New Zealand King Salmon Investments Ltd. · NZX:NZK
New Zealand King Salmon Investments — FY2019 Earnings Presentation
35 slides from New Zealand King Salmon Investments's earnings presentation, August 2019
Slide 1: New Zealand King Salmon Annual Results FY19
New Zealand King Salmon ANNUAL RESULTS FY19
Slide 2: Highlights
m0! HIGHLIGHTS / Cyt i Syy New Zealand King Salmon
Slide 3: Facts and Figures
FACTS AND FIGURES REVENUE OF $172.6 - ge MILLION 7. - ill o" 00 900 METRIC TONNES HARVESTED DURING FY19 GEOGRAPHIC SPREAD OF REVENUE NZSm PRO-FORMA OPERATING EBITDA FYI4 FYIS «FYI6 «FYI7. «FYIB.FYI9. GAAP EBITDA FYI4. FYIS FYI6 «FYI7.«FYI8FYI9 ANNUAL RESULTS FY19
Slide 4: Financial Highlights
FINANCIAL HIGHLIGHTS Strong financial performance, despite challenges: * Record revenue of $172.6m, up 8% on FY18. * Record price achieved of $22.95/kg, up 11% on FY18. * Sales volumes of 7,520mt, down 3% on FY18. * Solid Pro Forma Operating EBITDA of $25.2m*, down 4% on FY18 but within the FY19 ear
Slide 5: Operating Highlights
OPERATING HIGHLIGHTS Strong revenue growth with solid profit on stable volumes. Sales volume of 7,520 MT down 3.3% on FY18: * Sales volume was impacted by: » Disappointing summer survival in FY19. » Export demand that continues to exceed expectations. * Ongoing optimisation of sales mix into branded
Slide 6: Sustainability
SUSTAINABILITY \ ¢ New Zealand King Salmon
Slide 7: Operating Sustainably
OPERATING SUSTAINABLY Care for the environment is a key pillar in our business strategy —we want to minimise our footprint as much as we can, whilst helping our people, our community and our stakeholders for the long-term. To independently verify our sustainable practices in aquaculture and our supp
Slide 8: Health, Safety and Wellness
HEALTH, SAFETY AND WELLNESS We are uncompromising in our commitment to Health, Safety and Wellness We have had no serious injuries that required notification during the financial year. Lost Time Injuries recorded are largely low risk strains and sprains that required only time to rehabilitate. Key H
Slide 9: Financial Overview
0 FINANCIAL OVERWIEW New Zealand King Salmon
Slide 10: Summary Financial Information
SUMMARY FINANCIAL INFORMATION * Solid pricing and revenue growth on stable volumes. + GAAP results are impacted by fair value gains. Fair value gains recorded in FY19 were negative due to poorer FY19 summer survival with a larger % of fish on hand at year end being smaller juveniles. Grou ancial Per
Slide 11: Understanding Our GAAP Results
UNDERSTANDING OUR GAAP RESULTS Fair Value gains and losses arising from IAS-41 Agriculture and IAS-2 Inventory Our GAAP results are significantly impacted by Fair Value gains arising from the application of NZ IAS 41-Agriculture and NZ IAS 2-Inventory. In future periods we may realise fair value los
Slide 12: Harvest by Farm
HARVEST BY FARM Year to year timing variances and harvest management programmes give rise to individual farm production variances. Farm Indicative Size* Water Conditions Other factors Volume Harvested FY19 FY18 Ruakaka Low flow Low automation, less efficient 705 MT 1140 MT Queen Charlotte Otanerau 6
Slide 13: Balance Sheet
BALANCE SHEET New Zealand King Salmon maintains its strong financial position. Our balance sheet is strong with capacity to finance further growth: * Net debt of ($9.2m). * PP&E increased by $8.1m, including: » Investment in pens at Waitata and Ngamahau in line with discharge increases on these site
Slide 14: Business Update
Slide 15: New Production Model - Site Single Year Class
NEW PRODUCTION MODEL- SITE SINGLE YEAR CLASS This model is the key initiative for the FY20 and FY21 years for existing seafarm sites. It targets the protection of fish health, improved survival rates and the adoption of the best possible biosecurity practices. Currently we operate mixed year class f
Slide 16: New Production Model - Site Single Year Class
NEW PRODUCTION MODEL- SITE SINGLE YEAR CLASS The new production model is designed to maximise our potential harvest volume whilst minimising the exposure to summer temperature risk, within the constraints of existing waterspace. The new single year class production model forecasts a greater proporti
Slide 17: Forecast Volumes - FY20-FY22
FORECAST VOLUMES - FY20-FY22 Future harvest volumes impacted by FY19 survival and change in production model. The implementation of the new production model limits volume growth in the short term. New Zealand King Salmon is taking a responsible long-term approach so that it can deliver on its vision
Slide 18: Future Farming & Harvest Volumes
FUTURE FARMING & HARVEST VOLUMES This slide provides an update on future farming volumes: Farm relocation (MPI Salmon Relocation Process): * Adoption of the 2017 Panel recommendation would be unlikely to have any material impact on site capacity however it may result in modest fish performance impro
Slide 19: Capital Expenditure
CAPITAL EXPENDITURE Additional capital investment has been made to build capacity and improve performance: FY19 Capital expenditure was $16.9m, allowing NZKS to undertake the following key projects: + Pen capacity at Ngamahau and Waitata to utilise feed discharge increases ($4.6m) . * Barge construc
Slide 20: New Zealand King Salmon
New Zealand King Salmon
Slide 21: Sales by Market - Export
SALES BY MARKET - EXPORT Continuing to target branded premium markets North America (MT) Sales to North America continued their strong upward trajectory increasing by 9% on FY18. We continue to deliberately target the North American market and are pleased to maintain strong sales momentum. Ora King
Slide 22: Sales by Market - Export
SALES BY MARKET - EXPORT Strong growth in average sales price offset by volume constraints Prioritisation of growth markets North America and China has impacted other markets: Asia (ex Japan and China)-this market is growing in significance for New Zealand King Salmon. Sales continued recent momentu
Slide 23: Sales by Market - Domestic
SALES BY MARKET - DOMESTIC Branded premium export success has impacted fish availability domestically Domestic Market(MT) Limited availability and high customer demand meant orders surpassed our ability to supply. 4,047 3,976 * With strong growth in North American and export sale volumes, volume ava
Slide 24: Average Sale Prices
AVERAGE SALE PRICES Branding underpins ongoing improved value to our business Key markets experienced price growth and the optimisation of our product mix, with demand continuing to exceed supply. Sale Prices and Exchange Rates FY2015 FY2016_FY2017_FY2018 FY2019 Average Sales Price per kg Domestic S
Slide 25: Ora King Sales
ORA KING SALES Continued strength in Ora King sales Ora King Sales (MT) 2,706 2,772 FY2015 FY2016 FY2017 FY2018 FY2019 New Zealand King Salmon Ora King sales up 2% on FY18, and 29% ahead of FY17 despite challenging fish performance. We are very pleased to deliver another year of growth in sales of O
Slide 26: Fish Performance
FISH PERFORMANCE Harvest volume of 7,931MT, in line with FY19 guidance but slightly down on FY18 Key challenges: Mortality increased from 20.4% to 23.2%. Whilst temperatures were not as high as last year, they remained high for an extended period. Higher mortality has resulted in a reduction in our
Slide 27: New Zealand King Salmon ANNUAL RESULTS FY19 27
New Zealand King Salmon ANNUAL RESULTS FY19 27
Slide 28: Outlook
OUTLOOK Expectations for FY20 Due to reduced opening biomass at sea, harvest volumes are likely to be in line with FY19 at around 8,000 MT. Demand remains very supportive, especially in export markets. Additional significant investment in the new aquaculture production model is expected to improve f
Slide 29: Governance
GOVERNANCE * Independent director Mark Hutton has advised he will not seek re election at the November 2019 Annual Shareholders Meeting (ASM). * NZKS is committed to appointing a new independent director as soon as possible, consistent with the skills matrix review completed in 2018. The new appoint
Slide 30: Appendix
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Slide 31: Appendix - FY19 Reconciliation Between GAAP Results and Pro Forma Financials
APPENDIX-FY19 RECONCILIATION BETWEEN GAAP RESULTS AND PRO FORMA FINANCIALS Non-recurring Pro Forma FYI9 Statutory Marlborough Operating Financial salmon Fair Value Financial NZD 000s Statements relocation costs Adjustments __Information Revenue 172,609 172,609 Cost of goods sold (172,147) 62,105 (11
Slide 32: Appendix - FY18 Reconciliation Between GAAP Results and Pro Forma Financials
APPENDIX-FY18 RECONCILIATION BETWEEN GAAP RESULTS AND PRO FORMA FINANCIALS Non-recurring Pro Forma FY18 Statutory Marlborough Operating Financial salmon Fair Value Financial NZD 000s Statements relocation costs __ Adjustments __Information Revenue 160,271 160,271 Cost of goods sold (145,320) 47,760
Slide 33: Appendix - Glossary of Terms
APPENDIX- GLOSSARY OF TERMS FY19 Financial results for the 2019 financial year covering the period 1 July 2018 to 30 June 2019 CAGR Compounding annual growth rate EBITDA Earnings before interest, tax, depreciation and amortisation ERP Enterprise Resource Planning software allowing the business to ma
Slide 34: Disclaimer
DISCLAIMER The information in this presentation has been prepared by New Zealand King Salmon Investments Limited with due care and attention. However, neither New Zealand King Salmon Investments Limited nor any of its directors, employees, shareholders nor any other person shall have any liability w
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New Zealand King Salmon Investments — FY2019 Earnings Presentation on 6ix