Rcl Foods Limited · JSE:RCL
Rcl Foods — H1 2018 Earnings Presentation
40 slides from Rcl Foods's earnings presentation, Feb 26, 2018
Slide 1: Investor Presentation: Results for the Six Months Ended December 2017
INVESTOR PRESENTATION: 26 FEBRUARY 2018 RESULTS FOR THE SIX MONTHS ENDED DECEMBER 2017
Slide 2: Miles Dally, Chief Executive Officer
MILES DALLY CHIEF EXECUTIVE OFFICER
Slide 3: Headlines – Results for the Six Months Ended December 2017
Salient features | Strategic overview | Financial review | Operational reviews | Prospects HEADLINES – RESULTS FOR THE SIX MONTHS ENDED DECEMBER 2017 PERFORMANCE HEADLINES FINANCIAL HIGHLIGHTS Strong earnings growth Chicken recovery ahead of expectation following restructure, REVENUE EBITDA adverse
Slide 4: Moving Towards a More Balanced Portfolio
Salient features | Strategic overview | Financial review | Operational reviews | Prospects MOVING TOWARDS A MORE BALANCED PORTFOLIO Chicken recovery moderates contribution of other categories RELATIVE SHARE OF EBITDA 6 MONTHS TO DECEMBER (pre-IAS 39) Diversified earnings base geared for growth Cycli
Slide 5: 6 Months to December 2017 Results
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 6 MONTHS TO DECEMBER 2017 RESULTS 26.6% pre-IAS 39 EBITDA growth EBITDA GROWTH EBITDA MARGIN (pre-IAS 39) (pre-IAS 39) Chicken: Recovering well driven by the revised business model and lower feed prices 26.6%
Slide 6: Key Deliverables for 2018
Salient features | Strategic overview | Financial review | Operational reviews | Prospects KEY DELIVERABLES FOR 2018 Continue to invest behind brands and systems Continue to sharpen customer relationships and strategic focus by category Continue with implementation of revised Chicken business model
Slide 7: Rob Field, Chief Financial Officer
ROB FIELD CHIEF FINANCIAL OFFICER
Slide 8: Financial Summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects FINANCIAL SUMMARY SIX MONTHS ENDED DECEMBER 2017 STATUTORY DEC 2017 DEC 2016 % VAR Revenue Rm 12 765.1 13 085.5 (2.4) EBITDA Rm 1 201.0 900.4 33.4 EBITDA margin % 9.4 6.9 2.5 Effective tax rate (excl. JV’s, as
Slide 9: Operating Environment
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING ENVIRONMENT Muted market growth of 1.7%* Lower soft commodity prices provide input cost relief High levels of sugar imports placed pressure on local market sale volumes forcing industry to export sug
Slide 10: Material Financial Impacts
Salient features | Strategic overview | Financial review | Operational reviews | Prospects MATERIAL FINANCIAL IMPACTS IAS 39 IMPACTS Positive IAS 39 adjustment associated with the Group's commodity raw material procurement strategy, which increased EBITDA by R16.0 million for the current period (H1
Slide 11: Operating Results Summary (Rm)
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY (Rm) EBITDA DECEMBER 2016 TO 2017 16.7% growth over normalised* F17 result 32.7 77.7 276.0 11.7 18.4 39.6 15.3 16.0 1 201.0 1 185.0 27.9 1 015.6 51.9 35.3 900.4 Dec-2016 IAS 39 Once-o
Slide 12: Headline Earnings Waterfall (Rm)
Salient features | Strategic overview | Financial review | Operational reviews | Prospects HEADLINE EARNINGS WATERFALL (Rm) 1 201.0 390.7 DEC 2017 Normalised* result up 35.3% 8.6 Impairment 143.1 199.7 53.4 6.2 24.8 644.7 644.7 142.4 EBITDA Depreciation, Net finance Taxation Share of profits Minorit
Slide 13: Operating Results Summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY SEGMENTAL ANALYSIS – REVENUE AND EBITDA REVENUE (Rm) DEC 2017 DEC 2016 % VAR Consumer 6 687.6 7 072.8 (5.4) Sugar & Milling 7 010.0 7 613.0 (7.9) Logistics 1 006.5 1 056.3 (4.7) Sales
Slide 14: Operating Results Summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY SEGMENTAL ANALYSIS – NORMALISED EBITDA EBITDA (Rm) – pre-IAS 39 DEC 2017 DEC 2016 % VAR Consumer 585.5 276.8 111.5 Sugar & Milling 493.8 578.2 (14.6) Logistics 105.6 145.2 (27.3) Unal
Slide 15: Cash Flow Summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects CASH FLOW SUMMARY Rm DEC 2017 DEC 2016* % VAR Opening balance** 1 053.8 363.2 190.1 Operating profit adjusted for non-cash flow items 1 044.5 808.1 29.3 Working capital changes (1 144.2) (704.9) (62.3) Net fin
Slide 16: Working Capital
Salient features | Strategic overview | Financial review | Operational reviews | Prospects WORKING CAPITAL WORKING CAPITAL (Rm) DEC 2017 DEC 2016 % VAR Trade receivables 4 429.3 4 238.7 4.5 Inventories 3 185.2 3 285.7 (3.1) Biological assets 618.7 709.2 (12.8) Trade payables (4 354.9) (4 402.7) (1.1
Slide 17: Capital Expenditure
Salient features | Strategic overview | Financial review | Operational reviews | Prospects CAPITAL EXPENDITURE Capital expenditure (including intangibles) was R317.8m (H1 2017: R403.5m) Major spend items in the current period include amounts to restore the damaged Pongola silo and the replacement of
Slide 18: Debt Package
Salient features | Strategic overview | Financial review | Operational reviews | Prospects DEBT PACKAGE TERM VALUE (Rm) YEAR 1 YEAR 2 YEAR 3 (FEB 18) YEAR 4 (FEB 19) 1 355 5 year 400 847 4 year 250 3 year – RCF 498 Total 3 350 Hedged % 77% 77% 53% 53% Hedged (fixed rate) NET FINANCE COSTS (Rm) Unhed
Slide 19: Debt Covenants
Salient features | Strategic overview | Financial review | Operational reviews | Prospects DEBT COVENANTS COVENANT REQUIRED DEC 2017 JUNE 2017 DEC 2016 Senior leverage ratio (Net senior debt*/pre-IAS 39 HEBITDA) <2.75 1.7 1.4 2.2 Repricing (a step-up margin of 0.25% is triggered if the senior <2.7 1
Slide 20: Scott Pitman, Managing Director Consumer Division
SCOTT PITMAN MANAGING DIRECTOR CONSUMER DIVISION
Slide 21: Operational Review: Consumer
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CONSUMER HEADLINES REVENUE (Rm) DEC 2017 DEC 2016* % VAR • Against the backdrop of a very tough grocery Consumer 6 687.6 7 072.8 (5.4) market, Consumer has seen strong profit growth, in bot
Slide 22: Operational Review: Consumer
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CONSUMER REVENUE (Rm) DEC 2017 DEC 2016* % VAR Chicken 3 609.9 4 024.8 (10.3) Groceries1 2 692.9 2 595.8 3.7 Sales between business units (17.4) (37.0) (53.0) HEADLINES Cost recoveries – Ch
Slide 23: Operational Review: Chicken
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CHICKEN CHICKEN MAINSTREAM IMPORTS – LEG QUARTERS – Tons per month The chicken industry has seen recent recovery, but this is not due to the resolution of dumping problems. Dumped leg quart
Slide 24: Operational Review: Chicken
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CHICKEN CHICKEN ADDED VALUE RAINBOW SIMPLY CHICKEN SHARES FREEZER TO FRYER FOODSOLUTIONS 26.0% 35.8% Overall, Foodservice accounts saw the same economic 12MMA 6MMA pressure as the retail in
Slide 25: Operational Review: Groceries
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES GROCERY Grocery had another exceptional six months, with strong volume growth and market shares, and benefitted from lower soft commodity prices. Average EBITDA growth has been 12
Slide 26: Operational Review: Groceries
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES PIES The combination of innovation, cost take out and quality improvement coming together in a co-ordinated strategy has seen Piemans have a fantastic 6 months with 7.7% volume gr
Slide 27: Operational Review: Groceries
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES SPECIALITY Like most grocery categories in SA, the Woolworths dominated Speciality category was under pressure, but produced an acceptable result This innovation dominated categor
Slide 28: John du Plessis, Managing Director Sugar & Milling Division
JOHN DU PLESSIS MANAGING DIRECTOR SUGAR & MILLING DIVISION
Slide 29: Operational Review: Sugar & Milling
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR & MILLING REVENUE (Rm) DEC 2017 DEC 2016* % VAR Consumer 6 687.6 7 072.8 (5.4) Sugar & Milling 7 010.0 7 613.0 (7.9) Logistics 1 006.5 1 056.3 (4.7) Sales between segments (1 939.0) (
Slide 30: Operational Review: Sugar & Milling
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR & MILLING REVENUE (Rm) DEC 2017 DEC 2016 % VAR Animal Feed 2 242.1 3 057.8 (26.7) HEADLINES MillBake 1 849.6 1 982.5 (6.7) • Improved commodity positions and cost saving initiatives t
Slide 31: Operational Review: Animal Feed
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: ANIMAL FEED YELLOW MAIZE PRICE (R/ton) EBITDA increased by R11.7m (8.7%) to R146.1m primarily as a result of improved commodity positions relative to the 4 500.0 market, cost saving initiat
Slide 32: Operational Review: MillBake
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: MILLBAKE SAFEX WHEAT PRICE (R/ton) EBITDA decreased by R18.4m (11.8%) to R137.0m 5 300.0 stemming from challenges in Baking 5 100.0 H1 F17 H1 F18 4 900.0 AVG Price 2.3% AVG Price (6m) (6m)
Slide 33: Operational Review: Sugar
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR MIX AND VOLUME EBITDA decreased by R77.7m (-27.0%) to R210.7m F17 248 677 Record levels of sugar imports in August and September F18 322 236 2017, stemming from an inappropriate tarif
Slide 34: Chris Creed, Managing Director Logistics Division
CHRIS CREED MANAGING DIRECTOR LOGISTICS DIVISION
Slide 35: Operational Review: Logistics
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: LOGISTICS REVENUE (Rm) DEC 2017 DEC 2016* % VAR Consumer 6 687.6 7 072.8 (5.4) HEADLINES Sugar & Milling 7 010.0 7 613.0 (7.9) • Revenue and EBITDA contraction driven Logistics 1 006.5 1 05
Slide 36: Logistics Impacted by Chicken Restructure and Weak Economy
Salient features | Strategic overview | Financial review | Operational reviews | Prospects LOGISTICS IMPACTED BY CHICKEN RESTRUCTURE AND WEAK ECONOMY The Chicken restructure (not in the six months to December 2016 base) has had a material impact on the Logistics division Weak economy mutes growth in
Slide 37: Good Progress Made in Mitigation Strategy
Salient features | Strategic overview | Financial review | Operational reviews | Prospects GOOD PROGRESS MADE IN MITIGATION STRATEGY Logistics makes good progress on the mitigation strategy to offset the Chicken restructure, with focus on winning new business and network and transport cost optimisat
Slide 38: Winning New Business
Salient features | Strategic overview | Financial review | Operational reviews | Prospects WINNING NEW BUSINESS Planned take-on of the full Pick n Pay cold chain on track laying the foundation for a sound future partnership, a Pick n Pay first of integrating the full frozen and super-frozen (ice cre
Slide 39: Prospects
PROSPECTS
Slide 40: Prospects
Salient features | Strategic overview | Financial review | Operational reviews | Prospects PROSPECTS Recent political developments have been positive, however concrete plans and economic policies to revitalise our economy have yet to be enacted and their timeline remain as uncertainties. We therefor