Astral Foods Limited · JSE:ARL
Astral Foods — FY2020 Earnings Presentation
63 slides from Astral Foods's earnings presentation, September 2020
Slide 1: Annual Results Presentation
Annual Results Presentation for the 12 months ended 30 September 2020 2020
Slide 2: Agenda
Business Overview AGENDA Business Overview Slide 3 – Chris Schutte Operational Overview Slide 8 – Michael Schmitz, Andy Crocker, Gary Arnold Industry Matters Slide 29 – Gary Arnold Financial Overview Slide 32 – Daan Ferreira Covid-19 & Outlook Slide 43 – Chris Schutte Additional Informat
Slide 3: Business Overview
Chris Schutte Chief Executive Officer BUSINESS OVERVIEW
Slide 4: Salient Points
Business Overview SALIENT POINTS The nationwide hard lockdown severely impacted profits in 2H2020 eroding gains made in 1H2020, however Astral posted a satisfactory full year result Feed input costs increased over the period on higher maize and soya prices, which was unexpected given the above a
Slide 5: Key Financial Indicators
Business Overview KEY FINANCIAL INDICATORS Revenue @ R14.1 billion 4.6% Profit before interest and tax @ R838 million 5.0% Profit for the period @ R561 million 13.3% Headline earnings per share @ 1 441 cps 13.9% Total dividend for the year @ 775 cps 13.9% 5
Slide 6: Divisional Overview
Business Overview DIVISIONAL OVERVIEW Feed Poultry Raw material costs up Feeding cost increased Less internal feed required Bird performance improvement External sales volumes marginally up Broiler sales volumes stable Expenses well controlled Broiler sales realisations up Improved
Slide 7: PBIT Movement F2020 vs F2019
350 450 550 650 750 850 950 1 050 PBIT F2019 882 (R million) Business Overview Raw material 335 cost Feed 71 conversion efficiency Broiler sales 24 volumes Broiler selling 255 price National 61 Chicks strike - PY R44 million Water and 64 load shedding Covid-19 41 direct costs PBIT MOVEMENT – F2020 v
Slide 8: Feed Division
Business Overview Michael Schmitz MD: Feed FEED DIVISION
Slide 9: Feed Division
Operational Overview FEED DIVISION Revenue - R million Operating profit - R million 7000 500 6 979 489 508 6000 6 574 400 5000 300 4000 3000 200 2000 100 1000 0 0 F2019 F2020 F2019 F2020 Revenue up 6.2% Operating profit up 3.8% Raw material costs up Net margin 7.3% F2019: 7.4% Average selling
Slide 10: Feed Division
Operational Overview FEED DIVISION SAFEX yellow maize price increased for the year under review F2020 avg. R2 748 per ton (F2019: R2 639) up R109 per ton y-o-y Soya meal price increased for the year under review F2020 avg. R6 617 per ton (F2019: R5 727) up R890 per ton y-o-y Internal feed sale
Slide 11: Feed Division – Sales Mix
Operational Overview FEED DIVISION – SALES MIX F2019 F2020 14% 13% 22% 1 355 230 Tons 21% 1 364 233 Tons Volume decrease ≈ 0,7% 60% 60% 5% 5% ◼ Poultry Integrated ◼ Poultry External ◼ Dairy ◼ Other 11
Slide 12: Raw Materials
Andy Crocker MD: Commercial RAW MATERIALS
Slide 13: SAFEX Yellow Maize Price
Raw Materials SAFEX YELLOW MAIZE PRICE Source: CJA Strategic Risk Brokers 13
Slide 14: RSA – Total Maize Supply & Demand
Raw Materials RSA – TOTAL MAIZE SUPPLY & DEMAND Marketing year (May to April) 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21E 2021/22F '000 tons Actual Actual Actual Actual Actual Estimate Forecast Carry In (1 May) 2 074 2 471 1 093 3 689 2 662 1 000 1 415 Crop Estimate 9 955 7 779 16 820 12 510 11
Slide 15: SAFEX YM Price vs. CBOT in Rand Terms
Raw Materials SAFEX YM PRICE vs. CBOT IN RAND TERMS Source: CJA Strategic Risk Brokers 15
Slide 16: Durban Soya Meal Price
Raw Materials DURBAN SOYA MEAL PRICE Source: CJA Strategic Risk Brokers 16
Slide 17: Poultry Division – Commercial
Andy Crocker MD: Commercial POULTRY DIVISION COMMERCIAL
Slide 18: Poultry Division - Consolidated
Operational Overview POULTRY DIVISION - CONSOLIDATED Revenue - R million Operating profit - R million 12000 400 11 343 350 371 10000 10 877 300 8000 250 295 6000 200 150 4000 100 2000 50 0 0 F2019 F2020 F2019 F2020 Revenue up 4.3% Operating profit down 20.5% Broiler sales volumes down 0.2% Net m
Slide 19: Poultry Division - Commercial
Operational Overview POULTRY DIVISION - COMMERCIAL Profits decreased for the year under review on the back of major market disruption, caused by a weak economy exacerbated by the hard lockdown in 2H2020 A change in product mix as a result of lost QSR sales in 2H2020 under the hard lockdown, and
Slide 20: Poultry Division – Sales Mix
Operational Overview POULTRY DIVISION – SALES MIX F2019 F2020 21,7% 22,0% 7,3% 448 944 Tons 6,5% 447 918 Tons 51,0% 52,9% Volume decrease ≈ 0,2% 12,4% 11,7% 4,9% 4,4% 2,7% 2,5% ◼ IQF Mixed Portions ◼ IQF Single Portions ◼ Frozen ◼ Fresh ◼ Value Added ◼ Tertiary 20
Slide 21: Broiler Selling Price
Operational Overview BROILER SELLING PRICE 140% 135% 130% 125% 120% Lockdown impact 115% 110% 105% 100% 95% Lower brine effect 90% Feb-16 Feb-17 Feb-18 Dec-18 Feb-19 Feb-20 Oct-15 Oct-16 Oct-17 Oct-18 Oct-19 Dec-15 Dec-16 Dec-17 Dec-19 Jun-16 Jun-17 Jun-18 Jun-19 Aug-19 Jun-20 Aug-16 Aug-17 Apr-18 A
Slide 22: Broiler Selling Price vs. Feed Price
-30% -10% 10% 20% 30% 40% -20% 0% Oct-15 Source: Own Data Dec-15 Feb-16 Apr-16 Operational Overview Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 % Change in broiler feed price Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18 Dec-18 Feb-19 Apr-19 BROILER SELLING PRICE vs. FEED PRICE Jun-19
Slide 23: Poultry Division – Agriculture
Gary Arnold MD: Agriculture POULTRY DIVISION AGRICULTURE
Slide 24: Poultry Division - Agriculture
Operational Overview POULTRY DIVISION - AGRICULTURE Parent stock sales were higher for the year under review, as demand for the Ross broiler genetics increased Parent breeder productions were good, with certain key production indicators again improving Feed input costs increased due to higher
Slide 25: Broiler Production Performance
Operational Overview BROILER PRODUCTION PERFORMANCE 108% 106% 104% 102% 100% 98% 96% Key indicators base-lined to 100% in F2015 94% F2015 F2016 F2017 F2018 F2019 F2020 Slaughter age Live weight Average daily gain 25
Slide 26: Broiler Production Performance
Operational Overview BROILER PRODUCTION PERFORMANCE 130% 125% 120% 115% 110% 105% 100% 95% 90% 85% Key indicators base-lined to 100% in F2015 80% F2015 F2016 F2017 F2018 F2019 F2020 Mortality Feed consumption Performance efficiency factor 26
Slide 27: Other Africa
Gary Arnold MD: Agriculture OTHER AFRICA
Slide 28: Other Africa Division
Operational Overview OTHER AFRICA DIVISION Revenue - R million Operating profit - R million 500 40 480 482 35 400 35 30 300 25 20 22 200 15 10 100 5 0 0 F2019 F2020 F2019 F2020 Revenue up 0.6% Operating profit up 60.4% Raw material costs up Net margin 7.3% F2019: 4.5% Average selling prices up
Slide 29: Industry Matters
Gary Arnold MD: Agriculture INDUSTRY MATTERS
Slide 30: Poultry Imports
Industry Matters POULTRY IMPORTS Tons 70 000 65 000 60 000 55 000 50 000 45 000 40 000 35 000 30 000 25 000 20 000 15 000 10 000 5 000 0 Aug-16 Aug-17 Aug-18 Aug-19 Aug-20 Feb-16 Jun-16 Feb-17 Jun-17 Feb-18 Jun-18 Feb-19 Jun-19 Feb-20 Jun-20 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Oct-15 Apr-16 Oct-16 Ap
Slide 31: Industry Overview
Industry Matters INDUSTRY OVERVIEW Based on industry statistics current broiler slaughter numbers are approximately 20.1 million birds per week Corporate action during the year, saw a number of poultry producers acquire an interest in the JSE listed Quantum Foods Imports for the period average
Slide 32: Financial Overview
Daan Ferreira Chief Financial Officer FINANCIAL OVERVIEW
Slide 33: Income Statement
Financial Overview INCOME STATEMENT 2020 2019 Year ended 30 September R million R million % change Revenue 14 104 13 485 4.6% Operating profit 838 882 5.0% Operating profit margin 5.9% 6.5% Net finance income 12 30 Lease finance charges (68) Profit before tax 782 913 14.3% Tax (221) (265) Profit for
Slide 34: Group Annual Revenue
Financial Overview GROUP ANNUAL REVENUE (R billion) 14,1 13,5 13,0 12,4 12,0 11,3 7,0 6,2 6,6 9,6 6,6 7,2 8,5 6,2 8,2 7,4 7,2 6,9 7,0 5,5 6,3 4,3 4,9 5,2 4,0 3,6 3,5 4,8 10,9 11,3 3,5 5,1 10,6 3,9 4,1 9,9 3,7 2,7 8,7 9,1 2,5 2,8 7,0 2,7 2,7 5,8 6,0 2,7 4,6 5,1 5,0 5,3 2,0 4,4 3,3 3,6 1,7 2,2 2,3 1,3
Slide 35: Group Annual Operating Profit
Financial Overview GROUP ANNUAL OPERATING PROFIT 1 942 (R million) 14,8% 15,0% 12,8% 12,3% 457 1 101 9,6% 9,8% 1 086 9,3% 8,7% 882 8,3% 8,4% 809 838 7,3% 766 6,7% 6,6% 674 597 423 391 5,9% 5,9% 581 585 5,1% 549 6,5% 548 5,8% 272 493 333 477 389 214 4,6% 328 282 262 489 261 281 508 203 220 151 3,1% 1
Slide 36: Group Six Monthly Operating Profit
Financial Overview GROUP SIX MONTHLY OPERATING PROFIT 1 044 (R million) 191 898 875 266 207 550 551 546 503 186 237 243 429 239 836 379 324 233 280 250 292 120 616 617 154 203 213 212 59 197 252 265 153 157 351 310 184 173 258 287 135 156 194 140 113 45 59 22 -3 5 8 -117 -135 1H12 2H12 1H13 2H13 1H1
Slide 37: Balance Sheet
Financial Overview BALANCE SHEET September 2020 September 2019 R million R million % change Non-current assets (excl. ROU assets) 3 259 2 658 23% Non-current assets – ROU assets 537 - Net working capital 1 132 1 288 12% Current assets (excl. cash) 2 961 2 982 1% Current liabilities (excl. borrowings
Slide 38: Capital Expenditure
Financial Overview CAPITAL EXPENDITURE F2020 F2019 Year ended 30 September R million R million Depreciation and amortisation 403 176 Property, plant & equipment 190 176 Right of use assets 213 - Total capex spend 456 657 Festive expansion (including advance payments) 270 440 Other capex 186 217 Outs
Slide 39: Working Capital
Financial Overview WORKING CAPITAL September 2020 September 2019 Variance R million R million R million Current assets 2 961 2 982 (21) Biological assets 851 759 92 Inventory - Poultry 497 337 160 - Feed 317 291 26 - Other Africa 47 63 (16) Trade receivables 1 138 1 168 (30) Advance capex payments 2
Slide 40: Statement of Cash Flows
Financial Overview STATEMENT OF CASH FLOWS 2020 2019 For the twelve months ended 30 September R million R million Cash operating profit 1 232 936 Working capital movement (74) 257 1 158 1 193 Tax paid (153) (214) Net interest received 28 36 Investment (155) - Capital expenditure (454) (657) 424 358
Slide 41: HEPS & Dividend per Share
Financial Overview HEPS & DIVIDEND PER SHARE 3712 2016 2 050 1914 1674 1381 1441 1286 1148 1 150 1 055 958 960 965 900 840 890 864 760 810 787 775 700 700 700 656 631 585 487 434 440 490 326 380 272 230 222 108 168 90 F2005 F2001 F2002 F2003 F2004 F2006 F2007 F2008 F2009 F2010 F2011 F2012 F2013 F201
Slide 42: In Summary
Financial Overview IN SUMMARY Profit before tax at R782 million down 14.3% on prior year (R913 million) Net cash outflow limited to R18 million in a challenging year Major capital expansion project successfully commissioned and paid in full Total dividend 775 cps (R301 million) for the year
Slide 43: Covid-19 & Outlook
Chris Schutte Chief Executive Officer COVID-19 & OUTLOOK
Slide 44: Covid-19: Astral's Response
Covid-19 & Outlook COVID-19: ASTRAL’S RESPONSE Astral’s operations continued to perform like clockwork during the Covid-19 lockdown, with no disruptions experienced in any of the integrated operations, which is testament to the rigorous protocols implemented by management Currently only 3 active
Slide 45: Negative Influences
Covid-19 & Outlook NEGATIVE INFLUENCES Unprecedented unemployment rate following the hard lockdown, and resultant financial impact on business and the economy at large Consumer disposable income severely constrained, with a very slow recovery out of the lockdown as expected by most economists
Slide 46: Positive Influences
Covid-19 & Outlook POSITIVE INFLUENCES It is still unclear if higher import tariffs on frozen bone-in portions announced in March 2020, will discourage unfair trade (dumping) Reopening of the local hospitality and restaurant sector with QSR volumes returning to the sales mix, with a net market s
Slide 47: Thank You
é7Astral THANK YOU
Slide 48: Additional Information
é7Astral Fed tive FRESH CHICKEN ADDITIONAL INFORMATION
Slide 49: Key Financial Ratios
Additional Information KEY FINANCIAL RATIOS 70 30 65 61 60 55 25 51 48 48 49 50 46 45 20 41 42 39 39 16,5 40 37 36 36 36 16,1 33 14,5 34 13,9 31 15 31 31 30 14,8 29 28 30 11,4 26 26 11,1 25 11,0 15,0 10,0 12,8 9,9 23 19 9,9 24 21 12,3 9,3 9,3 8,9 21 20 10 19 7,8 20 7,5 7,4 9,8 7,3 9,6 9,3 6,5 16 17
Slide 50: Key Financial Indicators
Additional Information KEY FINANCIAL INDICATORS 120 106,08 97,45 100 96,06 78,00 80 61,07 61,05 60 49,95 44,16 41,36 41,65 37,43 40 33,47 34,24 35,38 34 34 29 28,28 27 27 26 23,83 24 24 22 21 21 17,36 17 19 18 20 14,34 14 15 16 23 20 15 10,79 9 11 9 10 9 10 8,53 21 7 12 12 14 2 0 0 3 0 0 0 0 0 Sep-0
Slide 51: World Corn Ending Stocks
Additional Information WORLD CORN ENDING STOCKS Million Tons 375 30% 27,8% 27,7% 350 26,2% 325 25,0% 22,8% 25% 300 22,9% 21,0% 275 20,2% 19,8% 250 20% 225 200 15% 175 150 125 10% 100 75 5% 50 25 214 279 311 326 343 303 298 282 273 0 0% 2014 2015 2016 2017 2018 2019 2020 2021E 2022F End Stock Maize s
Slide 52: RSA – Total Maize Supply & Demand
Additional Information RSA – TOTAL MAIZE SUPPLY & DEMAND ‘000 Tons 4 000 30% 28,31% 3 500 25% 21,75% 20,19% 20,95% 3 000 20% 2 500 2 000 15% 9,87% 9,96% 1 500 7,66% 10% 1 000 5% 500 2 471 1 093 3 689 2 662 1 000 1 415 2 936 0 0% 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21E 2021/22F Carry out Mai
Slide 53: El Niño Southern Oscillation
Additional Information EL NIÑO SOUTHERN OSCILLATION Source: International Research Institute for Climate and Society (IRI) – Columbia University 53
Slide 54: Vegetative Health Index
Additional Information VEGETATIVE HEALTH INDEX Source: NOAA - National Environmental Satellite, Data, and Information Service (VHI) 54
Slide 55: Broiler Feed
Additional Information BROILER FEED Inclusion & Cost Contribution 0,4 0,5 0,5 0,4 0,4 0,3 0,4 0,3 100% 1,8 1,8 5,4 3,0 3,8 4,7 2,9 6,0 3,3 5,4 3,3 3,2 5,3 3,6 3,7 4,5 6,6 4,2 7,4 9,9 4,7 7,0 8,7 90% 0,5 14,6 7,6 7,7 9,4 0,4 16,6 18,2 16,6 14,8 14,4 5,6 9,1 6,9 6,0 13,8 0,5 0,7 80% 1,7 0,7 0,6 6,2 5,
Slide 56: Broiler Price vs. Food Price Inflation
Additional Information BROILER PRICE vs. FOOD PRICE INFLATION 120% 120% 115% 115% 110% 110% 105% 105% 100% 100% 95% 95% 90% 90% Sep-17 Sep-18 Sep-19 Sep-20 Jul-17 Jul-18 Jul-19 Jul-20 Mar-17 Mar-18 Mar-19 Mar-20 Nov-17 Nov-18 Nov-19 Jan-17 May-17 Jan-18 May-18 Jan-19 May-19 Jan-20 May-20 Broiler sel
Slide 57: RSA Protein Price Comparison
Additional Information RSA PROTEIN PRICE COMPARISON cents / kg 10 000 9 000 8 000 7 000 6 000 5 000 4 000 3 000 2 000 1 000 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Jun-16 Feb-16 Feb-17 Jun-17 Feb-18 Jun-18 Feb-19 Jun-19 Feb-20 Apr-20 Jun-20 Apr-16 Aug-16 Apr-17 Aug-17 Apr-18 Aug-18 Apr-19 Aug-19 Aug-20 O
Slide 58: RSA Market Share
Additional Information RSA MARKET SHARE 20% 26% 4% 5% 9% 20% 7% 9% Astral RCL Country Bird Daybreak Sovereign Grainfields Chubby Chick Other Local broiler production ≈ 20.1 million birds per week Source: Own Estimates 58
Slide 59: RSA Market Share (Including Imports)
Additional Information RSA MARKET SHARE (INCLUDING IMPORTS) 18% 29% 14% 6% 15% 5% 3% 4% 6% Astral RCL Country Bird Daybreak Sovereign Grainfields Chubby Chick Other Imports Avg. poultry imports ≈ 7.3 million birds per week (12 months ending September 2020) Source: SAPA & Own Estimates 59
Slide 60: Total Poultry Imports
Additional Information TOTAL POULTRY IMPORTS 600 000 Tons 500 000 400 000 300 000 200 000 F2017 F2018 F2019 F2020 100 000 0 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep F2017 50 324 101 279 135 812 173 187 212 399 278 057 319 933 367 106 409 557 453 981 499 952 551 867 F2018 46 348 92 223 140 823
Slide 61: Total Imports – Country of Origin
Additional Information TOTAL IMPORTS – COUNTRY OF ORIGIN 2019 2020 September YTD Other 3,2% Other 3,5% US 16,6% US 17,5% Argentina Brazil Argentina Brazil 7,0% 49,8% 6,5% 54,2% EU 18,6% EU 23,1% 538 605 tons 362 170 tons Source: SAPA 61
Slide 62: Total Imports – Country of Origin
Additional Information TOTAL IMPORTS – COUNTRY OF ORIGIN Country (tons) 2018 2019 2020 YTD Brazil 348 155 268 869 196 130 United States 91 374 89 598 63 264 Poland 13 463 50 419 4 321 Argentina 33 278 37 939 23 479 Ireland 26 328 31 221 25 945 Denmark 25 672 23 325 12 009 Spain 4 932 18 824 21 052 T
Slide 63: Contact Details
Business Overview CONTACT DETAILS Chris Schutte Chief Executive Officer Tel : +27 (0) 12 667 5468 Fax : +27 (0) 86 504 2002 email: Chris.Schutte@astralfoods.com www.astralfoods.com Daan Ferreira Chief Financial Officer Tel : +27 (0) 12 667 5468 Fax : +27 (0) 86 504 1602 email: Daan.Ferreira@astralfo