RCL Foods Limited · JSE:RCL
RCL Foods — H1 FY2021 Earnings Presentation
53 slides from RCL Foods's earnings presentation, Mar 1, 2021
Slide 1: Investor Presentation: Results for the six months ended December 2020
2021 INVESTOR PRESENTATION 1 MARCH 2021 RESULTS FOR THE SIX MONTHS ENDED DECEMBER 2020
Slide 2: Miles Dally, Chief Executive Officer
MILES DALLY CHIEF EXECUTIVE OFFICER
Slide 3: Headlines – Results for the six months ended December 2020
Salient Features | Financial Review | Operational Reviews HEADLINES – RESULTS FOR THE SIX MONTHS ENDED DECEMBER 2020 A PLEASING SET OF RESULTS AMIDST A CHALLENGING ECONOMIC ENVIRONMENT Double digit growth in HEPS (at a statutory and underlying level) • Diversified portfolio enables resilience in spi
Slide 4: Headlines – Profitability growth driven by Baking, Sugar and Vector Logistics
Salient Features | Financial Review | Operational Reviews HEADLINES – RESULTS FOR THE SIX MONTHS ENDED DECEMBER 2020 PROFITABILITY GROWTH DRIVEN BY IMPROVED BAKING, SUGAR AND VECTOR LOGISTICS RESULTS Revenue up 10.5% driven by improved pricing in Sugar and REVENUE R15.7bn 10.5% Baking, higher Millin
Slide 5: Underlying EBITDA and growth per business unit
Salient Features | Financial Review | Operational Reviews HEADLINES – RESULTS FOR THE SIX MONTHS ENDED DECEMBER 2020 UNDERLYING EBITDA & GROWTH (%) PER BUSINESS UNIT Groceries demonstrates Baking delivered a substantial Improved volumes, an A substantial commodity New Vector Logistics business resil
Slide 6: Key deliverables
Salient Features | Financial Review | Operational Reviews KEY DELIVERABLES COMPLETE THE STRATEGIC SCALE GROWTH POTENTIAL IN 1 PORTFOLIO REVIEW 4 GROCERIES AND BAKING Future proof the shape of the portfolio, lay the Deliver on key value drivers identified for foundation for consistent quality of earn
Slide 7: Key deliverables – Strategic review: future proofing the portfolio
Salient Features | Financial Review | Operational Reviews KEY DELIVERABLES – STRATEGIC REVIEW: FUTURE PROOFING THE SHAPE OF RCL FOODS RCL FOODS purpose is achieved by leveraging our unique ecosystem of multiple business models – ranging from agricultural value chains to food technology. LIVING OUR P
Slide 8: Key deliverables – Delivering a stand-alone Chicken structure
Salient Features | Financial Review | Operational Reviews KEY DELIVERABLES – DELIVERING A STAND-ALONE CHICKEN STRUCTURE Decision taken to establish Chicken as a stand-alone, focused division Key objective to enable a single-minded and dedicated focus in driving the Chicken business turn-around. Key
Slide 9: Key deliverables – Launch the LIVEKINDLY collective partnership in Africa
Salient Features | Financial Review | Operational Reviews KEY DELIVERABLES – LAUNCH THE LIVEKINDLY COLLECTIVE PARTNERSHIP IN AFRICA Following RCL FOODS investment in the LIVEKINDLY collective we aim to form a joint venture*, LIVEKINDLY collective Africa Selected by the LIVEKINDLY collective for our
Slide 10: Rob Field, Chief Financial Officer
ROB FIELD CHIEF FINANCIAL OFFICER
Slide 11: Financial summary
Salient Features | Financial Review | Operational Reviews FINANCIAL SUMMARY UNDERLYING HEPS UP 28.0% INCOME STATEMENT DEC 2020 DEC 2019 % VAR Revenue Rm 15 701.4 14 210.2 10.5 EBITDA Rm 1 130.0 1 165.7 (3.1) EBITDA margin % 7.2 8.2 (1.0)ppts Net finance costs Rm 159.8 196.7 (18.8) Share of profits o
Slide 12: Operating results summary (Rm)
Salient Features | Financial Review | Operational Reviews OPERATING RESULTS SUMMARY (Rm) UNDERLYING EBITDA UP 18.0% DRIVEN BY IMPROVEMENT IN BAKING, SUGAR AND VECTOR LOGISTICS 3.1% 18.0% 155.8 133.4 107.0 1 344.8 95.2 15.8 84.4 110.0 119.6 80.5 1 165.7 1 140.1 21.0 1 130.0 Refer slide 5 of the Appen
Slide 13: Headline earnings waterfall (Rm)
Salient Features | Financial Review | Operational Reviews HEADLINE EARNINGS WATERFALL (Rm) DECEMBER 2020 1 130.0 453.7 159.8 173.6 184.8 86.1 684.6 17.6 529.9 68.6 42.2 EBITDA Depreciation, Net finance costs Share of profits Taxation Minority interest Headline Headline earnings IFRS 9* COVID-19 Unde
Slide 14: Operating results summary - unadjusted
Salient Features | Financial Review | Operational Reviews OPERATING RESULTS SUMMARY - UNADJUSTED SEGMENTAL ANALYSIS – REVENUE AND EBITDA REVENUE (Rm) DEC 2020 DEC 2019 % VAR Groceries 2 762.5 2 637.6 4.7 Baking 2 917.4 2 545.9 14.6 Sugar 4 377.9 3 778.1 15.9 Chicken 4 875.2 4 700.2 3.7 Vector Logist
Slide 15: Operating results summary – underlying EBITDA
Salient Features | Financial Review | Operational Reviews OPERATING RESULTS SUMMARY – UNDERLYING EBITDA OPERATING RESULTS SUMMARY – UNDERLYING EBITDA EXCLUDING MATERIAL ONCE-OFFS AND ACCOUNTING ADJUSTMENTS, UNDERLYING EBITDA UP 18.0% AND MARGIN IMPROVES 0.6% UNDERLYING EBITDA (Rm) DEC 2020 DEC 2019
Slide 16: Cash flow summary
Salient Features | Financial Review | Operational Reviews CASH FLOW SUMMARY CASH AT THE END OF THE PERIOD OF R1BN SAME AS YEAR-END Rm DEC 2020 DEC 2019 % VAR OPENING BALANCE* 1 030.0 (110.4) 1 033.2 Operating profit adjusted for non-cash flow items 996.4 951.3 4.7 Working capital changes (588.7) (10
Slide 17: Working capital
Salient Features | Financial Review | Operational Reviews WORKING CAPITAL WORKING CAPITAL IMPROVED BY 13.5%, DOWN BY 3.1% OF REVENUE DEC DEC % WORKING CAPITAL (Rm) NET WORKING CAPITAL AS A % OF REVENUE 2020 2019 VAR Trade and other receivables 7 175.6 5 985.6 19.9 24.5 22.3 TRADE RECEIVABLES Invento
Slide 18: Capital expenditure
Salient Features | Financial Review | Operational Reviews CAPITAL EXPENDITURE CAPITAL EXPENDITURE WELL CONTROLLED CAPEX SPEND, DOWN R12.9m EXPANSION (Rm) REPLACEMENT (Rm) Capital expenditure (including intangibles) was R424.2m (Dec 2019: R437.1m) Major spend items in the current period included: ▪ R
Slide 19: Return on invested capital (ROIC)
Salient Features | Financial Review | Operational Reviews RETURN ON INVESTED CAPITAL (ROIC) AT DECEMBER* CAPITAL EXPENDITURE GROUP REPORTED ROIC DECLINES TO NEGATIVE 4.4% MAINLY DRIVEN BY IMPAIRMENTS IN H2 OF FY2020 GROUP UNDERLYING ADJUSTED** ROIC IMPROVES TO 8.5% GROUP FOOD DIVISION 8.5% 12.7% 5.1
Slide 20: Debt package
Salient Features | Financial Review | Operational Reviews DEBT PACKAGE DEBT PACKAGE RESTRUCTURED IN DECEMBER 2018 AT LOWER INTEREST RATES INTEREST RATE OF 3M JIBAR + MARGIN OF 1.5% TO 1.55% OVER 5 YEAR TERM TERM VALUE (Rm) YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 (DEC 19)* (DEC 20) (DEC 21) (DEC 22)** (DE
Slide 21: Debt covenants
Salient Features | Financial Review | Operational Reviews DEBT COVENANTS RCL FOODS REMAINS WELL WITHIN COVENANT REQUIREMENTS Required covenant ratios were revised on restructuring of the debt package in December 2018 COVENANT REQUIRED DEC 2020 JUNE 2020 DEC 2019 Senior leverage ratio (Net senior deb
Slide 22: Paul Cruickshank, Food Division COO
PAUL CRUICKSHANK FOOD DIVISION CHIEF OPERATING OFFICER
Slide 23: Operational review: Food Division
Salient Features | Financial Review | Operational Reviews OPERATIONAL REVIEW : FOOD DIVISION DEC DEC % REVENUE (Rm) 2020 2019 VAR Groceries 2 762.5 2 637.6 4.7 Baking 2 917.4 2 545.9 14.6 Sugar 4 377.9 3 778.1 15.9 FOOD DIVISION SUB TOTAL 10 057.8 8 961.6 12.2 Chicken Division 4 875.2 4 700.2 3.7 Ve
Slide 24: Our wins for the period
Salient Features | Financial Review | Operational Reviews OUR WINS FOR THE PERIOD A clear strategy & focus driving a significantly improved EBITDA result Well executed COVID controls minimising disruption on operations Stronger than forecasted volume growth across most categories Significant overhea
Slide 25: Groceries
GROCERIES
Slide 26: Operational review: Food Division - Groceries
Salient Features | Financial Review | Operational Reviews OPERATIONAL REVIEW : FOOD DIVISION - GROCERIES UNDERLYING EBITDA RESULT OF R301.6m, DOWN 6.5% ON LAST YEAR DRIVEN BY PIES & BEVERAGE DEC DEC % GROCERIES HEADLINES 2020 2019 VAR REVENUE 2 762.5 2 637.6 4.7 Revenue excluding sundry sales 2 423.
Slide 27: Groceries: Culinary
Salient Features | Financial Review | Operational Reviews OPERATIONAL REVIEW : FOOD DIVISION - GROCERIES GROCERY : CULINARY GROCERY: CULINARY MARKET SHARE 6mm 6mm (VOLUME) Dec 2019 Dec 2020 Strong demand in the first quarter of the financial year 41.6% 42.8% softened in recent months as a result of
Slide 28: Groceries: Pet Food
Salient Features | Financial Review | Operational Reviews OPERATIONAL OPERATIONAL REVIEW: REVIEW : FOOD FOOD DIVISION DIVISION – GROCERIES - GROCERIES GROCERY : PET FOOD MARKET SHARE 6mm 6mm (VOLUME) Dec 2019 Dec 2020 Although the Pet Food category is under pressure with 34.8% 33.2% consumers tradin
Slide 29: Groceries: Pies and Beverages
Salient Features | Financial Review | Operational Reviews OPERATIONAL REVIEW : FOOD DIVISION - GROCERIES PIES Although the lockdown has had a negative impact on the Pies operating unit, volumes have gradually begun to recover towards pre-lockdown levels as restrictions have eased, particularly in th
Slide 30: Baking
BAKING
Slide 31: Operational review: Food Division - Baking
Salient Features | Financial Review | Operational Reviews OPERATIONAL OPERATIONAL REVIEW: REVIEW : FOOD FOOD DIVISION DIVISION - BAKING – BAKING UNDERLYING EBITDA OF R269.1m, UP 42.7% ON LAST YEAR MAINLY DUE TO STRONG DEMAND & IMPROVED OPERATIONS DEC DEC % BAKING HEADLINES 2020 2019 VAR REVENUE 2 91
Slide 32: Baking: Breads, buns and rolls
Salient Features | Financial Review | Operational Reviews OPERATIONAL REVIEW : FOOD DIVISION - BAKING BREADS, BUNS & ROLLS Bread, buns and rolls generated a strong result after landing a price increase early in the period to counter commodity price pressure Although volumes have come under pressure
Slide 33: Baking: Speciality and Milling
Salient Features | Financial Review | Operational Reviews OPERATIONAL REVIEW : FOOD DIVISION - BAKING SPECIALITY SPECIALITY Speciality continues to deliver strong volume growth mainly driven by speciality breads, increased in-home consumption and successful innovation launches Sound cost control and
Slide 34: Sugar
SUGAR
Slide 35: Operational review: Food Division - Sugar
Salient Features | Financial Review | Operational Reviews OPERATIONAL REVIEW: FOOD DIVISION - SUGAR SUGAR UNDERLYING EBITDA UP 50.8% TO R462.3m ON THE BACK OF COST CONTROL, A FAVOURABLE PRODUCT MIX AND HIGHER MARKET PRICING DEC DEC % SUGAR HEADLINES 2020 2019 VAR REVENUE 4 377.9 3 778.1 15.9 • Sugar
Slide 36: Operational review: Food Division - Sugar
Salient Features | Financial Review | Operational Reviews OPERATIONAL REVIEW: FOOD DIVISION - SUGAR SUGAR The business has continued to benefit from higher local demand as a result of increased home-based cooking and baking as well as the large-scale distribution of COVID-19 relief hampers Sugar imp
Slide 37: Sugar continued: world sugar price and Master Plan
Salient Features | Financial Review | Operational Reviews OPERATIONAL OPERATIONAL REVIEW: REVIEW : FOOD FOOD DIVISION DIVISION - SUGAR – SUGAR SUGAR continued NO.11 WORLD SUGAR PRICE (RAW SUGAR) Lastly, an increase in the international sugar price has 3.4% AVG Price AVG Price improved export earning
Slide 38: Sugar: Molatek
Salient Features | Financial Review | Operational Reviews OPERATIONAL OPERATIONAL REVIEW: REVIEW : FOOD FOOD DIVISION DIVISION - SUGAR – SUGAR MOLATEK Although the molasses-based feed market has become very competitive due to herd reductions amidst COVID uncertainty, Molatek has managed to maintain
Slide 39: Food Division – Key priorities
FOOD DIVISION – KEY PRIORITIES
Slide 40: Food Division priorities for second half of F21
Salient Features | Financial Review | Operational Reviews FOOD DIVISION PRIORITIES FOR SECOND HALF OF F21 FINANCIAL YEAR STRATEGIC OPERATIONAL Focused reduction of Sugar’s Agriculture costs Minimise COVID-19 disruption on operations Deliver on our Pies plant investment Effectively manage commodity p
Slide 41: Paul Cruickshank, Chicken Division
PAUL CRUICKSHANK CHICKEN DIVISION
Slide 42: Operational review: Chicken Division
Salient Features | Financial Review | Operational Reviews OPERATIONAL REVIEW: CHICKEN DIVISION AGRICULTURAL BREED CHALLENGES AND COVID-19 LOCKDOWN AFTER EFFECTS, DRIVING A 61.1% DECLINE IN UNDERLYING EBITDA DEC DEC % CHICKEN HEADLINES 2020 2019 VAR REVENUE 4 875.2 4 700.2 3.7 Revenue excluding sundr
Slide 43: Chicken market share and operations
Salient Features | Financial Review | Operational Reviews OPERATIONAL REVIEW: CHICKEN DIVISION CHICKEN 6mm 6mm MARKET SHARE (VOLUME) Dec 2019 Dec 2020 With the reopening of the QSR channel, we have seen a recovery in demand but not to pre-lockdown levels 9.9% 9.5% Nevertheless, efforts to expand our
Slide 44: Chicken continued: maize price, Master Plan and imports
Salient Features | Financial Review | Operational Reviews OPERATIONAL REVIEW: CHICKEN DIVISION CHICKEN CONTINUED SAFEX YELLOW MAIZE PRICE (R/Ton) 4 200 A substantial rally in commodity prices has begun to AVG Price AVG Price 16.0% (6m) (6m) negatively impact margins, a trend that is expected to wors
Slide 45: Chicken: Animal feed
Salient Features | Financial Review | Operational Reviews OPERATIONAL REVIEW: CHICKEN DIVISION ANIMAL FEED Our EPOL business has come under pressure in the last 6 months as the external feed market has become increasingly competitive Rising raw material input costs started to put pressure on margins
Slide 46: Marthinus Stander, Chicken Managing Director
MARTHINUS STANDER CHICKEN DIVISION MANAGING DIRECTOR
Slide 47: Forward view: Chicken Division
Salient Features | Financial Review | Operational Reviews FORWARD VIEW: CHICKEN DIVISION CURRENT PERFORMANCE IS LACKING SIGNIFICANTLY BEHIND THE REST We agreed focused short-term plans (“stop the bleeding”): • Mitigating the substantial raw material price increases • Addressing the lacking breed per
Slide 48: Chris Creed, Vector Logistics Managing Director
CHRIS CREED VECTOR LOGISTICS MANAGING DIRECTOR
Slide 49: Operational review: Vector Logistics
Salient Features | Financial Review | Operational Reviews OPERATIONAL REVIEW : VECTOR LOGISTICS VOLUME RECOVERY, NEW PRINCIPALS AND GOOD PROGRESS WITH THE CONSOLIDATION OF DUPLICATED NETWORKS DELIVERED A SOLID PERFORMANCE DEC DEC % VECTOR LOGISTICS HEADLINES 2020 2019 VAR • Pleasing revenue performa
Slide 50: Pleasing revenue growth despite continued COVID-19 impact on food service
Salient Features | Strategic Review | Financial Review | Operational Reviews PLEASING REVENUE GROWTH IN SPITE OF CONTINUED COVID-19 IMPACT ON FOOD SERVICE Revenue growth has been driven by new principal business landed in December 2019 as a result of being awarded the Shoprite and Massmart retailer
Slide 51: Good progress in consolidation of duplicated networks
Salient Features | Strategic Review | Financial Review | Operational Reviews GOOD PROGRESS MADE IN THE CONSOLIDATION OF THE DUPLICATED NETWORKS Good progress has been made in the last 6 months in consolidating a part of the duplicated networks. Capacity enablement for the new business in warehouses
Slide 52: Vector Logistics going beyond
Salient Features | Strategic Review | Financial Review | Operational Reviews VECTOR LOGISTICS GOING BEYOND Phase one of the implementation of Empty Trips (a smart online digital freight matching platform) is complete, with further rollouts anticipated. Our joint venture partners in Senn Foods (Botsw
Slide 53: TEL +27 8600
e000 TEL +27 31 242 8600