth • Rainbows purchase of 49% of the chicken component of
Slide 19: Rainbow - Mainstream is the area under pressure
Rainbow - Mainstream is the area under pressure RCL Performance • Mainstream is the area affected by imports, with IQF the most impacted • Government recently announced a decision to cap injection at 8%. Stakeholder input was requested by January 18th. A decision will be reached by government in tim
Slide 20: Rainbow - Business efficiencies are good
Rainbow - Business efficiencies are good RCL Rainbow, in a strongly inflationary environment has kept cost growth, excluding feed, at low levels • Overhead expenses are only up 4.1% on last year • Salary and wages costs are less than 1% up on last year • Rainbow has a number of key efficiency projec
Slide 21: Vector
Vector RCL Vector delivered 13.5% revenue growth in a market where consumer demand remains under pressure and grew EBIT by 15.2%, despite above inflationary increases in major cost drivers of fuel and electricity. Dec 2011 Dec 2012 Revenue Rm 3 917,5 4 500,6 Rainbow Rm 3 582,0 4 121,1 Vector Rm 653,
Slide 22: Vector - Midrand capacity expansion
Vector - Midrand capacity expansion RCL • Midrand expansion now completed to enable full B consolidation of PnP A Inland volumes and create capacity for growth • New expansion has added approximately 20% additional warehousing capacity to D our total network 22
Slide 23: Vector – Namibian Operations
Vector – Namibian Operations RCL • The take on of two new principals in Namibia, namely Namib Poultry and Mello Pies, has contributed to an improved performance from this operation 23
Slide 24: Vector – Operational Efficiency
Vector – Operational Efficiency RCL • While revenue grew by Revenue, Stock and Service Level Trends 10.7% in the secondary distribution network, stock levels increased by only 4.7% and demand service levels remained constant • The full implementation of advanced planning tools will allow further red
Slide 25: Conclusion
Conclusion RCL • The two major issues facing the poultry industry, namely high levels of imports and record high raw material input costs, are unlikely to be resolved in the near term and will continue to supress Rainbow’s margins • The trading outlook for Vector is likely to remain challenging, par
Slide 26: Appendices
Appendices RAINBOW = @--
Slide 27: RCL transformation phase
RCL transformation phase RCL 1999 - 2003 2004 - 2010 7,0 6,8 1991 - 1998 Fixing the Transformation to 6,0 Business in basics trouble consumer focused 4,7 Revenue 3,7 3,8 4,0 4,1 business (Rbn) 3,0 2,5 2,1 2,2 2,2 2,3 Acquired Vector (R455m) to 1,9 1,5 1,5 1,6 1,7 enable optimisation of 0,5 outboun
Slide 28: RCL growth phase
RCL growth phase RCL 8,6 7,9 2011 - 2015 7,0 6,8 6,0 Growth phase Restructured 4,7 4,0 4,1 – 2 focused operating companies Revenue 3,7 3,8 with clear strategies and (Rbn) 3,0 opportunities 2,5 2,3 2,1 2,2 2,2 1,7 1,9 – Strategic focus CEO / CFO 1,5 1,5 1,6 Capacity enhanced 0,5 – Acquisition of
Slide 29: Complex business chain
Complex business chain RCL • Integrated supply chain from “farm to fork” GP OPERATION AGRICULTURE PROCESSING Grandparent Grandparent farms Parent Parent farms BroilerBroiler farms chicks chicks chicks Broilers Processing Rearing Laying Hatching Rearing Laying Hatching Growing 4 plants + 2 FP plants
Slide 30: Infrastructure
Infrastructure RCL • Listed holding company for Rainbow Farms and Vector Logistics • Market capitalisation approximately R5,2bn (after rights issue approximately R10,0bn) • Over 8,000 employees (excluding seasonal casual workers) • 209 rearing, laying and broiler Limpopo farms and hatcheries Provinc
Slide 31: Infrastructure
Infrastructure RCL • Listed holding company for Rainbow Farms and Vector Logistics • Market capitalisation approximately R5,2bn (after rights issue approximately R10,0bn) • Over 8,000 employees (excluding seasonal casual workers) • 209 rearing, laying and broiler Limpopo farms and hatcheries Provinc
Slide 32: Market conditions - imports
Market conditions - imports RCL Calendar growth: MDM 6% Chicken 14% Turkey 41% Source: SAPA 32
Slide 33: Rainbow market conditions - yellow maize
Rainbow market conditions - yellow maize RCL • Summary: – Average market price for yellow maize Feed costs remain high with some relief going forward (SAFEX) increased by 15.0% vs. the comparable 6 months to December R/ton • Context: 3,000 +59% – Last year a large scale drought across the U.S corn b
Slide 34: Rainbow market conditions - soya (CBOT)
Rainbow market conditions - soya (CBOT) RCL • Summary: US $ per ton – Average CBOT soya meal price increased by 48% vs. the comparable 6 months to December 600.0 + 48% • Context: – Prices had an exceptionally strong bull run (+83%) 500.0 commencing in the 3rd quarter of FY12 to peak at a record $554
Slide 35: Rainbow market conditions - exchange rate
Rainbow market conditions - exchange rate RCL • The average R/$ exchange rate weakened by 12% vs. the comparable 6 months to December • In FY2013 the Rand traded 11 weaker and largely above the R8.50 level to the Dollar, trading near or above the R9.00 level on a few occasions. Stronger bond 10 inte
Slide 36: Chicken industry perspective
Chicken industry perspective RCL • Estimated per capita consumption of broiler meat in Kilograms per capita Source: SAPA 36
Slide 37: Chicken industry perspective
Chicken industry perspective RCL •Average broiler production per week (in millions) excluding imports 18.5 18.7 17.8 16.8 14.6 12.9 12.8 11.8 11.8 11.9 11.0 11.0 10.5 9.8 9.8 9.2 8.5 8.0 94 95 96 97 98 99 00 1 2 3 4 5 6 7 8 9 10 11 Source: SAPA 37
Slide 38: Chicken industry perspective
Chicken industry perspective RCL Source: Red Meat Abbatoir Association 38
Rainbow Chicken Limited (RCL) — H1 2013 Earnings Presentation on 6ix