Sanford Limited · NZX:SAN
Sanford — FY2021 Earnings Presentation
48 slides from Sanford's earnings presentation, Nov 18, 2021
Slide 1: FY21 Results Briefing
FY21 RESULTS BRIEFING For the 12 months ended 30 September 2021
Slide 2: Disclaimer
DISCLAIMER Important Notice This presentation contains not only a review of operations and information about Sanford Limited (the Company), but also contains some forward-looking statements about the Company and the environment in which it operates. This disclaimer applies to this presentation and a
Slide 3: Agenda Today
AGENDA TODAY 1. Summary 2. FY21 Results 3. Update by Division 4. Strategic transition 5. Questions 3
Slide 4: 1. Summary
1. SUMMARY SANFORD
Slide 5: Key Messages
KEY MESSAGES 1. FY21 Results: Substantial impact on profitability from Covid-19 again for the full year. Starting to come out the other side during H2. 2. Business segments: Recovery uneven across three divisions. Salmon and Wildcatch continue to improve, mussels lagging. 3. Strategic transi
Slide 6: FY21 Results Snapshot
FY21 RESULTS SNAPSHOT A continuation of the impacts of Covid-19 Catch/Harvest Volume Sales Volume Revenue Adjusted EBIT1 103.0k GWT 113.5k GWT $489.6M $23.3M -8.2 % + 7.4% 4.4% -39.1 % EBIT GW kg Adjusted EBITDA1 NPAT2 EPS No Final Dividend 21₵ $52.6M $16.2M 17CPS -15₵ /kg -20.6% -16.5% -3₵ Flat 1.
Slide 7: FY21 Results Summary
FY21 RESULTS SUMMARY Market conditions remain challenging, but some improvement in Q4: • Conditions slightly ahead of our August market update, as the world starts to reopen. • Momentum starting to improve: Some seasonal improvement in H2, coupled with Q4 improvement. • Supply chain remains challeng
Slide 8: FY21 Results Summary Continued
FY21 RESULTS SUMMARY CONTINUED Achievements during FY21: • Managed inventory, improved price points by year end. • Consent granted for marine extracts facility, stood up alternative processing pending new plant consent & build. • Agreed deal with Kotahi to handle all Sanford frozen export capacity.
Slide 9: Covid Caused a Sudden Drop to Previously Stable Earnings
COVID CAUSED A SUDDEN DROP TO PREVIOUSLY STABLE EARNINGS Adjusted EBIT by financial year 80 -41% 63.4 63.7 64.7 64.8 60 -39% 38.3 $m 40 23.3 20 0 FY 16 FY 17 FY 18 FY 19 FY 20 FY21 9
Slide 10: Covid Had a Dramatic Impact on Global Foodservice Channels
COVID HAD A DRAMATIC IMPACT ON GLOBAL FOODSERVICE CHANNELS 10
Slide 11: Q4 Started to Improve as Global Foodservice Reopened
Q4 STARTED TO IMPROVE AS GLOBAL FOODSERVICE REOPENED Adjusted EBIT by Quarter 30 25 24 22 20 15 15 13 $m 11 10 11 10 9 8 5 4 2 0 Q1 Q2 Q3 Q4 -3 -5 FY 17-19 Avg FY 20 FY 21 11
Slide 12: Revenue Is Recovering but Timing Varies by Division
REVENUE (+4% YOY) IS RECOVERING BUT TIMING VARIES BY DIVISION • Wildcatch: annual growth +2%; H2 growth +9%; Commodity prices recovering but not yet back to pre Covid levels. • Mussels: annual growth -16%; Covid impacts later than other divisions but recovery seen in Q4 in both volume and price. • S
Slide 13: Debt and Inventory Managed, Driving Improved Operating Cashflow
DEBT AND INVENTORY MANAGED, DRIVING IMPROVED OPERATING CASHFLOW Net Debt Inventory 200 $80.0 $184 $75 $179 $72 180 $70.0 160 $152 $60.0 $59 $138 140 $50.0 120 $45 $m $m 100 $40.0 80 $30.0 60 $20.0 40 $10.0 20 - $- Sep-18 Sep-19 Sep-20 Sep-21 Mar-20 Sep-20 Mar-21 Sep-21 13
Slide 14: Environmental, Social, Governance (ESG) FY21 Highlights
ENVIRONMENTAL, SOCIAL, GOVERNANCE (ESG) FY21 HIGHLIGHTS* Climate • Science aligned emissions reduction pathway prepared.** • Seafood sector wide climate adaptation strategy underway. • Climate risk planning and TCFD a focus for FY22. • Opportunities - Seafood’s light carbon footprint. Ocean and Envi
Slide 15: 2. FY21 Results
DRAFT 2. FY21 RESULTS 15
Slide 16: EBIT Performance Dominated by Fall in Mussel Pricing
EBIT PERFORMANCE DOMINATED BY FALL IN MUSSEL PRICING Key drivers of Adjusted EBIT change 45 40 3.3 35 30 22.1 $m 25 2.4 20 1.5 38.3 15 23.3 10 5 16 FY20 Adj EBIT Wildcatch Mussels Salmon Other FY21 Adj EBIT
Slide 17: EBIT Performance Heavily Impacted by Foodservice Exposure
EBIT PERFORMANCE HEAVILY IMPACTED BY FOODSERVICE EXPOSURE OVER FIRST 3 QUARTERS Key drivers of Adjusted EBIT change 45 Covid Price Impact -$23m Covid Cost Impact -$3m Strategy in Action +$10m 40 35 30 21 $m 25 2 2 3 20 38.3 3 2 15 2 1 4 23.3 10 5 FY20 Adj EBIT Mussel Pricing Salmon stock Increased F
Slide 18: Balance Sheet and Cash Flow
BALANCE SHEET AND CASH FLOW Balance Sheet remains strong, debt levels contained Gearing Net Debt Net Debt / Adjusted EBITDA 22.3% $178.6M -3.1% vs Sep 20 3.4x Sep 20 | 2.8x Sep 20 | 23.6% Total Equity Return on Average Total Equity $634M +4.4% vs Sep 20 2.6% Sep 20 | 3.2% Operating Cashflow Operatin
Slide 19: Seafood Inventory Value Reduced, Particularly for Mussels
SEAFOOD INVENTORY VALUE REDUCED, PARTICULARLY FOR MUSSELS Inventory volume (PWT) Inventory value** YOY decrease -14% YOY decrease -21% $80.0 14.0 $74.8 $72.2 $70.0 $6.3 12.2 $6.4 12.0 0.5 $58.9 10.4 10.4 $60.0 9.8 $20.2 10.0 2.8 0.5 0.3 $6.0 0.1 tonnes 000’s 1.4 $50.0 $45.1 $30.2 2.9 $1.0 $13.4 8.0
Slide 20: 3. Update by Division
3. UPDATE BY DIVISION Mm SANFORD
Slide 21: Wildcatch FY21
FRESH FROZEN WILDCATCH FY21 Covid recovery started during H2, Scampi leading recovery Sales Volumes +7% Revenue +2% Profit contribution* +11% 80 400 60 551 1.20 71 3551 681 350 66 286 60 300 282 $0.79 40 0.80 250 GWT (000’s) 33 30 $m $m 40 200 150 $0.47 20 $0.46 0.40 20 100 50 0 0 0 - FY 19 FY 20 FY
Slide 22: Wildcatch FY21: H2 Pricing Starting to Recover
FRESH FROZEN WILDCATCH FY21 H2 pricing starting to recover. Inventory has returned to pre-Covid levels. GWT AND AVERAGE PRICING TREND INVENTORY GWT (000's) $6.00 $5.40 30 18 16.4 NZD FOB PRICE / GW KG * $4.47 16 15.1 $5.00 $4.45 25 14.3 $4.19 $4.01 $3.86 $3.74 14 13.0 $4.00 $4.31 $3.51 20 11.9 GWT (
Slide 23: Greenshell Mussels FY21
MUSSELS GREENSHELL MUSSELS FY21 Closure of global foodservice resulted in very low profit contribution Sales volume +4% Revenue -16% Profit contribution* -95% 40 37 140 36 25 23 1.20 35 34 121 120 108 30 101 20 18 100 $0.65 0.80 GWT (000’s) 25 15 $0.52 80 $m $m 20 60 10 15 0.40 10 40 5 1 5 20 $0.03
Slide 24: Greenshell Mussels FY21: Strong Q4 Sales
MUSSELS GREENSHELL MUSSELS FY21 Strong Q4 sales returned inventory to pre Covid levels. Pricing starting to improve. GWT AND AVERAGE PRICING TREND INVENTORY GWT $3.50 $3.16 $3.21 $3.32 14 14 12.8 $2.92 $2.94 $2.91 12.4 $2.74 11.7 $3.00 12 12 $2.52 $2.32 $2.42 NZD FOB PRICE / GW KG* $2.50 13.2 10 10
Slide 25: Salmon FY21
SALMON SALMON FY21 Higher revenues in 2H21, incl market/channel diversification. Profit contribution impacted by inventory management in Q1 to Q3. Sales volumes +41% Revenue +32% Profit contribution1 +9% 6,000 80 25 $5.60 6.00 5,095 70 $4.91 5,000 67 20 5.00 20 19 60 18 4,000 49 51 4.00 3,522 3,625
Slide 26: Salmon FY21: Sales Pricing Steadily Increasing
SALMON SALMON FY21 Sales pricing is steadily increasing to pre-Covid levels with a positive outlook GWT AND AVERAGE PRICING TREND INVENTORY GWT $16.00 $14.59 $14.94 $14.90 $14.73 $14.82 2.0 1.0 $14.25 $13.47 $13.85 $14.41 0.9 $14.00 $12.82 0.8 0.7 0.7 $12.00 1.5 NZD FOB PRICE / GW KG * 0.6 $10.00 1.
Slide 27: 4. Strategic Transition
4. STRATEGIC TRANSITION SANFORD
Slide 28: Framework for Strategic Planning
FRAMEWORK FOR STRATEGIC PLANNING 28
Slide 29: FY22 Business Planning Framework – Strategy on a Page
FY22 BUSINESS PLANNING FRAMEWORK – STRATEGY ON A PAGE 29
Slide 30: FY22 Business Plan – Steps to Enable Our Recovery
FY22 BUSINESS PLAN – STEPS TO ENABLE OUR RECOVERY Covid has been a shock to the Business – FY22 is about business recovery P R I O R I T I ES F O R F Y 2 2 1. Rebuild mussel profitability 2. Grow developing opportunities in wildcatch 3. Retain salmon profitability and prepare for future growth 4. Es
Slide 31: FY22 Business Plan – Initiatives to Enable Our Recovery
FY22 BUSINESS PLAN – INITIATIVES TO ENABLE OUR RECOVERY P R I O R I T I ES K E Y I N I T I AT I V ES • Continue momentum in the US, Asia & Europe building market and country diversification 1. Rebuild mussel • Develop alternate revenue streams – marine extracts profitability • Partner with Kotahi to
Slide 32: FY22 Outlook
FY22 OUTLOOK Positives Challenges Expect to see further price recovery. Ongoing supply chain cost & Key capital initiatives: performance. ‒ Marine Extracts build Loss of access to the South Georgia ‒ RAS Hatchery confirmation toothfish fishery. ‒ Continued vessel refurbishment Covid impact
Slide 33: Capital Expenditure FY20 – FY21
CAPITAL EXPENDITURE FY20 – FY21 • Deep water vessels undergoing significant mid-life refurbishment commencing in FY21 & continuing in FY22. • Marine Extracts investment delayed due to resource consent issues now resolved. FY20 FY21 Integrity $31m $30m Includes: Includes: Vessel capex Vessel capex Pr
Slide 34: Capital Expenditure FY22
CAPITAL EXPENDITURE FY22 • Spend aligned to business performance, with FY22 integrity capex prioritised. We maintain an eye Integrity ~$40m on the future and will respond accordingly. Includes: Vessel surveys & equipment • Continuation of deep water vessels Processing equipment Mussel farming mid-li
Slide 35: SanCore Business Systems Transformation
SANCORE BUSINESS SYSTEMS TRANSFORMATION Status: Havelock Mussel operation went live in July with MPS (Innova) Timaru factory and one of the deep water vessels will go live in December 21. D365 financial system scheduled to go live in Q4 FY22. Accounting Treatment: Revised accounting policy i
Slide 36: 5. Questions?
SS SANFORD 5. QUESTIONS?
Slide 37: Close
SANFORD
Slide 38: FY21 Integrated Report
FY21 INTEGRATED REPORT Sanford’s FY21 integrated report is available at https://www.sanford.co.nz/investors/ The report outlines Sanford's Business Excellence Framework – this enables each part of the business to map out its role in helping to deliver on our goals We strive to inform in a tran
Slide 39: Diverse Footprint Gives Optionality with Shifting Covid Restrictions
DIVERSE FOOTPRINT GIVES OPTIONALITY WITH SHIFTING COVID RESTRICTIONS Geographic distribution of revenue - FY21 vs. FY20 • Diverse footprint allows us to move sales around as 44% 41% markets change • North America mussel pricing impact negated by strong BGB growth and Q4 recovery in mussels 17% • Ful
Slide 40: Global Supply Chain Disruptions Creating Significant Challenges
GLOBAL SUPPLY CHAIN DISRUPTIONS CREATING SIGNIFICANT CHALLENGES Global Schedule Reliability 40
Slide 41: Wildcatch FY21: Demand Is Building
FRESH FROZEN WILDCATCH FY21 Wildcatch demand is building. H2 pricing started to recover Positives Challenges Scampi market development & Access to the South Georgia fishery. getting closer to customer is driving Reduced pricing for Ling Sounds strong price growth. as market recovery has lagged
Slide 42: FRESH FROZEN
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Slide 43: Greenshell Mussels FY21: Half Shell Mussel Pricing
MUSSELS GREENSHELL MUSSELS FY21 Half shell mussel pricing drives the poor result Positives Challenges Quarter 4 market demand and pricing has The poor mussel pricing over quarters 1 driven a significant drop in inventory levels. through 3 has had a significant impact on Future pricing looking
Slide 44: Greenshell Mussels Highlight: Marine Extracts
MUSSELS GREENSHELL MUSSELS HIGHLIGHT: MARINE EXTRACTS Concept Marine Extracts Plant Milestones: ‒ Resource and Building Consent approved in September ‒ Construction began in November 2021, scheduled for completion and commissioning in July 2022 First revenue generated from the facility in Septem
Slide 45: Salmon FY21: Growth of Big Glory Bay Product
SALMON SALMON FY21 Growth of Big Glory Bay product across H2 has driven significant improvement Positives Challenges Big Glory Bay sales have grown to 21% (3% in PY) Large stock levels of H&G were sold at low of all salmon volume and 25% of value driven by margin in the year. North American mark
Slide 46: Salmon
SALMON Big Glory Bay Salmon retail display in Washington, USA. Marel flexi cut portions for Harris Teeter, USA retailer. Premium Sashimi kits in Shanghai retail. Frozen inventory moved with positive margins to Japanese retail. 46
Slide 47: USD FX Hedging Pattern for the Year
USD FX HEDGING PATTERN FOR THE YEAR 47
Slide 48: FY21 Financial Results - GAAP to Non GAAP Reconciliation
FY21 FINANCIAL RESULTS - GAAP TO NON GAAP RECONCILIATION Non-GAAP Profit measures FY21 $m FY20 $m Sanford's standard profit measure prepared under New Zealand GAAP is net profit. Revenue 489.6 468.8 Sanford has used non-GAAP measures when discussing financial performance in this document. The Direct