Synlait Milk Ltd. · NZX:SML
Synlait Milk — FY2018 Earnings Presentation
31 slides from Synlait Milk's earnings presentation, Oct 1, 2018
Slide 1: Today Tomorrow – Annual Report 2018
TO DAY TO MORROW Synlait Milk Limited Annual Report 2018
Slide 2: Disclaimer
I PG 2 DISCLAIMER Synlait Milk Limited Annual Report 2018 - This presentation is intended to constitute a summary of certain performance or achievements may differ materially from those - Forward looking statements in this presentation are unaudited and information about Synlait Milk Limited (“Synla
Slide 3: Today: Chairman's Remarks, Strategic Update, Financial Results
I PG 3 Synlait Milk Limited Annual Report 2018 TO DAY CHAIRMAN’S REMARKS STRATEGIC UPDATE OUR FINANCIAL RESULTS
Slide 4: Chairman's Remarks
TO DAY CHAIRMAN’S REMARKS - RECORD FULL-YEAR PROFIT OF $74.6 MILLION, UP 89% ON FY17 PRIMARILY DUE TO INCREASED CONSUMER PACKAGED INFANT FORMULA SALES VOLUMES - GROSS PROFIT PER METRIC TONNE UP 63% TO $1,294, DRIVEN BY CONSUMER PACKAGED INFANT FORMULA SALES INCREASING TO 28% OF TOTAL SALES (FY17 13%
Slide 5: Strategic Update
TO DAY STRATEGIC UPDATE - STRENGTHENED RELATIONSHIP WITH THE A2 MILK COMPANY™ WITH ANNOUNCEMENT OF EXTENDED SUPPLY AGREEMENT - MANUFACTURING DIVERSIFICATION BEGUN WITH GROUND BREAKING ON SYNLAIT POKENO - EVERYDAY DAIRY CATEGORY EXPANSION BEGUN WITH: - ADVANCED LIQUID DAIRY PACKAGING FACILITY PROGRES
Slide 6: To Succeed: Our Categories
I PG 6 INGREDIENTS INFANT NUTRITION EVERYDAY DAIRY ADULT NUTRITION Synlait Milk Limited Annual Report 2018 OUR CATEGORIES WE WILL LEVERAGE OUR UNIQUE SUSTAINABLE VALUE CHAIN TO SUCCEED IN EACH CATEGORY TO BUILD SUCCESSFUL BUSINESSES THAT CONTRIBUTE TO OUR LONG-TERM SUCCESS SUSTAINABLE VALUE CHAIN EN
Slide 7: Environment
I PG 7 ENVIRONMENT Synlait Milk Limited Annual Report 2018 2028 REDUCTIONS PER KGMS: - 35% less on-farm greenhouse gas (GHG) emissions - 50% less off-farm GHG emissions - 20% reduction in on-farm and off-farm water use - 45% reduction in nitrogen loss to waterways $1.3 million budgeted for PKE-free
Slide 8: People
I PG 8 PEOPLE Synlait Milk Limited Annual Report 2018 HEALTH, SAFETY AND WELLNESS - Total Recordable Injury Frequency Rate (TRIFR) decreased from 25.1 to 18.1 per million hours worked, a 28% improvement - Critical Risk Projects to manage health, safety and wellness priorities throughout organisation
Slide 9: Enterprise
I PG 9 ENTERPRISE Synlait Milk Limited Annual Report 2018 INVESTMENT IN INNOVATION - Targeting R+D spend in FY19 equal to 1.5% of revenue FOOD SAFETY AND QUALITY - Uphold highest quality and safety standards, the cornerstone of Synlait’s business SUSTAINABLE SUPPLY - Partner with farmers, suppliers
Slide 10: Our Geographic Footprint
I PG 10 AUCKLAND • 35,000 MT infant formula canning capacity POKENO Synlait Milk Limited Annual Report 2018 • CNCA and SAMR registration in progress • Plant on schedule for 2019 / 2020 milk season commission • A1 protein-free and Lead With PrideTM milk pools being formed OUR GEOGRAPHIC PALMERSTON NO
Slide 11: Synlait's Integrated Value Chain
I PG 11 SYNLAIT’S INTEGRATED VALUE CHAIN Synlait Milk Limited Annual Report 2018 RESEARCH + CATEGORY DEVELOPMENT - Select categories and markets - Design products - Innovate production and processes DIFFERENTIATED MILK SUPPLY MANUFACTURING CONSUMER PACKAGING - Three-year rolling contracts EXCELLENCE
Slide 12: Dunsandel Manufacturing Excellence
I PG 12 MANUFACTURING EXCELLENCE Synlait Milk Limited Annual Report 2018 CONTRACTED FARMS WETMIX KITCHENS HIGH SPECIFICATION SPRAY DRYERS CONSUMER PACKAGING APPROX. 200 80,000 MT CAPACITY 120,000 MT CAPACITY 70,000 MT CAPACITY A1 PROTEIN-FREE WETMIX 2 D3 DUNSANDEL MILK WETMIX 1 D2 AUCKLAND GRASS FED
Slide 13: A Portfolio of Infant Formula Customer Partnerships
I PG 13 A PORTFOLIO OF INFANT FORMULA CUSTOMER PARTNERSHIPS Synlait Milk Limited Annual Report 2018 - Registration with State Administration - Five-year supply agreement for Market Regulation (SAMR - the signed in February 2018 replacement organisation for CFDA) - SAMR registration received in FY18
Slide 14: Everyday Dairy Expansion Through Talbot Forest Cheese Acquisition
I PG 14 EVERYDAY DAIRY EXPANSION THROUGH Synlait Milk Limited Annual Report 2018 TALBOT FOREST CHEESE ACQUISITION - Conditional agreement made to acquire selected - The Temuka site is a specialised cheese Talbot Forest Cheese assets, including: manufacturing facility, with high degree of product cus
Slide 15: Today: Our Financial Results
TO DAY OUR FINANCIAL RESULTS Nigel Greenwood CHIEF FINANCIAL OFFICER
Slide 16: Overview
I PG 16 OVERVIEW Synlait Milk Limited Annual Report 2018 $ MILLIONS NET PROFIT AFTER TAX 80.0 74.6 70.0 60.0 - Full-year profit up 89% year-on-year to $74.6 million, 50.0 ahead of all previous results 39.5 40.0 35.7 - Profit growth primarily driven by 89% increase in 30.0 consumer packaged infant fo
Slide 17: Sales Volume
I PG 17 SALES VOLUME Synlait Milk Limited Annual Report 2018 MT SALES VOLUME 160,000 140,000 18,776 120,000 - Revenue increase of $120.0 million to $879.0 in FY18 is due to a 15,999 100,000 35,580 combination of higher value consumer packaged infant formula 122,606 sales and an uplift in dairy commo
Slide 18: Production Volume
I PG 18 PRODUCTION VOLUME Synlait Milk Limited Annual Report 2018 MT PRODUCTION VOLUME MILLIONS KGMS 160,000 70.0 140,000 36,651 60.0 - Milk purchases remain our most significant cost when 19,403 determining gross profit, with a final milk price paid in 120,000 16,043 FY18 of $6.65 per kgMS, compare
Slide 19: Profitability
I PG 19 PROFITABILITY Synlait Milk Limited Annual Report 2018 $ GROSS PROFIT PER MT 1,400 1,294 - Total gross profit per MT up $502 to $1,294, primarily due to 1,200 consumer packaged infant formula volumes as a percentage of 1,000 877 total product sales growing from 13% in FY17 to 28% in FY18 792
Slide 20: Overheads
I PG 20 OVERHEADS Synlait Milk Limited Annual Report 2018 $ MILLIONS OVERHEADS 60.0 2.0 54.2 6.5 1.1 50.0 44.6 40.0 - Total overhead expenses for FY18 were up $9.7 million on FY17 30.0 to $54.2 million, the most notable aspects of this increase being: 20.0 - Employee costs of $6.5 million 10.0 - Con
Slide 21: Operating Cash Flow
I PG 21 OPERATING CASH FLOW Synlait Milk Limited Annual Report 2018 $ MILLIONS OPERATING CASH FLOW 120.0 115.2 104.4 98.4 90.0 - Operating cash flows at $98.4 million were $16.8 million down on FY17 at $115.2 million - Primarily due to increase in closing inventory (finished goods 60.0 and raw mater
Slide 22: Net Debt
I PG 22 NET DEBT Synlait Milk Limited Annual Report 2018 $ MILLIONS NET DEBT 250.0 119.4 200.0 150.0 - Total net debt increased by $32.3 million to $114.9 at year 11.2 114.9 end from $82.6 million last year 100.0 82.6 (98.4) - $103.8 million was deployed into five growth initiative 50.0 projects fin
Slide 23: Milk Price
I PG 23 MILK PRICE Synlait Milk Limited Annual Report 2018 $ PER kgMS SYNLAIT MILK PRICE $8.00 $7.00 $0.13 $6.00 $0.14 $5.00 $6.16 $6.65 $4.00 $0.11 - Total average milk price of $6.78 per kgMS including $3.00 premiums in FY18 $2.00 $3.91 $1.00 - International dairy commodity prices lifted by 10% ov
Slide 24: Tomorrow
TO MORROW Leon Clement CHIEF EXECUTIVE OFFICER Synlait Milk Limited Annual Report 2018 I PG 24
Slide 25: To Do: Initial Observations, Goals, Challenges
I PG 25 Synlait Milk Limited Annual Report 2018 TO DAY TO DO TO MORROW INITIAL OBSERVATIONS WHAT ARE WE TRYING WHAT ARE OUR TO ACHIEVE CHALLENGES SYNLAIT IS FAST WHAT: - Concentration risk - Maintain growth and rapidly diversify - Focus and implementation risk SYNLAIT IS STRONG HOW: - Shore up our e
Slide 26: Outlook: Growth and Capabilities
I PG 26 OUTLOOK Synlait Milk Limited Annual Report 2018 4 GROWTH: DEEPER AND BROADER = CHASE PROFIT POOLS NEW 1 Deepen relationships with existing customers and build into new categories 3 Ex pa 1 ns 2 Broaden customer base in core categories io n En gi ne 3 Accelerate development of new profit pool
Slide 27: FY19 Outlook
I PG 27 FY19 OUTLOOK Synlait Milk Limited Annual Report 2018 MT CONSUMER PACKAGED INFANT FORMULA SALES 50,000 41,000 - 45,000 45,000 40,000 - Continued growth in a2MC volumes 35,580 35,000 - Expect SAMR approval for New Hope’s Akara brand and 30,000 Bright Dairy’s Pure Canterbury brand 25,000 - Expe
Slide 28: Appendices
APPENDICES Synlait Milk Limited Annual Report 2018 I PG 28
Slide 29: About Talbot Forest Cheese
I PG 29 ABOUT TALBOT FOREST CHEESE Synlait Milk Limited Annual Report 2018 - Talbot Forest Cheese is a specialty cheese manufacturer founded by Paul Fitzsimons in 2000 and based in Temuka and Geraldine, Canterbury - Under their Talbot Forest Cheese brand, they now produce and sell a range of cheeses
Slide 30: Gross Profit by Category
I PG 30 GROSS PROFIT BY CATEGORY Synlait Milk Limited Annual Report 2018 Sales Volume (MT) Gross Profit ($m) Gross Profit / MT FY18 FY17 FY18 FY17 FY18 FY17 Powders and Cream1 93,042 122,606 134.4 97.4 1,065 696 Consumer Packaged 35,580 18,776 27.6 13.8 777 733 Lactoferrin 16 11 4.4 0.8 285,757 76,6
Slide 31: Investors and Media Contacts
INVESTORS MEDIA Clayton Cleek, CFA, Investor Relations Officer Dan Walraven, Corporate Affairs Manager +64 21 916 070 +64 27 836 7532 Clayton.Cleek@synlait.com Daniel.Walraven@synlait.com