Synlait Milk Ltd. · NZX:SML
Synlait Milk — H1 FY2017 Earnings Presentation
24 slides from Synlait Milk's earnings presentation, Mar 29, 2017
Slide 1: Building Value: FY17 Interim Report Presentation
BUILDING VALUE FY17 INTERIM REPORT PRESENTATION 29 March 2017
Slide 2: Strategic Update
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Slide 3: Remain a Growth Company
REMAIN A GROWTH COMPANY WE HAVE: - §trong partnerships with leading brand owners. - High specification plant with high utilisation. - §trong support from our 200 milk suppliers in challenging times. WE WILL: - Consolidate and grow our well established infant formula business. - Explore new areas of
Slide 4: Six Month Highlights
SIX MONTH HIGHLIGHTS $97.6m additional capital raised Infant volumes contributed 16% of sales $4.5m in premiums paid to milk Four suppliers significant appointments to the Senior Leadership Team © Synlait 2017
Slide 5: Chinese Infant Formula Regulations
CHINESE INFANT FORMULA REGULATIONS - Volumes impacted in H1 FY17 by uncertainty around regulations, but have already regained momentum in H2 FY17. - “Three brand rule” to be applied to each registered manufacturing site, not overall entity. - Multiple manufacturing sites could expand number of brand
Slide 6: Value Added Sales
VALUE ADDED SALES - Orders received at this time give us confidence that we will end the year at least at our previous guidance of 18,000 MT of finished infant formula, with increasing run rates between now and the end of the year. - Munchkin’s Grass Fed™ infant formula shipments to the US are under
Slide 7: Capital Investment
CAPITAL INVESTMENT - Tetra Pak has been awarded the contract for the new wet mix facility, which is on track for commissioning in November 2017. - Recruiting a fourth shift for existing blending and consumer packaging facility underway and will allow us to operate at capacity from June 2017. - Plans
Slide 8: Senior Leadership Team
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Slide 9: Top Shareholders
For personal use only − − Rank Group Name %S/O − 1 Bright Dairy Holding Limited 39.06% 2 Mitsui & Co., Ltd. 8.38% 3 The a2 Milk Company (NZ) Limited 8.17% 4 BT Investment Mgt Group 6.52% 5 Munchkin, Inc. 3.87% 6 John Penno 3.41% 7 Ellerston Capital Limited 3.10% 8 Regal Funds Management Pty. Ltd. 1.
Slide 10: Financial Analysis
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Slide 11: Overview
OVERVIEW - Reported earnings after taxation for H1 FY17 is up $0.4m on prior year performance, to $10.6m. - $2.0m growth in gross margin is driven by increased infant formula volumes, with increased volumes for commodity ‘$milnons products being offset by an onerous Bbbatyear —GoseRosk —NetOvethade
Slide 12: Sales Volume
For personal use only SALES VOLUME SALES VOLUME BY PRODUCT CATEGORY (MT) - H1FY17 sales volume at 61,063 MT is 14,707 MT up on H1 FY16. 60.000 - - This increase is predominantly through a 13,593 MT increase in Powders and Cream 70,000 volume as a result of increased milk collection and higher levels
Slide 13: Milk Premiums
For personal use only MILK PREMIUMS - $4.5m in premiums paid in H1 FY17, with a total of $9.4m expected to be paid over the full year. - Number of milk suppliers providing a2 Milk™ has increased from 35 to 60. - Increased premiums for Munchkin’s Grass Fed™, combined with higher milk flows, has incre
Slide 14: Gross Profit per Metric Tonne
For personal use only GROSS PROFIT PER METRIC TONNE GROSS PROFIT PER METRIC TONNE (MT) - Gross profit decreased to $716 / MT from $900 / MT in FY16 H1. - Gross profit for Powders and Cream for the period is $667 / MT, down from $837 / MT in H1 FY16, driven by carry over stock and onerous contracts.
Slide 15: Gross Profit per MT (Powders and Cream)
For personal use only GROSS PROFIT PER MT (POWDERS AND CREAM) - Gross profit for Powders and Cream for POWDERS AND CREAM GROSS PROFIT PER MT the period is $667 / MT, down from $837 / MT in H1 FY16. - Two large drivers of this dilution: — Carry over stock from FY16 sold at low margins. — Onerous cont
Slide 16: For personal use only
For personal use only − − Gross profit per MT Sales volume (MT)
Slide 17: Gross Profit per MT (Lactoferrin)
GROSS PROFIT PER MT (LACTOFERRIN) - Lactoferrin margin improving LACTOFERRIN GROSS PROFIT PER MT driven by increasing market prices rae from H2 FY16 but not yet to the 500,000 levels seen in H1 FY16. - Lactoferrin cost of gross sales (COGS) are largely fixed costs. This =» -- includes costs of spare
Slide 18: Overheads
For personal use only OVERHEADS OVERHEADS - H1FY17 overheads increased by 1) weet . a Ee $4.7m compared to H1 FY16. — = E - Listing costs associated withthe 2 dual listing on the ASX are a one i off cost ($0.5m). - Employee and consultancy costs increasing as we continue to invest ° aes Aba ype Gung
Slide 19: Positive Underlying Performance
POSITIVE UNDERLYING PERFORMANCE - NPAT for the period of $10.6m, up $0.4m on the same period previous year. - H1FY17 impacted by timing variances and one off events - Onerous contracts ($6.2m before tax H1 FY17, $1.1m H1 FY16) impacting revenue, but expected to be unwound by end of the year. - $0.5m
Slide 20: Operating Cash Flow
OPERATING CASH FLOW OPERATING CASH FLOW - $56.5m benefit through proportionately lower advance rates for contracted milk supply in the 2016 / 2017 milk season. - Higher milk flows of 5.7m kgMS (with related cash inflow to come second half). Sy ratte dive met O° it - Receivables assignment delivered
Slide 21: Net Debt
For personal use only NET DEBT NET DEBT - Net debt has decreased $145.4m since H1 FY16. - The key drivers of this are the capital raise completed in October 2016 and strong operating cash flows in the second half of FY16. . “ae. . FY16H1Net Cashflow from Investmentin Capital Raise Net Interest ‘Othe
Slide 22: Full Year Outlook
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Slide 23: Full Year Expectations Unchanged
FULL YEAR EXPECTATIONS UNCHANGED - H2 FY17 will deliver significantly higher SALES VOLUME - CANNED INFANT FORMULA infant volumes and NPAT than H1 FY17. - The a2 Milk Company™ continues to grow infant volumes, supported by our five year manufacturing agreement. - Commodity pricing continues to be vol
Slide 24: Thank You
THANK YOU Visit our Investor Centre at www.synlait.com for more information. Media or investor queries can be directed to: Dan Walraven Communications Manager Synlait Milk Limited P: +64 3 373 3069 E: daniel. walraven@synlait.com © Syniait 2017