Synlait Milk Ltd. · NZX:SML
Synlait Milk — FY2020 Earnings Presentation
36 slides from Synlait Milk's earnings presentation, Sep 28, 2020
Slide 1: Synlait Milk Full Year Investor Presentation
SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION For the 12 months ended 31 July 2020
Slide 2: Strong Financial Result Delivered
PAGE 02 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 STRONG FINANCIAL RESULT DELIVERED 27% 9% 1.3 B 203.7 M • Synlait remains a solid and highly profitable business despite COVID-19 $ $ • EBITDA grew strongly REVENUE GROSS PROFIT demonstrating the strength of our infant and lactoferrin business
Slide 3: Financial Performance
PAGE 03 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 FINANCIAL PERFORMANCE Angela Dixon Chief Financial Officer Synlait Dunsandel
Slide 4: Results at a Glance
PAGE 04 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 RESULTS AT $ millions 200 EBITDA A GLANCE 180 160 138.6 152.1 171.4 140 120 100 83.7 88.8 80 Stronger second half performance resulted in FY20: 60 40 • Total EBITDA of $171.4 million up 13% 20 FY16 FY17 FY18 FY19 FY20 • Total revenue of $1.3
Slide 5: Revenue Momentum Continues
PAGE 05 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 REVENUE MOMENTUM $ millions 1,400 Revenue 1,302 CONTINUES 1,200 1,024 1,000 879 800 759 600 547 Total revenue up 27% to $1.3 billion 400 • Consumer-packaged infant formula sales volumes up 15% to 49,180 MT 200 • Lactoferrin sales volumes up 4
Slide 6: We Are Growing Into Our Capacity
PAGE 06 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 WE ARE GROWING INTO OUR CAPACITY Powder Production Capacity Utilisation • Total powders production up 8% to 158,045 MT IWS improves • Consumer-packaged infant formula production up 18% facility efficiency • Lactoferrin facilities approaching
Slide 7: General Operating Costs
PAGE 07 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 GENERAL $ millions 90 SG&A Bridge OPERATING COSTS 4.6 80.9 80 4.0 4.4 4.4 1.4 70 62.1 60 50 40 SG&A costs increased to $80.9 million (FY19: $62.1 million) driven by: 30 20 • Depreciation $4.0 million 10 • Subsidiaries operating costs $4.6 mil
Slide 8: Inventory
PAGE 08 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 $ millions Inventory Bridge INVENTORY 300 14.5 9.3 269.4 27.5 250 53.3 200 164.8 Inventory up 63% to $269.4 million, driven by: 150 100 • Dairyworks and Talbot Forest Cheese acquisitions added $53 million of inventory 50 0 • Production of inf
Slide 9: Operating Cash Flow Remains Strong
PAGE 09 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 OPERATING CASH FLOW $ millions Operating Cash Flow* 137 140 REMAINS STRONG 127 115 104 105 98 70 35 • Underlying operating cash flows increased to $127 million excluding subsidiaries FY16 FY17 FY18 FY19 FY20 • Further cashflow impact holding
Slide 10: Investing for the Future
PAGE 10 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 INVESTING FOR $ millions 700 FY20 Net Debt Bridge THE FUTURE 600 139 116 26 18 527 500 (106) 400 334 300 • Significant growth projects of $573 million completed in FY20 included Synlait 200 Pokeno, the Advanced Dairy Liquid Packaging Facility
Slide 11: Operational Achievements
PAGE 11 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 OPERATIONAL ACHIEVEMENTS Leon Clement Chief Executive Officer Milk reception bay, Synlait Dunsandel
Slide 12: Achievements at a Glance
PAGE 12 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 ACHIEVEMENTS AT A GLANCE CORE INFANT BUSINESS SYNLAIT POKENO NEW MULTINATIONAL CUSTOMER CONTINUES TO PERFORM COMMISSIONED OPPORTUNITY BEING FINALISED INVESTMENT IN THE DAIRYWORKS AND TALBOT MANUFACTURING PLANET REMAINS A FOCUS FOREST CHEESE A
Slide 13: Our Infant Nutrition Business Continues to Perform
PAGE 13 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 OUR INFANT NUTRITION BUSINESS CONTINUES TO PERFORM, SUPPORTED BY OUR CORNERSTONE CUSTOMER AND SHAREHOLDER Overall performance How we enable The a2 Milk Company’s growth aspirations: • Sales of consumer-packaged infant formula up 15% to 49,180
Slide 14: Our SAMR Renewal Process Is Progressing
PAGE 14 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 OUR SAMR RENEWAL PROCESS IS PROGRESSING This Is Essential To Maintaining China Market Access For Infant Formula Market dynamics Navigating this is core to Synlait’s value proposition and service. Regulatory environment Our registrations: Prem
Slide 15: Synlait Pokeno Commissioned; Well Placed for New Customer Opportunity
PAGE 15 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 SYNLAIT POKENO COMMISSIONED; WELL PLACED FOR NEW CUSTOMER OPPORTUNITY Establishment Phase (FY20 / FY21): Transition Phase (FY22 +): • Second integrated processing capability established in North Island (Synlait Auckland • Focus on transitioni
Slide 16: Manufacturing Excellence
PAGE 16 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 MANUFACTURING EXCELLENCE Our World Class Facilities Mean We Can Keep Extracting Value Integrated Work Systems programme delivered significant efficiencies over the last three years: SIGNIFICANT CONVERSION DRYER PROCESSING MILK 18% REDUCTION I
Slide 17: Expanding the Synlait Network
PAGE 17 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 EXPANDING THE SYNLAIT NETWORK Value Drivers For Dairyworks And Talbot Forest Cheese 1. Business and supply chain synergies • Talbot Forest Cheese undertaking all primary production and Dairyworks all secondary production • Duplication of seco
Slide 18: Build a Healthier Synlait
PAGE 18 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 BUILD A HEALTHIER SYNLAIT Our Investment In People Is Strengthening Our Company SAFETY ENGAGEMENT • TRIFR improved significantly: 8.1 (FY19: 13.7) • Record engagement continued. Ratio of engaged to actively disengaged: 5.2:1 (FY19: 3.6:1) DIV
Slide 19: Synlait Joins B Corp Community
PAGE 19 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 SYNLAIT JOINS B CORP TM COMMUNITY Our Investment In The Planet Remains A Focus • Synlait’s mission is to be a catalyst for change • Being a Certified B CorporationTM commits us to balancing purpose and profit • This creates a new benchmark fo
Slide 20: Addressing Our Strategic Risks
PAGE 20 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 ADDRESSING OUR STRATEGIC RISKS Warehouse, Synlait Pokeno
Slide 21: How We Are Addressing Our Strategic Risks
PAGE 21 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 HOW WE ARE ADDRESSING OUR STRATEGIC RISKS RISK APPROACH COVID-19 Proven ability to meet customer demand and supply challenges Single consumer-packaged formula customer New, multinational customer opportunity being finalised Single site Synlai
Slide 22: COVID-19
PAGE 22 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 COVID-19 We Are Well Placed To Keep Responding • Proven ability to maintain operational and supply chain continuity • New Zealand’s reputation as a trusted source of safe, high quality nutrition reinforced by country’s response • Progress mad
Slide 23: Outlook
PAGE 23 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 OUTLOOK Synlait Dunsandel
Slide 24: FY21 Focus
PAGE 24 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 FY21 FOCUS FY21 is a year to focus and set ourselves up for the next phase of earnings growth off current facilities. Focused on: Embedding New And Existing Customer 1 Partnerships Optimising Assets And Creating Value 2 Off Recent Investments
Slide 25: Cyclical ROCE Profile
PAGE 25 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 CYCLICAL ROCE PROFILE Building In Front Of The Demand Curve • Synlait’s 4th major investment cycle is nearing completion, with $ millions Return On Capital Employed $573 million invested in organic growth projects and acquisitions 1,200 24% o
Slide 26: FY21 Guidance
PAGE 26 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 FY21 GUIDANCE • There continues to be significant global uncertainty regarding COVID-19. • While Synlait has proven its ability to maintain operational continuity over recent months, in terms of demand for the products it manufactures, it exp
Slide 27: Today's Takeaways
PAGE 27 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 TODAY’S TAKEAWAYS • Synlait is in good shape and has come through COVID-19 well • Strong financial result delivered: • Revenue up 27% to $1.3 billion • Earnings before interest, taxes, depreciation, and amortisation (EBITDA) up 13% to $171.4
Slide 28: Appendix
PAGE 28 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 APPENDIX Synlait Pokeno
Slide 29: The China Infant Nutrition Landscape Is Highly Regulated
PAGE 29 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 THE CHINA INFANT NUTRITION LANDSCAPE IS HIGHLY REGULATED International companies that wish to sell Factory Registration – GACC Product Registration – SAMR infant formula in China need to obtain • All infant formula manufacturing plants need t
Slide 30: Banking Facilities, Covenants and Bond Issue
PAGE 30 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 BANKING FACILITIES, COVENANTS AND BOND ISSUE As at 31 July 2020 Synlait had four syndicated bank facilities in place We have five key covenants in place with our syndicated banks: with ANZ and BNZ: 1. Interest cover ratio – EBITDA to interest
Slide 31: Banking Facilities, Covenants and Bond Issue
PAGE 31 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 BANKING FACILITIES, COVENANTS AND BOND ISSUE Description Calculation Covenant FY20 Shareholders’ funds Total shareholders’ funds No less than $295.5 million $470 million (excluding FX derivatives and intangibles) Working capital ratio Liquid
Slide 32: Gross Profit Performance
PAGE 32 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 GROSS PROFIT $ millions 220 Gross Profit PERFORMANCE 203.7 186.3 166.5 165 112.1 110 Uplift in gross profit due to: 120.8 55 • Favorable product mix (consumer-packaged infant formula and lactoferrin) 85.2 81.3 85.9 100.4 82.9 67.5 44.6 • Lact
Slide 33: Milk Price / Milk Pool
PAGE 33 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 MILK PRICE MILK POOL Milk Payments To Farmer Suppliers No. of farms Synlait Milk Procurement kgMS (millions) $8.00 $0.25 300 90 $0.13 $0.18 80 $0.14 250 $6.00 70 200 60 50 $4.00 150 $6.65 $7.05 40 $6.16 $6.40 100 30 $2.00 20 50 10 2016/17 201
Slide 34: Supreme Court: No News Yet
PAGE 34 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 SUPREME COURT: NO NEWS YET A Judgment Can Take Up To Six Months The Supreme Court of New Zealand heard the case in June 2020. There are a range of possible outcomes, including: Supreme Court judgment released Judgment in favour of Synlait Jud
Slide 35: Disclaimer
PAGE 35 SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 DISCLAIMER This presentation is intended to constitute a summary of certain and projections involve known and unknown risks, uncertainties, Any past performance information in this presentation is given for information about the Synlait Group
Slide 36: Investors / Media
SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2020 INVESTORS MEDIA Hannah Lynch Linda Chalmers Corporate Affairs Manager Senior Communications Advisor – External +64 21 252 8990 +64 21 951 347 hannah.lynch@synlait.com linda.chalmers@synlait.com Synlait Dunsandel