Astral Foods Limited · JSE:ARL
Astral Foods — H1 2014 Earnings Presentation
57 slides from Astral Foods's earnings presentation, May 2014
Slide 1: Interim Results Presentation
Interim Results Presentation for the six months ended 31 March 2014 1
Slide 2: Agenda
AGENDA Business Overview Poultry Industry Trends Financial Overview Industry Matters Prospects Q&A 2
Slide 3: Business Overview
Business Overview Poultry Industry Trends Financial Overview Industry Matters Prospects Q&A 3
Slide 4: The Period in Perspective: Financial Indicators
THE PERIOD IN PERSPECTIVE The past six months to end March 2014 reflects an improved performance compared to one of the worst trading periods experienced by the poultry industry in the prior year Revenue 11% Operating profit 260% Financial Indicators Headline earnings 308% Interim dividend
Slide 5: The Period in Perspective: Key factors
THE PERIOD IN PERSPECTIVE Key factors that impacted the business: • Continued high total poultry imports, increasingly from Europe (October 2013 to March 2014 ≈ 5.1 million birds per week which equals approximately 26% of local production – refer slides 31 and 32) • Record high local maize prices
Slide 6: The Period in Perspective
THE PERIOD IN PERSPECTIVE A solid performance from the Feed division and an improved performance from the Poultry division have contributed positively to the Group’s earnings The Group’s integrated best cost business model proved its value with the business remaining profitable versus an industr
Slide 7: Poultry Division
2 \ASTRAL Poultry Division
Slide 8: Poultry Division - Overview
POULTRY DIVISION - OVERVIEW (Revenue - R million) (Operating profit - R million) 3 000 3 317 45 30 2 952 2 000 (20) 1 000 (70) (117) - (120) 1H2013 1H2014 1H2013 1H2014 Revenue up 12% Operating profit up Broiler volumes up 6.2% Profit margin 1.4% Broiler realisations up 5.9% Feed costs down 3.2%
Slide 9: Poultry Division - Overview
POULTRY DIVISION - OVERVIEW Average broiler feed prices decreased by R150 per ton (down 3.2% vs 1H2013) Broiler sales volumes increased on the comparable period by 6.2% Broiler selling prices increased on the comparable period by 5.9% High total poultry imports during the period ≈ 5.1 millio
Slide 10: Poultry Division - Sales
POULTRY DIVISION – SALES Product Mix 22% 3% 202 386 tons 55% 8% 10% 2% IQF Mixed Portions IQF Single Portions Fresh Value Added Frozen Tertiary 10
Slide 11: Broiler Production Performances
BROILER PRODUCTION PERFORMANCES 120% 115% 110% 105% 100% 95% 90% 85% 80% 75% Key indicators base-lined to 100% in 2009 70% F2009 F2010 F2011 F2012 F2013 1H2014 Mortality Feed conversion (FCR) Efficiency factor (PEF) 11
Slide 12: Broiler Production Performances
BROILER PRODUCTION PERFORMANCES 106% 104% 102% 100% (35.4 days) 98% 96% (34.1 days) Key indicators base-lined to 100% in 2009 94% F2009 F2010 F2011 F2012 F2013 1H2014 Slaughter age Live weight Processing yield 12
Slide 13: Poultry Division - Prospects
POULTRY DIVISION - PROSPECTS Projected lower feed costs into 2H2014 (versus 1H2014) Continued realignment of poultry production capacity to reduce costs Reduced heating / energy costs at County Fair with LPG replacement project Bedding down of major capital expenditure and acquisitions (KZN
Slide 14: Feed Division
—_ \ASTRAL _ Feed Division 14
Slide 15: Feed Division - Overview
FEED DIVISION - OVERVIEW (Revenue - R million) (Operating profit - R million) 3 000 200 2 550 150 2 397 156 157 2 000 100 1 000 50 - - 1H2013 1H2014 1H2013 1H2014 Revenue up 6% Operating profit unchanged Volumes up 4.1% Profit margin at 6.2% Avg. realisations up 2.3% Good Rand / ton margin 15
Slide 16: Feed Division - Overview
FEED DIVISION - OVERVIEW Higher in-house feed volumes (up 7%) due to higher broiler placements External feed volumes increased by 1% Positive improvement in sales mix with higher Dairy and Pig feed sales Maintained good Rand per ton margin despite a competitive landscape Maintained cost in
Slide 17: Feed Division - Sales
FEED DIVISION – SALES Meadow Feeds - Sales Mix 17% 23% 10% 605 066 tons 50% Dairy Poultry Integrated Poultry External Other 17
Slide 18: Feed Division - Prospects
FEED DIVISION - PROSPECTS Increased acreage and good rainfall should lead to crop in excess of 13 mil tons Lower local price for current maize harvest will benefit feed prices International maize balance sheet remains healthy Continued focus to implement new cost saving technologies Focus
Slide 19: New Standerton Feed Mill
NEW STANDERTON FEED MILL 19
Slide 20: New Standerton Feed Mill
NEW STANDERTON FEED MILL Delays in the commissioning of the feed mill have been experienced due to rain (8 weeks) experienced over the project duration Recent unforeseen late equipment deliveries have impacted the commissioning Commissioning process scheduled for June 2014 Forecast total pro
Slide 21: Other Africa Division
a _ \ASTRAL Other Africa Division 21
Slide 22: Other Africa Division - Overview
OTHER AFRICA DIVISION - OVERVIEW (Revenue - R million) (Operating profit - R million) 300 20 248 20 200 203 10 11 100 - - 1H2013 1H2014 1H2013 1H2014 Revenue up 22% Operating profit down 44% Feed volumes unchanged Zambian performance down Hatchery volumes up 18% Moz operations performed well 22
Slide 23: Other Africa Division - Overview
OTHER AFRICA DIVISION - OVERVIEW Zambia Feed sales from Tiger Animal Feeds decreased 8% for the period due to increased market competition Profitability at Tiger Animal Feeds impacted negatively by unfavourable raw material positions and stock mismanagement The double up of the Tiger Chicks br
Slide 24: Other Africa Division - Prospects
OTHER AFRICA DIVISION - PROSPECTS Zambia Current harvest maize and soya prices are lower with Tiger Animal Feeds well positioned to take advantage of these Increased sales of day old chicks from the double up of the hatchery and broiler breeder operation The continued expansion of feed and day
Slide 25: Poultry Industry Trends
Business Overview Poultry Industry Trends Financial Overview Industry Matters Prospects Q&A 25
Slide 26: SAFEX Yellow Maize Price
SAFEX YELLOW MAIZE PRICE F2010 F2011 F2012 F2013 F2014 Source: CJA Strategic Risk Brokers 26
Slide 27: SAFEX Soya Beans Price
SAFEX SOYA BEANS PRICE F2010 F2011 F2012 F2013 F2014 Source: CJA Strategic Risk Brokers 27
Slide 28: Industry Broiler Selling Prices
11.00 11.50 12.50 13.00 13.50 14.00 14.50 15.00 15.50 16.00 17.00 17.50 12.00 16.50 Source: Oct-08 15.44 15.81 Dec-08 16.28 Industry 13.95 Feb-09 13.78 14.06 Rand per kilogram Apr-09 14.60 14.04 Jun-09 13.41 13.81 Aug-09 13.09 13.12 Oct-09 13.22 13.47 Dec-09 13.41 SAPA trends and statistics | 12.70
Slide 29: Broiler Price vs. Food Price Inflation
BROILER PRICE VS. FOOD PRICE INFLATION 145 145 140 140 135 135 130 130 125 125 120 120 115 115 110 110 105 105 100 100 95 95 90 90 85 85 80 80 75 75 70 70 65 65 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Feb-09 Jun-09 Feb-10 Jun-10 Feb-11 Jun-11 Feb-12 Jun-12 Feb-13 Jun-13 Feb-14 Apr-09 Aug-09 Apr-10
Slide 30: Change in Broiler Selling Price vs. Feed Price
-20.00% -10.00% 0.00% 10.00% 20.00% 40.00% -30.00% 30.00% Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Source: SAPA & Own Data Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 % Change in feed price Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 CHANGE IN BROILER SE
Slide 31: Total Poultry Imports per Month
Tons - 5 000 10 000 20 000 30 000 40 000 50 000 15 000 25 000 35 000 45 000 Oct-08 Source: SAPA Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Total poultry imports Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 TOTAL POULTRY IMPORTS PER MONTH Feb-12 Apr-12 Jun
Slide 32: Total Poultry Imports (Chicken, Turkey, MDM)
TOTAL POULTRY IMPORTS (CHICKEN, TURKEY, MDM) Tons 450 000 400 000 350 000 300 000 250 000 200 000 150 000 100 000 F2011 F2012 F2013 F2014 50 000 0 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep F2011 24 684 48 108 76 511 103 474 127 429 156 795 182 871 215 684 250 081 286 051 320 321 349 364 F2012
Slide 33: Financial Overview
Business Overview Poultry Industry Trends Financial Overview Industry Matters Prospects Q&A 33
Slide 34: Abridged Statement of Comprehensive Income
ABRIDGED STATEMENT OF COMPREHENSIVE INCOME 2014 2013 Six months ended 31 March % change R million R million Revenue 4 700 4 219 11% Operating profit 213 59 260% Operating profit margin 4.5% 1.4% Profit on sale of interest in associate - 47 Profit before interest and tax 213 106 101% Net finance cost
Slide 35: Group Six Monthly Revenue
GROUP SIX MONTHLY REVENUE 7.000 (R billion) 6.000 5.000 4.700 4.500 4.384 4.334 4.290 4.122 4.219 4.039 3.800 4.000 3.591 3.675 3.552 3.429 3.415 2.551 2.900 2.152 2.397 2.519 2.175 3.000 2.238 1.770 1.847 1.708 1.901 2.194 1.750 1.730 2.944 1.629 2.000 3.317 2.878 2.956 2.952 3.049 2.741 2.581 2.60
Slide 36: Poultry – Six Monthly Revenue
POULTRY – SIX MONTHLY REVENUE 4000 1.40000 (R million) 1.20000 3500 1.00000 3000 0.80000 2500 0.60000 3317 2000 2956 2952 3049 2878 2741 2652 0.40000 2581 2606 2408 2449 1500 0.20000 1000 0.00000 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14 Revenue Change in realisations (SAPA) Change in v
Slide 37: Feed – Six Monthly Revenue
FEED – SIX MONTHLY REVENUE 3000 1.60000 (R million) 2800 1.40000 2600 1.20000 2400 1.00000 2200 2000 0.80000 1800 2519 2551 0.60000 2397 1600 2238 2175 2152 0.40000 1847 1400 1750 1730 1708 1770 0.20000 1200 1000 0.00000 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14 Revenue Change in volume
Slide 38: Group Six Monthly Operating Profit
GROUP SIX MONTHLY OPERATING PROFIT (R million) 375 380 1.3 133 324 302 304 299 281 279 1.1 154 280 135 151 149 126 130 213 208 0.9 180 153 157 175 0.7 156 135 80 59 0.5 137 145 134 128 229 124 140 45 0.3 8 -20 -3 -117 0.1 -120 -0.1 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14 Poultry Feed
Slide 39: Abridged Statement of Financial Position
ABRIDGED STATEMENT OF FINANCIAL POSITION Mar 2014 Sep 2013 % change R million R million Non-current assets 2 060 1 983 4% (Sep 2013 restated: previously R2 016 million) 12% Net working capital 427 486 8% Current assets (excl. cash) 1 996 1845 Current liabilities (excl. borrowings) (1 569) (1 359) 15
Slide 40: Cash Flow
CASH FLOW 2014 2013 For the six months ended 31 March R million R million Cash operating profit 287 122 Working capital requirement 58 (89) 345 33 Tax paid (52) (15) Net interest paid (19) (15) Capital expenditure (150) (104) Finance received - loans 49 85 Other cash flow items 5 - Cash flow before
Slide 41: Capital Expenditure
CAPITAL EXPENDITURE 2014 2013 Six months ended 31 March R million R million Depreciation 69 60 Replacement capex 74 36 Expansion capex - other 41 14 - new feed mill 41 58 Total capex spent 156 108 Commitments - other 148 - County Fair expansion 81 - new feed mill 31 Total spent and committed 416
Slide 42: In Summary
IN SUMMARY Improvement in Poultry division performance continued Cash flow for the period positive Net debt to equity ratio of 12,5% (30 September 2013: 15,5%) Substantial reinvestment in business for future benefit (R1,2 billion over past three years including commitments) Interim dividen
Slide 43: Industry Matters
Business Overview Poultry Industry Trends Financial Overview Industry Matters Prospects Q&A 43
Slide 44: Industry Matters
INDUSTRY MATTERS Market contraction continued with the closure of further small sized poultry producers Liquidation sales of distressed assets has resulted in consolidation Astral supports the requirement for regulatory control around brining, however the 15% brining level should be debated
Slide 45: Prospects
Business Overview Poultry Industry Trends Financial Overview Industry Matters Prospects Q&A 45
Slide 46: Prospects
PROSPECTS The slowing level of growth in the economy and higher unemployment levels will continue to depress consumer spending. This, coupled with other factors like industrial action in the mining sector, will continue to impact profit margins in the industry. There will be a good maize crop in Sou
Slide 47: Astral's strategy is to be the best cost integrated poultry producer
"“Astral’s strategy is to be the best cost integrated poultry producer in selected African countries”
Slide 48: Q&A
Business Overview Poultry Industry Trends Financial Overview Industry Matters Prospects Q&A 48
Slide 49: Additional Information
a \ASTRAL KN Additional Information AS a 49
Slide 50: South Africa - Total Maize Supply & Demand
SOUTH AFRICA - TOTAL MAIZE SUPPLY & DEMAND Marketing year (May to April) 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14E 2014/15F '000 tons Actual Actual Actual Actual Actual Estimate Forecast Carry In (1 May) 1 049 1 581 2 131 2 336 991 1 414 496 Crop Estimate 12 700 12 050 12 815 10 360 12 121 11
Slide 51: RSA Maize Carry Out and Stock to Use Ratio
RSA MAIZE CARRY OUT AND STOCK TO USE RATIO ‘000 tons 2 500 25% 22.85% 24.20% 2 000 20% 17.37% 16.89% 14.81% 1 500 15% 10.38% 1 000 10% 5.04% 500 5% 0 0% 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14E 2014/15F Carry out Maize stock to use ratio Source: CJA Strategic Risk Brokers 51
Slide 52: SAFEX Yellow Maize vs. CBOT Corn in Rand Terms
SAFEX YELLOW MAIZE VS. CBOT CORN IN RAND TERMS F2010 F2011 F2012 F2013 F2014 Source: CJA Strategic Risk Brokers 52
Slide 53: Local Broiler Production, Imports & Per Capita Consumption
LOCAL BROILER PRODUCTION, IMPORTS & PER CAPITA CONSUMPTION Million birds per week / Rand per kg kg 28.0 26.0 40 24.0 36 22.0 20.0 32 18.0 28 16.0 14.0 24 12.0 10.0 20 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Aug-13 Feb-09 Apr-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14
Slide 54: Total Poultry Imports – Country Split
TOTAL POULTRY IMPORTS – COUNTRY SPLIT 2013 2014 YTD (March) 12% 12% 6% 10% 10% 48% 46% 10% 17% 7% 16% 7% Brazil Argentina Netherlands UK Germany Other Source: SAPA 54
Slide 55: Producer Price Comparison – RSA Protein
PRODUCER PRICE COMPARISON – RSA PROTEIN Cents per kg 5500 Sheep 5000 4500 4000 3500 Beef 3000 2500 Pork 2000 1500 Chicken 1000 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Dec-12 Dec-08 Dec-09 Dec-10 Dec-11 Dec-13 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-1
Slide 56: Draft Brining Legislation
DRAFT BRINING LEGISLATION Draft Brining Regulations – impact on consumer if we do nothing Unit Size 2 kg Unit Size 2 kg 70:30 85:15 R40.00 / 2 kg R47.24 / 2 kg 185g / piece 153g / piece 10.8 pieces 13.1 pieces Live Mass 1.784 kg Live Mass 1.784 kg Age 34.1 days Age 34.1 days 56
Slide 57: Contacts
CONTACTS Astral Foods Limited Chris Schutte Tel: +27 (0) 12 667 5468 Chief Executive Officer Fax: +27 (0) 86 504 2002 Tel : +27 (0) 12 667 5468 Astral Foods Corporate Office Fax : +27 (0) 86 504 2002 92 Koranna Avenue, Email: ces@astralfoods.com Doringkloof Centurion, 0157, Gauteng, South Africa Daa