Quantum Foods Holdings Ltd · JSE:QFH
Quantum Foods — FY2014 Earnings Presentation
58 slides from Quantum Foods's earnings presentation, November 2014
Slide 1: Results presentation for the year ended 30 September 2014
Results presentation for the year ended 30 September 2014
Slide 2: Results presentation November 2014
Results presentation November 2014 2 RESULTS PRESENTATION – FOR THE YEAR ENDED 30 SEPTEMBER 2014 / QUANTUM FOODS
Slide 3: Agenda
AGENDA 2 Introduction Hennie Lourens Financial review Andre Muller Operational review • Supply chain (raw materials) Adel van der Merwe • Feed business Thinus van Lill • Broiler business Jimmy Murray • Layer business Roelof Viljoen • Africa Roelof Viljoen Strategy and prospects Hennie Lourens RESULT
Slide 4: Quantum Foods summary
QUANTUM FOODS SUMMARY 3 Established in 1963 as an animal feeds business Business composed of four revenue streams: Feed business Layer business Broilers business Africa Nova Nulaid Tydstroom Mega Eggs/Nulaid Quantum Foods unbundled from Pioneer Foods on 6 October 2014 4 RESULTS PRESENTATION – FOR TH
Slide 5: Operating environment: 2014
OPERATING ENVIRONMENT: 2014 4 “Difficult industry circumstances with relief towards year-end” Consumer demand remain muted Energy costs (electricity, gas, fuel) remain high Record high maize prices Significant weakening of ZAR Large maize crop brought relief in last quarter RESULTS PRESENTATION – FO
Slide 6: Key features
KEY FEATURES 5 “Improved operating performance” Revenue up by 2% to R3.6 billion Headline earning per share 11 cents (2013: loss of 34 cents) Impairment of assets of R50 million (2013: R232 million) R45 million capital investment. Domestic capital programme largely completed EBITDA increased from R3
Slide 7: Financial review: Andre Muller
FINANCIAL REVIEW: ANDRE MULLER RESULTS PRESENTATION – FOR THE YEAR ENDED 30 SEPTEMBER 2014 / QUANTUM FOODS 7
Slide 8: Key financial matters
KEY FINANCIAL MATTERS 7 Pioneer Food Group Internal Restructuring during 2014 = Quantum Foods Quantum Foods fully capitalised on 30 September 2014 • South African operations: Debt free, but without cash • African operations: Debt free, retain cash reserves for expansion Carve-outs for comparatives •
Slide 9: Statements of income
STATEMENTS OF INCOME 8 2013 2013 2014 Carve-outs Pro forma Year ended 30 September profit/(loss) Rm Rm Rm Revenue 3 560.9 3 483.4 3 483.4 Operating loss* (20.9) (251.5) (251.5) Income from associates 0.6 0.3 0.3 Net finance costs 0.9 (101.0) (14.8) Loss before tax (19.3) (352.2) (266.0) Tax 10.9 65.
Slide 10: Revenue analysis
REVENUE ANALYSIS 9 R1 241m R1 319m 35% 38% R152m Feed business R95m 4% R152m 3% 2014 4% Layer business 2013 R152m 4% R1 087m R3 561m Broiler business R3 483m 31% Africa R1 081m 31% R1 081m R988m 30% 28% 10 RESULTS PRESENTATION – FOR THE YEAR ENDED 30 SEPTEMBER 2014 / QUANTUM FOODS
Slide 11: Adjusted operating profit
ADJUSTED OPERATING PROFIT 10 2014 2013 Profit/(loss) Rm Rm South Africa business (8.1) (41.0) Africa business 35.1 20.4 Group total 27.0 (20.6) RESULTS PRESENTATION – FOR THE YEAR ENDED 30 SEPTEMBER 2014 / QUANTUM FOODS 11
Slide 12: Sensitivities 2015
SENSITIVITIES 2015 11 Full year impact on operating profit Change in Rm Maize price of R100/ton 11 Soybean meal price of R100/ton 3 Egg selling price of 10c per doz 8 Broiler meat selling price of 10c per kg 2 12 RESULTS PRESENTATION – FOR THE YEAR ENDED 30 SEPTEMBER 2014 / QUANTUM FOODS
Slide 13: EPS & HEPS
EPS & HEPS 12 2013 2013 2014 Carve-outs Pro forma Year ended 30 September Rm Rm Rm Loss before pro forma adjustments (8.5) (286.8) (286.8) Adjustment for intergroup finance costs - after tax - - 62.0 Loss as reported (8.5) (286.8) (224.8) Adjusted for items of a capital nature - after tax 34.5 207.2
Slide 14: Statements of financial position
STATEMENTS OF FINANCIAL POSITION 13 2013 2013 2014 Carve-outs Pro forma Year ended 30 September Rm Rm Rm Non-current assets 1 061.4 1 132.7 1 132.7 Net working capital – excluding cash and borrowings 490.3 460.8 460.8 Non-current liabilities (195.9) (207.1) (207.1) Cash 105.5 24.2 24.2 Total net ass
Slide 15: Statements of cash flow
STATEMENTS OF CASH FLOW 14 2014 Year ended 30 September Rm Cash operating profit 69.6 Working capital investment (28.3) Stock including biological assets (5.8) Debtors and creditors (22.5) Tax paid (1.4) Net finance income 1.6 Cash generated before investments 41.5 Capital expenditure (44.6) Sale of
Slide 16: Capital expenditure
CAPITAL EXPENDITURE 15 2014 Year ended 30 September Rm Gauteng abattoir 12 Zambia expansion 7 SAP ERP reimplementation 6 Other maintenance capex 20 Total 45 16 RESULTS PRESENTATION – FOR THE YEAR ENDED 30 SEPTEMBER 2014 / QUANTUM FOODS
Slide 17: Supply chain (raw materials): Adel van der Merwe
SUPPLY CHAIN (RAW MATERIALS): ADEL VAN DER MERWE RESULTS PRESENTATION – FOR THE YEAR ENDED 30 SEPTEMBER 2014 / QUANTUM FOODS 17
Slide 18: US corn prices
US CORN PRICES 17 900 $6.65 $6.56 $6.66 600 $4.30 +73.31% -1.43% c/bu $3.83 +0.16% -34.48% 300 +2.73% 0 2010 2011 2012 2013 2014 CBOT corn 2010-2014 Reporting period: Oct-Sep 18 RESULTS PRESENTATION – FOR THE YEAR ENDED 30 SEPTEMBER 2014 / QUANTUM FOODS
Slide 19: Safex yellow maize price
SAFEX YELLOW MAIZE PRICE 18 3 500 R2 377 3 000 R2 380 R2 264 2 500 R1 672 R/ton 2 000 R1 278 +42.34% -4.87% +5.03% 1 500 1 000 +30.80% -15.70% 500 0 2010 2011 2012 2013 2014 Yellow maize (Safex) 2010-2014 Reporting period: Oct-Sep RESULTS PRESENTATION – FOR THE YEAR ENDED 30 SEPTEMBER 2014 / QUANTUM
Slide 20: Landed soybean meal price
LANDED SOYBEAN MEAL PRICE 19 8 500 R6 658 7 500 6 500 R5 687 +17.07% R/ton 5 500 4 500 R3 398 R3 918 R3 511 +45.15% 3 500 -3.22% +15.30% 2 500 -13.90% 1 500 2010 2011 2012 2013 2014 Soybean meal 2010-2014 Reporting period: Oct-Sep 20 RESULTS PRESENTATION – FOR THE YEAR ENDED 30 SEPTEMBER 2014 / QUAN
Slide 21: Exchange rate
EXCHANGE RATE 20 11.5 R10.6037 10.5 R9.2888 +14.16% 9.5 Rand R8.0729 8.5 R7.4865 +15.06% 7.5 R6.9697 +15.83% 6.5 -17.39% -6.90% 5.5 2010 2011 2012 2013 2014 ZAR vs US$ 2010-2014 Reporting period: Oct-Sep RESULTS PRESENTATION – FOR THE YEAR ENDED 30 SEPTEMBER 2014 / QUANTUM FOODS 21
Slide 22: Raw material - overview
RAW MATERIAL - OVERVIEW 21 Wheat and maize milling Physical supply of maize Soybean meal by-product supply to Coastal feed mills outsourced supply split between agreement with Pioneer to BTG Pactual Commodities imports and local Foods 22 RESULTS PRESENTATION – FOR THE YEAR ENDED 30 SEPTEMBER 2014 /
Slide 23: Feed business: Thinus van Lill
FEED BUSINESS: THINUS VAN LILL RESULTS PRESENTATION – FOR THE YEAR ENDED 30 SEPTEMBER 2014 / QUANTUM FOODS 23
Slide 24: Feed business - overview
FEED BUSINESS - OVERVIEW 23 “Solid performance, increasing competitive trading environment” Feed prices reached record highs driven by high raw material cost Good growth in external feed volumes of 6% Internal volumes reduced by 5% due to downscaling of broiler south operations Focused cost control
Slide 25: Feed business - focus areas
FEED BUSINESS - FOCUS AREAS 24 Focus on external volume growth continue Price volume management remain key Optimal feed performance and specialised customer service drive continue Unlock further value through the use of new technology and efficiency improvements Cost control remain key focus area RE
Slide 26: Broiler business: Jimmy Murray
BROILER BUSINESS: JIMMY MURRAY 26 RESULTS PRESENTATION – FOR THE YEAR ENDED 30 SEPTEMBER 2014 / QUANTUM FOODS
Slide 27: Broiler business - overview
BROILER BUSINESS - OVERVIEW 26 “Business model re-engineered” BROILER SOUTH Value chain re-engineering complete • Durbanville abattoir mothballed • Farm operations curtailed • Live broiler supply agreements commenced Significant financial improvement Farming performance at world-class levels BROILER
Slide 28: Broiler business - focus areas
BROILER BUSINESS - FOCUS AREAS 27 Optimise production capacity Broilers North product mix improvement Optimise farming operation costs Hartebeespoort abattoir operation remain under review 28 RESULTS PRESENTATION – FOR THE YEAR ENDED 30 SEPTEMBER 2014 / QUANTUM FOODS
Slide 29: Layer business: Roelof Viljoen
LAYER BUSINESS: ROELOF VILJOEN RESULTS PRESENTATION – FOR THE YEAR ENDED 30 SEPTEMBER 2014 / QUANTUM FOODS 29
Slide 30: Layer business - overview: improved supply and demand
LAYER BUSINESS - OVERVIEW 29 “Improved supply and demand situation” Projected national laying flock and egg production based on pullets hatched to September 2014 25.8 430 25.0 410 Cases per week (thousand) 24.2 390 Hens (millions) 23.4 370 22.6 350 21.8 330 21.0 310 2010 2011 2012 2013 2014 2015 Sou
Slide 31: Layer business - overview
LAYER BUSINESS - OVERVIEW 30 “Disappointing operational performance” Planned decrease in egg volumes Lower hen numbers Product mix disappointing Gauteng farm operations suffered due to disease Operating cost at pack stations too high % Revenue increase 0.6 Volumes decrease (8.0) Selling price increa
Slide 32: Layer business - focus areas
LAYER BUSINESS - FOCUS AREAS 31 Farm efficiencies Improved focus on efficiencies and costs at pack stations KwaZulu-Natal operation to be established by April 2015 Improved product and customer mix Growth opportunities explored 32 RESULTS PRESENTATION – FOR THE YEAR ENDED 30 SEPTEMBER 2014 / QUANTUM
Slide 33: Africa: Roelof Viljoen
AFRICA: ROELOF VILJOEN RESULTS PRESENTATION – FOR THE YEAR ENDED 30 SEPTEMBER 2014 / QUANTUM FOODS 33
Slide 34: Africa operations - Zambia
AFRICA OPERATIONS - ZAMBIA 33 “Solid performance from Zambia” Excellent breeding results Competitor activity in broiler day-old chicks increased Layer day-old pullet volumes continue increasing Capex of R36 million approved to increase egg production Project to increase day-old layer pullets complet
Slide 35: Africa operations - Uganda
AFRICA OPERATIONS - UGANDA 34 “Best financial performance since business acquired” Pleasing operating efficiencies on breeder farms Managing director appointed during 2014 Capex of R38 million approved for expansion Demand remains strong RESULTS PRESENTATION – FOR THE YEAR ENDED 30 SEPTEMBER 2014 /
Slide 36: Strategy and prospects
STRATEGY AND PROSPECTS 36 RESULTS PRESENTATION – FOR THE YEAR ENDED 30 SEPTEMBER 2014 / QUANTUM FOODS
Slide 37: Strategy
STRATEGY 36 1 2 3 4 5 Optimal business Unlock World class Organic High performance composition supply chain value efficiency growth human capacity • Gauteng abattoir • Centralisation of • Below inflation • Animal feed • Ensure review procurement cost increase per • Layer livestock improvement in • A
Slide 38: Prospects
PROSPECTS 37 Consumer to remain under pressure Lower raw material costs expected Stable egg prices Improved broiler trading conditions Margin improvement remain management focus 38 RESULTS PRESENTATION – FOR THE YEAR ENDED 30 SEPTEMBER 2014 / QUANTUM FOODS
Slide 39: Thank you
Thank you RESULTS PRESENTATION – FOR THE YEAR ENDED 30 SEPTEMBER 2014 / QUANTUM FOODS 39
Slide 40: Salient features
Quantum Foods Holdings Ltd (previously Business Venture Investments no 1792 (Pty) Ltd) Incorporated in the Republic of South Africa Registration number: 2013/208598/06 Share code: QFH ISIN code: ZAE000193686 (“Quantum Foods” or “the Group” or “the Company”) Summary consolidated financial results for
Slide 41: Commentary
COMMENTARY INTRODUCTION Cash operating expenses decreased, mostly as a For Quantum Foods, the year under review was a result of the downscaling of the Western Cape broiler momentous one. It was confirmed that Quantum Foods business, but also due to the increased traction of would unbundle from the P
Slide 42: Commentary continued
COMMENTARY continued NOVA FEEDS PROSPECTS The animal feed business performed well, with external The outlook for the South African economy remains sales volumes increasing by 6% for the year. Nova challenging. Low economic growth, higher inflation Feeds continues to supply the leading dairy farmers
Slide 43: Group statement of financial position
GROUP STATEMENT OF FINANCIAL POSITION Audited Audited 30 September 30 September 2014 2013 Notes R’000 R’000 ASSETS Non-current assets 1 061 357 1 132 722 Property, plant and equipment 1 045 078 1 124 027 Intangible assets 7 116 59 Investment in associates 6 112 5 517 Deferred income tax 3 051 3 119
Slide 44: Group statement of comprehensive income
GROUP STATEMENT OF COMPREHENSIVE INCOME Audited Audited Year ended Year ended 30 September 30 September 2014 2013 Note R’000 R’000 Revenue 3 560 943 3 483 351 Cost of sales (2 982 629) (2 879 966) Gross profit 578 314 603 385 Other income 14 450 19 744 Other gains/(losses) – net 7 74 767 (146 446) S
Slide 45: Group statement of changes in equity
GROUP STATEMENT OF CHANGES IN EQUITY Audited Audited Year ended Year ended 30 September 30 September 2014 2013 R’000 R’000 Share capital (refer to Note 4) 1 585 386 – Opening balance – – Borrowings and net invested equity capitalised during the reporting period 1 344 176 – Common control transaction
Slide 46: Group statement of cash flows
GROUP STATEMENT OF CASH FLOWS Audited Audited Year ended Year ended 30 September 30 September 2014 2013 R’000 R’000 NET CASH FLOW FROM OPERATING ACTIVITIES 39 908 163 870 Net cash profit from operating activities 69 550 25 298 Working capital changes (28 292) 139 197 Net cash generated from operatio
Slide 47: Group segment report
GROUP SEGMENT REPORT Audited Audited Year ended Year ended 30 September 30 September 2014 2013 R’000 R’000 Segment revenue 3 560 943 3 483 351 Eggs and layer livestock 1 086 619 1 081 384 Broilers 1 241 320 1 318 775 Animal feed 1 080 880 988 333 Africa 152 124 94 859 Segment results (20 859) (251 4
Slide 48: Notes to the summary consolidated financial statements
NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS BACKGROUND The Group was established during the current reporting period. The Group represents the business of Pioneer Foods related to the production of eggs, chicken products, animal feed and poultry livestock. The Group comprises the followin
Slide 49: Accounting policies
2. Accounting policies These summary consolidated financial statements incorporate accounting policies that are consistent with those applied in the Group’s consolidated financial statements for the year ended 30 September 2014 and with those of previous financial years, except for the adoption of t
Slide 50: Notes to the summary consolidated financial statements continued
NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATE- MENTS continued 3. Impairment of property, plant and equipment (continued) In terms of the income approach, the discounted cash flow method is used to determine the present value of projected future cash flows for a CGU using a rate of return that i
Slide 51: Share capital, other reserves, borrowings
2014 R’000 4. Share capital Issued and fully paid – ordinary shares 233 284 332 (2013: nil) ordinary no par value shares 1 585 386 Reconciliation of shares issued during the reporting period Opening balance – Shares issued to acquire entities under common control 1 504 354 Additional share capital r
Slide 52: Notes to the summary consolidated financial statements continued
NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS continued 2014 2013 R’000 R’000 7. Other gains/(losses) – net Biological assets fair value adjustment 51 950 44 477 Unrealised – reflected in carrying amount of biological assets 9 767 14 432 Realised – reflected in cost of goods sold 42 183 30
Slide 53: Contingent liabilities and future capital commitments
9. Contingent liabilities Litigation Dispute with egg contract producers As previously reported, six egg contract producers proceeded with claims in the Western Cape High Court, Cape Town. The claims from three of the six contract producers are still unresolved. Pioneer Foods is defending contractua
Slide 54: Fair value measurement
NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS continued 11. Fair value measurement All financial instruments measured at fair value are classified using a three-tiered fair value hierarchy that reflects the significance of the inputs used in determining the measurement. The hierarchy is as
Slide 55: Fair value measurement continued; events after reporting period
11. Fair value measurement (continued) The Group uses a variety of methods that makes assumptions that are based on market conditions existing at the reporting date. Quoted market prices or dealer quotes for similar instruments are used for derivative financial instruments. Other techniques, such as
Slide 56: Preparation of financial statements, audit and directors
NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS continued 13. Preparation of financial statements The summary consolidated financial statements have been prepared under the supervision of AH Muller, CA(SA), Chief Financial Officer. 14. Audit This summarised report is extracted from audited in
Slide 57: Greymatter & Finch # 8683
GREYMATTER & FINCH # 8683
Slide 58: www.quantumfoods.co.za
www.quantumfoods.co.za
Quantum Foods Holdings — FY2014 Earnings Presentation on 6ix