Slide 1: Annual Results Presentation for the Year Ended 31 December 2022
SCALES CORPORATION LIMITED Bringing Nutrition to the World Annual Results Presentation For the Year Ended 31 December 2022 23 February 2023
Slide 2: Agenda
1. FY22 Results and Overview I. Summary II. Sustainability III. Group Performance IV. Divisional Performance V. Capital Management 2. Global Proteins 3. Impact of Cyclone Gabrielle and FY23 Outlook Appendices: A. NZ IFRS Reconciliation B. Disclaimer Scales Corporation Limited – 2022 Full Year Result
Slide 3: 1. FY22 Results and Overview
1. FY22 Results and Overview
Slide 4: I. Summary
HIN : t |. Summary
Slide 5: Strong Group performance driven by record Global Proteins and Logistics results
✓ Strong Group performance driven by record Global Proteins and Logistics results ✓ We believe our global investment strategy will continue to ensure that Scales meets its future business earnings ambitions ✓ Financial results towards the top end of the FY22 Guidance range: ✓ Underlying* NPAT Attrib
Slide 6: Key FY22 metrics
158,595 MT $619.2m 27,580 14.3% TEU2 equivalents Petfood ingredients sold1 Record revenue ROCE3 (2021: 149,207) (2021: $514.6m) managed (2021: 13.8%) (2021: 30,313) 15.5 cents 4,580,000 $27.0m 3,324,000 Dividends declared TCEs of own-grown apples TCEs of apples exported4 Net cash per share (2021: 4,
Slide 7: II. Sustainability
II. Sustainability
Slide 8: Update on our Sustainability strategy
Update on our Sustainability strategy Future operating Focus areas Current assessment Strategy Business delivery environment Review goals Refine materiality Baseline Horizon scans Pathway analysis and risks areas measurement Business objective and project setting • Horizon scan • Reviewed materialit
Slide 9: Excellent progress made on our Sustainability initiatives
Excellent progress made on our Sustainability initiatives • Built and communicated our Employee Value Proposition (EVP) to key stakeholders • Custom built two leadership programmes that are currently being rolled out: Leading through Others (Senior Managers) and Emerging Leaders (Assistant PEOPLE Ma
Slide 10: III. Group Performance
III. Group Performance
Slide 11: Excellent results, particularly from Global Proteins and Logistics
Excellent results, particularly from Global Proteins and Logistics • Reported NPAT Attributable to Shareholders of $19.4m, down 28% (2021: $26.9m) • Underlying NPAT Attributable to Shareholders of $27.6m, down 7% (2021: $29.8m) • Underlying NPAT of $46.4m, up 17% (2021: $39.8m) • Underlying EBITDA o
Slide 12: Underlying NPAT, EBITDA and Revenue trends
Underlying NPAT Underlying EBITDA Revenue Attributable to Shareholders • Historic results are unadjusted for businesses that have been sold or acquired • 2018 results have not been restated for the effects of NZ IFRS 16 Scales Corporation Limited – 2022 Full Year Results 12
Slide 13: A further change in divisional earnings mix
A further change in divisional earnings mix • Global Proteins – growth due to: • Strong market conditions and new product development, leading to improved volumes, mix and margin • Contribution from Fayman following investment • Horticulture – lockdowns in China resulted in material reductions in ma
Slide 14: Underlying EBITDA by division
Global Proteins Horticulture Logistics • Trends in Underlying EBITDA by division are shown in the graphs below • 2018 results have not been restated for the effects of NZ IFRS 16 Scales Corporation Limited – 2022 Full Year Results 14
Slide 15: Strong financial position
Strong financial position Balance Sheet $m 2022 2021 Current assets excl cash Trade and other receivables 42.1 28.7 • Movement in working capital primarily reflects: Inventories 42.6 29.6 Unharvested agricultural produce 25.1 24.6 ◦ Unseasonal increase in trade and other receivables due to late mark
Slide 16: IV. Divisional Performance
IV. Divisional Performance
Slide 17: Significant growth from strategic investments and petfood market demand
Significant growth as a result of strategic investments and ongoing petfood market demand • 6% increase in petfood ingredients volumes sold: Financial Performance - Global Proteins ◦ Excludes volumes sold by Fayman $m 2022 2021 % change • 46% increase in revenue and 80% increase in Underlying EBITDA
Slide 18: Horticulture affected by severe market disruption
The Horticulture division and industry was affected by severe market disruption Financial Performance - Horticulture • Revenue of $228.9m (2021: $243.4m) $m 2022 2021 % change Revenue 228.9 243.4 -6% • Underlying EBITDA $17.0m (2021: $40.8m) Underlying EBITDA 17.0 40.8 -58% Underlying EBIT (1.1) 22.
Slide 19: Slight Premium price growth offset by difficult year for volumes and Traditional prices
Slight Premium price growth offset by a difficult year for volumes and Traditional prices • Pricing and total volumes impacted by slow sales rates: Apple Prices by Variety (NZD / TCE, FOB) 2022 2021 % change ◦ Many Premium prices were in line with or slightly above the prior year, confirming our str
Slide 20: Strategic value of Logistics accompanied by strong growth
Strategic value of division accompanied by strong growth • Excellent full year results: Financial Performance - Logistics $m 2022 2021 % change ◦ 51% increase in revenue to $123.3m (2021: $81.9m), principally as a result of changes in Revenue 123.3 81.9 51% market freight costs Underlying EBITDA 6.6
Slide 21: V. Capital Management
3 V. Capital Managements
Slide 22: Investing to future-proof the business
Investing to future-proof the business • Horticulture ROCE impacted by lower current year earnings Maintenance • FY22 capital expenditure included: $m 2022 2021 Global Proteins 1.6 0.5 ◦ Mr Apple orchard redevelopment Horticulture 2.6 3.7 Logistics 0.2 0.1 ◦ Whakatu packhouse automation programme Ot
Slide 23: 2. Global Proteins
2. Global Proteins
Slide 24: Global Proteins division attractive attributes
Scales’ Global Proteins division is being developed to benefit from the following attractive attributes • Resiliency to market cycles – we believe that petfood and edible proteins are well insulated against changes in the macroeconomic environment • Above average returns on invested capital • Abilit
Slide 25: Continued expansion of the petfood industry
Continued expansion of the petfood industry • The USA is the world’s largest petfood market (sales of US$42.3b in 20221) • It has also become the largest exporter of petfood products to China: ◦ Exports totalled over US$304m Jan–Nov 2022, up ~200% year-on-year, accounting for nearly 50% of all China
Slide 26: Our value proposition: quality ingredients and end-to-end supply chain
Our value proposition is our wide range of quality ingredients and end-to-end supply chain excellence • ‘One stop shop’ for customers and suppliers By-product raw material supply from Current and growing abattoirs is • Global, long-standing and strong relationships fragmented. To mismatch between pr
Slide 27: Global Proteins: Operations
We have global aspirations for our Global Proteins division New Zealand Australia Name Fayman International / Meateor Name Meateor NZ Australia Ownership 50% Ownership 50% / 33% Activities Petfood ingredients Activities Edible proteins and petfood ingredients Processing sites 2 Key Species Lamb, bee
Slide 28: Strong market relationships and sales channels for animal by-products
We have strong market relationships and sales channels for all animal by products including petfood, edible and pharmaceutical We use partnership models across a variety of countries to secure and aggregate Our deep market knowledge and key raw material supply relationships with shipping companies e
Slide 29: Gameplan: partnership models for entering new markets
Gameplan • When entering a new market, we use partnership models with existing industry players who have strong relationships to secure raw material supply and who have networks with end-buyers: Local partnerships – access to supply, new ◦ Our investments will include an ability to increase our stak
Slide 30: Installation of new processing equipment allowing new product development
Previous investments in processing capability and Installation of new Future growth initiatives capacity plus increased processing equipment demand through the Integrate planning with allowing new product pandemic enabled customers to develop new development resulting increases in volume in-house pr
Slide 31: 3. Impact of Cyclone Gabrielle and FY23 Outlook
3. Impact of Cyclone Gabrielle and FY23 Outlook
Slide 32: Cyclone Gabrielle impact on orchards
We are pleased to report that all team members are safe and well. However, many people Extensively damaged have experienced significant loss or disruption as a result of this event. The Hawke’s Bay Moderately damaged community, its people and its culture, are an integral part of Scales. Accordingly,
Slide 33: Group update
Group update • As previously advised, due to the wide ranging impacts of Cyclone Gabrielle on Hawke’s Bay, we have withdrawn our FY23 profit Guidance: ◦ We expect to provide updated Guidance as soon as practicable, once the financial impacts of the cyclone are fully understood • FY22 dividend paymen
Slide 34: Appendices
Appendices
Slide 35: Reconciliation of Divisional Underlying Profitability to Reported Profitability (EBITDA)
Reconciliation of Divisional Underlying Profitability to Reported Profitability Group Global Proteins Horticulture Logistics Corporate and eliminations $m 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 Underlying / Reported Revenue EBITDA Reconciliation Underlying EBITDA (excluding NZ IFRS 16) 66
Slide 36: Reconciliation of Divisional Underlying Profitability to Reported Profitability (NPAT)
Reconciliation of Divisional Underlying Profitability to Reported Profitability Group Global Proteins Horticulture Logistics Corporate and eliminations $m 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 NPAT Reconciliation Underlying NPAT (excluding NZ IFRS 16) 46.9 40.4 49.1 26.5 (2.0) 15.6 4.0 2
Slide 37: Disclaimer
The information in this presentation has been prepared by Scales Corporation Limited with due care and attention. However, neither Scales Corporation Limited nor any of its directors, employees, shareholders nor any other person shall have any liability whatsoever to any person for any loss (includi