Slide 1: Scales Corporation Limited Annual Results Presentation
Scales Corporation Limited Growing your Diversified Agribusiness Annual Results Presentation For the year ended 31 December 2019 26 February 2020
Slide 2: Agenda
Agenda 1. Operating & Strategic Summary 2. Group Financials 3. Divisional Performance and Strategy 4. Capital Management 5. Sustainability 6. Governance and Outlook 7. Appendices Scales Corporation Limited – 2019 Full Year Results 2
Slide 3: Operating & Strategic Summary
Operating & Strategic Summary 1
Slide 4: Operating & Strategic Summary
Operating & Strategic Summary • Statutory Profit for the Year $121.6m (2018: $45.5m) including gains from sale of Polarcold and part-sale of Meateor. • Underlying* NPAT $36.4m ahead of 2018 ($35.8m). • Underlying EBITDA from the Horticulture Division of $39.7m (2018: $42.6m): ▪ Outstanding result in
Slide 5: Strength in Numbers
Strength in Numbers 5,953,000 $484.6m 39,438 16% TCEs of apples exported* Revenue TEU equivalents freighted ROCE (up 2% on 2018) (new revenue record) (up 12% on 2018) (2018: 17%) 19.0 cents 111.0 MT $104.9m 3,822,000 Dividends declared Petfood ingredients sold** TCEs of own-grown Net cash per share
Slide 6: Strategic Update – Investment
Strategic Update – Investment Scales remains committed to reinvesting the proceeds from the sale of Polarcold, Liqueo and 50% of Meateor NZ • Scales will seek to reinvest in the following focus areas: ▪ Organic growth opportunities that strengthen our existing business units. ▪ Acquisition growth op
Slide 7: Group Financials
Group Financials ail fC as —
Slide 8: Group Financial Performance
Group Financial Performance Strategic changes contributing to record profit for the year • New revenue record of $484.6m, an increase of Income Statement 20% on 2018: Reported Financials $Millions 2019 2018 % chg. ▪ Includes full year trading from Shelby. Revenue 484.6 402.5 20% • Reported Profit fo
Slide 9: Trends in Financial Performance
Trends in Financial Performance • Variation in 2019 Underlying EBITDA reflects changes in Group structure. Historic results are unadjusted for businesses that have been sold or acquired. Underlying EBITDA Underlying NPAT $67.9m $67.1m $38.6m $35.8m $36.4m $61.4m $62.0m $34.8m $32.7m $52.7m 2015 2016
Slide 10: Trends in Divisional Performance
Trends in Divisional Performance • Stable or growing earnings from all divisions Horticulture Food Ingredients Logistics* Underlying EBITDA Underlying EBITDA Underlying EBITDA $45.3m $42.6m $13.5m $40.0m $39.7m $38.9m $10.2m $9.2m $4.9m $7.6m $8.0m $3.3m $3.3m $2.3m $1.9m 2015 2016 2017 2018 2019 20
Slide 11: Balance Sheet
Balance Sheet Balance Sheet $Millions 2019 2018 • Balance sheet reflects strategic and NZ IFRS changes: Current Assets (excluding Cash) Trade and other receivables 20.6 22.9 ▪ Divestment of Polarcold, as well as 50% of the Meateor NZ business. Inventories 26.4 45.4 ▪ Implementation of NZ IFRS 16 Lea
Slide 12: Balance Sheet (continued)
Balance Sheet (continued) • Scales is ready for investment with a net cash Balance Sheet (continued) position at 31 December 2019 of $104.9m (2018: $Millions 2019 2018 Net Debt of $62.2m), comprising: Non-Current or Other Liabilities ▪ Cash and term deposits of $159.4m. Deferred tax liabilities (19.
Slide 13: Divisional Performance and Strategy
Divisional Performance and Strategy 3
Slide 14: Horticulture – Financial Performance
Horticulture – Financial Performance Continued stability in orchard volumes notwithstanding redevelopment • Record revenue of $264.8m, up 4% on 2018. Financial Performance - Horticulture $Millions 2019 2018 % chg. • Underlying EBITDA of $39.7m (2018: $42.6m). Horticulture Revenue 264.8 254.6 4% • Hi
Slide 15: Horticulture – Own-Grown Volumes
Horticulture – Own-Grown Volumes Steady export crop levels, growth in premium volumes • Excellent total own grown export crop of 3.8m TCEs, well ahead of previous guidance. • Premium variety volumes up 14% on 2018: ▪ Growth across all premium varieties, with 18% increase in NZ Queen. ▪ Continued str
Slide 16: Horticulture – Prices & Other KPIs
Horticulture – Prices & Other KPIs Increased average prices for Premium Varieties Horticulture KPIs • Weighted average FOB price similar to 2018 Apple Prices by Variety (NZD / TCE, FOB) reflecting: 2019 2018 % chg. ▪ Improved pricing for Premium Varieties, including solid Premium Varieties 39.8 38.8
Slide 17: Horticulture – Orchard Redevelopment
Horticulture – Orchard Redevelopment A decade long investment • Initial redevelopment (2008 to 2014) ▪ Approximately 300 ha of orchard redeveloped. ▪ Sales to Asia and Middle East increased from 20% to 53% between 2007 and 2015. • Phase 2 Redevelopment (2017 to 2020): ▪ Total redevelopment of around
Slide 18: Horticulture – Market Strategies
Horticulture – Market Strategies Maximising appeal throughout the value chain – to consumers, wholesalers and retailers. • Renewed marketing activations, and increased in-market branding initiatives, Sales by Channel – 2014 vs 2019 2% particularly in Asia and Middle East: 2019 ▪ Notable increase in
Slide 19: Horticulture – Volume Outlook
Horticulture – Volume Outlook Replanting profile: future volumes and apple pricing • Mr Apple is nearing the end of its second phase of orchard redevelopment. Since 2017, 143 hectares of new orchard have been developed including 78 hectares of Dazzle®. • Further plantings of approximately 32 hectare
Slide 20: Food Ingredients
Food Ingredients Food Ingredients retains positive momentum with further offshore opportunities • Divisional progress: Financial Performance - Food Ingredients ▪ The Food Ingredients division has made significant progress in diversifying $Millions 2019 2018 % chg. its geographical exposure and range
Slide 21: Food Ingredients – A Global Strategy
Food Ingredients – A Global Strategy Developing a $25m EBITDA division Petcare expenditure in the United States • Petfood ingredients is an attractive industry for investment: (US$b) ▪ Global industry now worth over US$100b* and growing strongly. 80.0bn 72.1bn CAGR = 5.1% ▪ China market growing very
Slide 22: Logistics
Logistics 122 years old and still evolving • Return to normalised trading, following a particularly strong 2018: Financial Performance - Logistics* ▪ Arranged ocean freight for the equivalent of 39,438 TEUs, up $Millions 2019 2018 % chg. 12% on 2018. ▪ Arranged 6,184 tonnes of airfreight, compared t
Slide 23: Capital Management
4 Capital Management
Slide 24: Performance Against Benchmarks
Performance Against Benchmarks Redefining our targets • Return on Capital Employed (ROCE) varies Capital Management Return on Capital Employed between each of the individual divisions: 2019 2018 ▪ Horticulture capital employed increased by around $15m between 2018 and 2019, mainly due to orchard Hor
Slide 25: Capital Expenditure
Capital Expenditure Investments in organic growth Capital Management Operational Capital Expenditure $Millions 2019 2018 • Continuing to invest in growth, including: ▪ Orchard redevelopment at Mr Apple - approximately 44 Horticulture 3.1 3.5 hectares at a cost of $5.4m. Food Ingredients 0.2 0.5 Logi
Slide 26: Sustainability
Sustainability 5
Slide 27: Sustainability – Environment
Sustainability – Environment Reducing our environmental impact • Second carbon footprint certification process recently carried out at Mr Apple. Early indications suggest: ▪ A slight reduction in footprint. ▪ Excellent reductions in waste to landfill and electricity use. • An EECA* audit at two Mr A
Slide 28: Sustainability – People and Safety
Sustainability – People and Safety It’s all about our people • Second group-wide staff engagement survey undertaken November 2019: ▪ A rise in engagement to 61% in 2019 from 56% in 2018. ▪ Business units to focus on how they can engage with staff, communicate smarter and be more collaborative throug
Slide 29: Governance and Outlook
6 Governance and Outlook
Slide 30: Governance
Governance Investing in our strategic leadership • Two new additions to the Board in 2019: ▪ Tomakin Lai – appointed January 2019. ▪ Nadine Tunley – appointed February 2019. • Tomakin and Nadine have brought complementary skills and expertise to our Board table. • Continued participation in the Inst
Slide 31: 2020 Outlook
2020 Outlook Shaping our future • COVID-19: ▪ The impact on Scales and Mr Apple in particular from the COVID-19 outbreak remains uncertain at this time. It is expected that any impact may be mitigated by the following: ◦ Mr Apple is expecting a more balanced global supply situation in 2020 with sale
Slide 32: 2020 Outlook (continued)
2020 Outlook (continued) • Food Ingredients: ▪ Given specific 2019 challenges that are not expected to repeat, Scales expects a further improvement in performance from this division in 2020. ▪ Divisional entities are continuing to develop organic growth opportunities both domestically and offshore.
Slide 33: Appendices
Appendices 7 Airfreighted PosyTM apples for sale in a Chinese supermarket (February 2020)
Slide 34: Appendix I - Reconciliation of Underlying to Reported Measures
Appendix I - Reconciliation of Underlying to Reported Measures Reconciliation of Divisional Underlying Profitability to Reported Profitability Group Horticulture Food ingredients Logistics Corporate and eliminations 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 EBITDA Underlying 52.7 67.1 39.7 4
Slide 35: Appendix II - Disclaimer
Appendix II - Disclaimer The information in this presentation has been prepared by Scales Corporation Limited with due care and attention. However, neither Scales Corporation Limited nor any of its directors, employees, shareholders nor any other person shall have any liability whatsoever to any per