Rainbow Chicken Limited · JSE:RBO
Rainbow Chicken — FY2012 Earnings Presentation
44 slides from Rainbow Chicken's earnings presentation, Aug 29, 2012
Slide 1: Group audited results for the year ended 30 June 2012
Rainbow Chicken Limited (RCL) Group audited results for the year ended 30 June 2012 29 August 2012
Slide 2: Introduction
Introduction RCL • During the prior year RCL changed its financial year-end from 31 March to 30 June to align with its holding company, Remgro Limited • This presentation covers the results for the year to June 2012 • The results for the 2012 financial year will be compared to the 15 month period en
Slide 3: 2012 statutory highlights
2012 statutory highlights RCL Note: the % in Revenue -8.9% (+12.8%) Headline EBITDA -20.1% (+2.3%) brackets is the change Rm Rm compared to the 8621,4 7855,1 comparable 12 6952,8 769,5 6811,4 months in 2011 671,5 614,9 575,8 2009 2010 2011* 2012 2009 2010 2011* 2012 Headline EBITDA -1.1% (-0.8%) Hea
Slide 4: Overview
Overview RCL Market conditions What has RCL done? • South Africa GDP growth decreased to 2.7% in the first • Reinforced RCL’s strategic focus on brands in the form quarter of 2012 from the modest growth of 3.2% in of added value chicken in consumer and foodservice as calendar 2011 well as Vector’s d
Slide 5: 2012 highlights
2012 highlights RCL Statutory 2011* 2012 % Revenue Rm 8621,4 7855,1 -8.9 Headline EBITDA Rm 769,5 614,9 -20.1 Headline EBIT Rm 559,1 414,7 -25.8 Effective tax rate % 32,9 35,0 -2.1 Headline earnings Rm 388,8 267,1 -31.3 Cash generated by operations Rm 643,3 506,4 -21.3 Net cash Rm 469,5 305,8 -34.9
Slide 6: 12 months comparative
12 months comparative RCL • RCL’s 2012 headline EBITDA of Comparison to 12 months to June 2011 R614,9 million increased by 2.3% over the comparable 12 months in 2011. A credible result considering market 12 12 conditions Months Months 30 June 30 June • This marginal growth however 2011 2012 % transl
Slide 7: Group revenue
Group revenue RCL • RCL’s total revenue decrease of 8.9% to R7.9 billion is a consequence 8621,4 of the additional April to 7855,1 June trading quarter Rm included in the fifteen 6811,4 6952,8 months comparative 5955,0 ended 30 June 2011 • Revenue increased by 12.8% on a comparable basis 2008 2009 2
Slide 8: Segmental analysis
Segmental analysis RCL • Rainbow’s operating margin of 3.4% is Segmental revenue Segmental operating profit & margin disappointing but explained by poor retail pricing and high feed 5.3% costs Rm Rm 7855,1 414,2 7196,6 • Vector delivered a pleasing result with good volume growth as 3.4% well as impr
Slide 9: Rainbow feed cost history
Rainbow feed cost history RCL • On the comparable 12 months Rainbow’s feed cost increased by 20.4% in 2012 • 2012 is double 2007’s +R423m feed cost (pre global +R9m +R698m financial crisis) 2.5 2,4 2,4 -R377m 2,1 +R475m 1,7 Rbn 1,3 2007 2008 2009 2010 2011 2012 9
Slide 10: Yellow maize (SAFEX)
Yellow maize (SAFEX) RCL • 2011 versus 2012: – Average market price for R/ton yellow maize increased by 3 000 59% 2 750 2 500 • During 2012: – Record maize prices 2 250 – International corn prices 2 000 +59.0% hit record high due to US 1 750 drought concerns and 1 500 -2.5% continued corn to ethanol
Slide 11: Soya (CBOT)
Soya (CBOT) RCL • 2011 versus 2012: – Average CBOT soya meal US $ per ton price increased by 7.1% 450.0 – Sustained at a historically high level 400.0 • During 2012: – Increase since January driven by poor 350.0 Argentinean crop and low +14.5% +1.3% +1.4% +7.1% US stocks 300.0 250.0 2009 2010 2011*
Slide 12: Exchange rate
Exchange rate RCL • The rand has remained relatively robust despite debt problems in 11 Eurozone and ongoing concerns over the global 10 economy • The R:US$ exchange rate 9 increased from R6.79 at -11.6% + 23.9% +8.5% the beginning of the current financial year to 8 -9.2% R8.38 at the end of June 20
Slide 13: Financial review
Financial review RCL • RCL’s operating results HEBITDA (pre IAS39) – 15.2% negatively impacted by poor retail pricing of commodity chicken lines as industry has struggled to resolve significant overstocks, mainly attributable Margin to high level of imports % 10.7% • Although both Rainbow and Vector
Slide 14: Financial review: cash flow
Financial review RCL • Working capital levels Cash flow reflected continue to be well 621.8 Rm 12 MONTHS TO JUNE 2012 managed 469.5 • Cash generated by 305.8 operations decreased by 92.5 21.3% or R137.0 million 15.1 over the previous 15 (4.0) (71.7) month period ended 30 (115.4) June 2011. (247.3) (
Slide 15: Financial review: working capital
Financial review RCL • Receivables have been Working capital movement consistently well managed with debtor days of 30 reflecting an improvement on the 35 days recorded in June 2011 Rm (147.8) • The increase in inventories (104.9) (115.4) and biological assets mainly Trade and other impacted by: rec
Slide 16: Financial review: capex
Financial review RCL • RCL has been confident to Capex spend invest to service anticipated growth in key product lines and from strategic customers. However, current difficult 210,3 200,3 market conditions demand 157,4 that investment decisions meet 149,2 Dep 480.9 higher hurdle rates of return Rm •
Slide 17: Financial review: return on net assets
Financial review RCL • Impacted in 2012 by challenged Return on net assets (%) earnings 20.1% 20.0% 17.8 % 14.1% 2009 2010 2011* 2012 * 15 Month period 17
Slide 18: Financial review: dividend per share
Financial review RCL • Lower final dividend declared Dividend per share (cents) due to reversion to 12 months and earnings decline • Total 2012 dividend of 60,0 84,0 cents per share represents 76,0 56,0 68,0 cover of 1,5 times (2011: 1,6 48,0 60,0 Final 44,0 times) 32,0 28,0 28,0 28,0 Interim 24,0 6
Slide 19: Financial review: underlying operating profit
Financial review RCL Underlying operating profit Headline 10.7 EBITDA 9.7 margin (%) 8.9 8.4 8.9 7.8 8.2 7.7 Pre IAS39 Post IAS39 769 728 710 671 620 602 615 574 Headline EBITDA (Rm) 2009 2010 2011* 2012 * 15 month period 19
Slide 20: Market conditions remain very tough
Market conditions remain very tough. A flood of imports, causing over-supply, and record grain prices have placed tremendous pricing pressure on the industry A flood of imports (up 41% 12 months to June 2012) Source: SAPA And record grain costs (feed costs up 20.4% for the year) Maize Soya 20 20
Slide 21: Rainbow's strategy has resulted in an acceptable set of results
Against this background Rainbows strategy has resulted in an acceptable set of results Contribution of added value to Rainbows total revenue 2004 2012 30% Added Value Added Value 47% 53% Mainstream Mainstream 70% Contribution to retail revenue 2004 2012 4% 31% Added Value Added Value Mainstream Main
Slide 22: Added value growth across all three areas in Rainbow
Added value growth has been across all three areas in Rainbow FoodSolutions • Volume growth in the food service industry has slowed down with the tough economic environment but is picking up more recently • Rainbow has continued to cement relationships and business with all partners during a tough t
Slide 23: Rainbow has made some key operational progress
Rainbow has made some key operational progress • There has been a strong focus on improving operational efficiencies and costs with significant progress in Agriculture and Processing • Made large inroads into the “Creating Space for Growth” strategic thrust. The Operational efficiencies output is le
Slide 24: Two key common industry issues requiring focus through Sapa
There are two key common industry issues which require Rainbow focus through Sapa 1. Dumping and illegal imports • Rainbow is working with the industry body, Sapa, to manage the flood of imports through a number of means. • Anti-dumping applications and other avenues are currently being worked on by
Slide 25: Rainbow has fine tuned its vision
Rainbow has fine tuned its vision, to sharpen and drive decision making even further Current Vision Rainbow Chicken will be at the heart of every meal. We will achieve this by creating innovative solutions and strong brands. Key to our success is consistent, profitable, sustainable demand. New Visio
Slide 26: Vector Overview
Vector Overview RCL Market conditions What has Vector done? • The logistics sector has been challenged by increasing • New Business - awarded Pick ‘n Pay’s Inland frozen operating costs driven by high fuel and electricity distribution business previously distributed from their prices and weakening R
Slide 27: Vector infrastructure
Vector infrastructure RCL Key Figures Employees – 2980 15 distribution sites 4 Plant based cold storage facilities Northern Primary fleet – 104 Province Secondary fleet – 306 Windhoek Customers – 9500+ Cases delivered – 163000/day (43m pa) Botswana ISO 22000 accreditation at warehous
Slide 28: Introduction to the Vector business
Introduction to the Vector business RCL Primary Principal Secondary Customer Secondary Manufacturers Primary Transport Sales Solutions Credit & Information Warehousing Distribution Distribution (PBCS) (VPT) (VSS) Management (VCS) (PSD) (CSD) Primary Primary Transport Secondary Secondary Plant Based
Slide 29: Vector clients
Vector clients RCL Customers Principals In Customer Secondary Distribution Vector is contracted by the customer ( eg. CLC, Nandos, Spur) to deliver their full basket of products directly to the outlets In Principal Secondary Distribution Vector is contracted by the principal e.g. Mc Cains to deliver
Slide 30: Business initiatives - Midrand
Business initiatives - Midrand RCL • Bulk storage facilities B A were provided to McCain from June 2011 at Site B • Pick n Pay frozen business consolidated at Midrand D from June 2012 C D • Significant increase to inland capacity with development of Midrand sites B and D. 30
Slide 31: Conclusion
Conclusion RCL • RCL committed to its strategy, however • Volatile state of global and local economy means a sustainable improvement in consumer spending is difficult to predict in the near future • Local chicken supply and demand imbalance • Record feed raw material commodity prices • Energy rate i
Slide 32: Appendices
Appendices RAINBOW = @---
Slide 33: Complex business chain
Complex business chain RCL • Integrated supply chain from “farm to fork” GP OPERATION AGRICULTURE PROCESSING Grandparent Grandparent farms Parent Parent farms BroilerBroiler farms chicks chicks chicks Broilers Processing Rearing Laying Hatching Rearing Laying Hatching Growing 3 plants + 2 FP plants
Slide 34: RCL national footprint
RCL national footprint RCL • South Africa’s largest processor and marketer of chicken • 7,942 employees (excluding seasonal casual workers) Limpopo Province Botswana Mpumalanga Gauteng Swaziland North West Namibia KwaZulu Natal Free State Lesotho Northern Cape Eastern Cape Western Cape 34
Slide 35: RCL national footprint
RCL national footprint RCL • South Africa’s largest processor and marketer of chicken • 7,942 employees (excluding seasonal casual workers) • 209 rearing, laying and broiler farms and hatcheries • 34m birds on the ground Limpopo Province Botswana Mpumalanga Rustenburg Gauteng Swaziland North West Ca
Slide 36: RCL national footprint
RCL national footprint RCL • South Africa’s largest processor and marketer of chicken • 7,942 employees (excluding seasonal casual workers) • 209 rearing, laying and broiler farms and hatcheries • 34m birds on the ground Limpopo • 5 feed mills Province • 20,600 tons per week Botswana (1,1m tons per
Slide 37: RCL national footprint
RCL national footprint RCL • South Africa’s largest processor and marketer of chicken • 7,942 employees (excluding seasonal casual workers) • 209 rearing, laying and broiler farms and hatcheries • 34m birds on the ground • 5 feed mills Limpopo Province • 20,600 tons per week (1,1m tons per year) Bot
Slide 38: RCL national footprint
RCL national footprint RCL • South Africa’s largest processor and marketer of chicken • 7,942 employees (excluding seasonal casual workers) • 209 rearing, laying and broiler farms and hatcheries • 34m birds on the ground Limpopo Province Windhoek Botswana Tzaneen • 5 feed mills Polokwane • 20,600 to
Slide 39: RCL's transformation
RCL’s transformation RCL 1999 - 2003 2004 - 2010 7,0 6,8 1991 - 1998 Fixing the Transformation to 6,0 Business in basics trouble consumer focused 4,7 Revenue 3,7 3,8 4,0 4,1 business (Rbn) 3,0 2,1 2,2 2,2 2,3 2,5 Clarified our strategic 1,9 1,5 1,5 1,6 1,7 framework Restructured the company and
Slide 40: RCL growth phase
RCL growth phase RCL 8,6 7,0 7,9 2011 - 2015 6,8 6,0 Growth phase 4,7 4,0 4,1 2015 strategy growth Revenue 3,7 3,8 3,0 focused (Rbn) 2,1 2,2 2,2 2,3 2,5 Capacity enhanced through: 1,9 1,5 1,5 1,6 1,7 − Wolwehoek acquisition 0,5 − Bushvalley acquisition 91 92 93 94 95 96 97 98 99 00 01 02 03 04 0
Slide 41: Group strategy
Vision Change the game How? By restlessly driving..... * consumers and customers needs first + better brand propositions which reflect what we do * our whole business to see and do things differently Vector will be Africa’s chosen : multi-temperature route to market solution: Vector delivers supply
Slide 42: Chicken industry perspective
Chicken industry perspective RCL Estimated per capita consumption of broiler meat in Kilograms per annum Source: SAPA 42
Slide 43: Chicken industry perspective
Chicken industry perspective RCL Average broiler production per week (in millions) excluding imports 18.5 18.7 17.8 16.8 14.6 12.9 12.8 11.8 11.8 11.9 11.0 11.0 10.5 9.8 9.8 9.2 8.5 8.0 94 95 96 97 98 99 00 1 2 3 4 5 6 7 8 9 10 11 Source: SAPA 43
Slide 44: Chicken industry perspective
Chicken industry perspective RCL Millions of broiler per week • 19.1m broilers produced per week 4.8 • 1,8m tons per annum 4,5 4,2 • Astral = Earlybird Farms + County Fair • Others = Numerous smaller producers producing less than 200k broilers per week 1,3 1.2 1.1 1,0 1,0 Rainbow Astral Country Tyds
Rainbow Chicken Limited (RCL) — FY2012 Earnings Presentation on 6ix