Synlait Milk Ltd. · NZX:SML
Synlait Milk — Investor Day (December 2017)
46 slides from Synlait Milk's investor day presentation, Dec 20, 2017
Slide 1: Strategic Update
STRATEGIC UPDATE 20 DECEMBER 2017
Slide 2: Disclaimer
DISCLAIMER - 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 (“Synlait”). It should be read expressed or implied in
Slide 3: Update of presentation made to institutional investors on 8 December 2017
THIS IS AN UPDATE OF THE PRESENTATION MADE TO INSTITUTIONAL INVESTORS ON 8 DECEMBER 2017. INVESTOR DAY I Synlait Milk Limited 2017 I Page 3
Slide 4: Strategic Update
STRATEGIC UPDATE John Penno MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER
Slide 5: We are a growth company
WE ARE A GROWTH SYNLAIT IS A B2B OVER THE PAST 10 YEARS WE MANUFACTURING HAVE GROWN FROM START-UP COMPANY FOCUSSED TO ANNUAL PRODUCTION COMPANY ON MAKING THE MOST VOLUMES OF ALMOST 140,000 FROM MILK. METRIC TONNES (MT) 2007 2017 INVESTOR DAY I Synlait Milk Limited 2017 I Page 5
Slide 6: Scalable manufacturing capability
SCALABLE MANUFACTURING CAPABILITY Proven ability to scale manufacturing capacity, MT HISTORICAL PRODUCTION AND MILK SUPPLY MILLION kgMS growing production volumes at a 19% compound rate since 160,000 80 Synlait’s first year of processing in FY09. 140,000 70 Next step change in processing capacity ex
Slide 7: Synlait adds value from farm to consumer
SYNLAIT ADDS VALUE FROM FARM TO CONSUMER RESEARCH + CATEGORY DEVELOPMENT - Select categories and markets - Design products - Innovate production and processes DIFFERENTIATED MILK SUPPLY MANUFACTURING CONSUMER PACKAGING - Contract supply of milk EXCELLENCE - Two state of the art canning lines CONSUME
Slide 8: Lead With Pride programme
TRANSFORMATIONAL IN THE DAIRY INDUSTRY, SYNLAIT’S LEAD WITH PRIDE™ PROGRAMME RECOGNISES AND REWARDS THOSE SUPPLIERS WHO ARE ACHIEVING DAIRY FARMING EXCELLENCE. Lead With Pride™ is Australasia’s only internationally accredited ISO / IEC 17065 dairy farm assurance system. The programme measures dairy
Slide 9: Registering brands in China
REGISTERING BRANDS IN CHINA INFANT FORMULA IS THE MOST REGULATED FOOD PRODUCT IN THE WORLD - IT IS THE ONLY FOOD PROVIDED TO SOME INFANTS IN THEIR FIRST MONTHS OF LIFE. - The Chinese Food and Drug Adminstration (CFDA) registration of The a2 Milk Company’s infant formula was granted in September 2017
Slide 10: Enhanced senior leadership capability
ENHANCED SENIOR LEADERSHIP CAPABILITY THE SENIOR LEADERSHIP TEAM (SLT) HAS EVOLVED TO MEET THE CHANGING NEEDS OF OUR BUSINESS John Nigel Boyd Chris Martijn Neil Antony Callam Matthew Rob Roger Penno Greenwood Williams France Jager Betteridge Moess Weetman Foster Stowell Schwarzenbach MANAGING DIRECT
Slide 11: Sustained financial success
SUSTAINED FINANCIAL SUCCESS $MILLIONS NPAT (NZ$ MILLIONS) 40 38.2 EBIT INCREASED TO NET DEBT DECREASED FROM $65.8m $214m 34.4 35 CAGR: 35% $83m 30 TO 25 (FY16: $61.1m) 19.6 20 GEARING DOWN FROM LEVERAGE FROM 15 11.5 10.6 2.6X DOWN TO 0.9X(1) 46.8% 10 5 ROCE OF 13.9% (FY16: 13.5%)(2) TO 18.0% (3) Not
Slide 12: Expectations of growth
EXPECTATIONS OF GROWTH MT(000) SALES - CANNED INFANT FORMULA - We expect Chinese infant formula demand to continue to 35 35,000 grow, particularly with the relaxing of the one child policy. - The regulatory change targeting rationalisation of brands may boost 30 demand in the second half of FY18, po
Slide 13: Second powder manufacturing site
SECOND POWDER MANUFACTURING SITE - Synlait will invest in powder manufacturing capacity when required to meet customer demand for infant formula products - Establishing this capacity on a second site allows mitigation of our current single site risk - Also introduces access to a second milk pool whi
Slide 14: Our categories
OUR CATEGORIES INFANT EVERYDAY ADULT INGREDIENTS NUTRITION DAIRY NUTRITION DELIVERED IN CONSUMER, Blending + Consumer Build Sales - Product Development FOODSERVICE AND People, Technical Packaging II New initiatives INGREDIENTS PACKAGING Wetmix II Market Research Tailor Product To Customer Need Cream
Slide 15: Strategic diversification
STRATEGIC DIVERSIFICATION - Significant success in transitioning dairy - We have negotiated a contract with commodity products into higher value Foodstuffs South Island to exclusively supply infant formula (Gross Profit $781/MT in FY18 their private label milk, as a first step in this from $231/MT i
Slide 16: Foodstuffs South Island contract
FOODSTUFFS SOUTH ISLAND CONTRACT - Exclusive supply of private label fresh milk and cream (Value and Pams) from early 2019 - Distributed in retail channels (PAK’n SAVE, New World, Four Square and On The Spot) - Ten year agreement with demand to underpin capital investment INVESTOR DAY I Synlait Milk
Slide 17: Capital investment
CAPITAL INVESTMENT - $125m modern and sophisticated advanced liquid dairy packaging facility to be constructed at our Dunsandel site - Investment to be funded through debt facilities - Annual capacity of 110 million litres of which one third will be initially utilised for Foodstuffs South Island pro
Slide 18: Business development
BUSINESS DEVELOPMENT Martijn Jager DIRECTOR SALES AND BUSINESS DEVELOPMENT
Slide 19: Developing a category strategy
DEVELOPING A CATEGORY STRATEGY 1 WHERE TO PLAY Understand the category landscape + 2 HOW TO WIN Create and validate hypothesis on = 3 OPPORTUNITIES Identify the specific opportunities to pursue and identify value worth pursuing how to enter / grow the category and create sustainable value + 4 PRIORI
Slide 20: Category delivers value to the business
CATEGORY DELIVERS VALUE TO THE BUSINESS TARGET THE RIGHT MARKET OPPORTUNITIES DELIVER OFFERINGS CUSTOMERS VALUE STRENGTHEN STRATEGIC CUSTOMER PARTNERSHIPS PROVIDE INTERNAL DIRECTION AND FOCUS OPTIMISE OUR BUSINESS INVESTOR DAY I Synlait Milk Limited 2017 I Page 20
Slide 21: The life-stage nutrition landscape
THE LIFE-STAGE NUTRITION LANDSCAPE YOUNG MIDDLE YOUNG MIDDLE GRAND MATERNAL INFANT TODDLER CHILD ADOLESCENT ADULT SENIOR ADULT ADULT SENIOR SENIOR SENIOR EVERYDAY DAIRY MILK CREAM BUTTER MATERNAL NUTRITION INFANT NUTRITION GROWING CURRENT UP MILKS FOCUS FORTIFIED & FUNCTIONAL DAIRY DRINKS SPORTS NUT
Slide 22: Our focus categories
OUR FOCUS CATEGORIES INFANT EVERYDAY ADULT INGREDIENTS NUTRITION DAIRY NUTRITION Diversify Markets - Categories, Customers, Geography Deliver Higher Value Products Adapt To A Changing World Demographic Focus On B2B, But Move Closer To Customers And Consumers Build Supply Chain Integrity Strong contr
Slide 23: Example: the everyday dairy opportunity in foodservice
EXAMPLE: THE EVERYDAY DAIRY OPPORTUNITY IN FOODSERVICE THE CHINA FOODSERVICE SECTOR DRIVEN BY GROWING OUTLETS NET OUTLET GROWTH IS GROWING STRONGLY PURCHASE POWER & 100,000 TIME-PRESSURED LIVES $1000 Whilst retail is declining 80,000 in Australasia, Europe and North America $800 Net Outlet growth (2
Slide 24: Example: whipping cream is a high growth opportunity
EXAMPLE: WHIPPING CREAM IS A HIGH GROWTH OPPORTUNITY 2014-2017 CAGR IMPORTS OF CREAM INTO CHINA HAVE VERY HIGH GROWTH Double digit growth is forecast to continue SPAIN (off the chart) 200% - Cream is predominantly used in bakery, and tea and coffee outlets 150% - Trends towards natural, safe and pre
Slide 25: Liquid milks leverage the same integrated value chain
LIQUID MILKS LEVERAGE THE SAME INTEGRATED VALUE CHAIN RESEARCH + CATEGORY DEVELOPMENT - Select categories and markets - Design products - Innovate production and processes DIFFERENTIATED MILK SUPPLY - Contract supply of milk MANUFACTURING CONSUMER PACKAGING - Facilitate and monitor differentiated mi
Slide 26: Research and development
RESEARCH AND DEVELOPMENT Roger Schwarzenbach GM INNOVATION AND TECHNICAL SERVICES
Slide 27: Synlait innovation and technical - highly capable team
SYNLAIT INNOVATION AND TECHNICAL - HIGHLY CAPABLE TEAM - Technical team building to 32 highly skilled and experienced scientists and technologists - Six managers have average experience of 23 years gained from some of the biggest global food companies and markets - Strong innovation partnerships wit
Slide 28: R+D covers every stage of the value chain
R+D COVERS EVERY STAGE OF THE VALUE CHAIN MANUFACTURING NEW PROCESS EXCELLENCE DEVELOPMENT - Improvement in right first time production - Develop cutting-edge processes - Higher throughput on existing capital • Alternative processes to protect sensitive - Superior quality and performance nutritional
Slide 29: R+D capability across many disciplines
R+D CAPABILITY ACROSS MANY DISCIPLINES Nutrition and health are But we also have broader R+D capability that we are continuing to strengthen a cornerstone of Synlait NUTRITION SCIENTIST LOOKS DAIRY SCIENTIST / FOOD TECHNOLOGIST / AT THE EFFECTS OF FOOD FOOD CHEMISTS FOOD ENGINEERS COMPONENTS ON HEAL
Slide 30: Massey and FoodPilot core to delivering Synlait's aspirations
MASSEY AND FOODPILOT CORE TO DELIVERING SYNLAIT’S ASPIRATIONS - Largest and best equipped publically accessible pilot plant in the Southern Hemisphere - Massey University offers access to an extensive network of expertise - Trained chefs, food technologists and scientists - Extensive lab facilities
Slide 31: Business transformation
BUSINESS TRANSFORMATION Chris France DIRECTOR STRATEGY AND BUSINESS TRANSFORMATION
Slide 32: Supporting diversification
SUPPORTING DIVERSIFICATION - Over the last two years we have established processes, methodology and tools to support our projects - Our diversification strategy creates an increasingly complex portfolio PIPELINE RESOURCES of inter-related projects VISIBILITY AND - This year we are introducing formal
Slide 33: Unlocking value
UNLOCKING VALUE “… We run our plants close to capacity so planning is important…” During FY17 we introduced the Oliver Wight Integrated Business Planning (IBP) process to better align to strategy and business operations (supply, demand, product development and strategic projects) over a three year t
Slide 34: Enabling good practice
ENABLING GOOD PRACTICE We have commenced a significant project to: - re-engineer our business processes - reconfigure our information technology - refresh our systems and data architecture - remove cost and enable growth We will invest approximately $10m in this project over the next two years INVES
Slide 35: People and culture
PEOPLE AND CULTURE Boyd Williams DIRECTOR PEOPLE, CULTURE AND PERFORMANCE
Slide 36: Key drivers of engagement
KEY DRIVERS OF ENGAGEMENT INVESTOR DAY I Synlait Milk Limited 2017 I Page 36 Source: Aeon-Hewitt
Slide 37: Building an engaged workforce at Synlait
BUILDING AN ENGAGED WORKFORCE AT SYNLAIT Engagement Improvement Actions include: LEADERSHIP COMPANY PRACTICES - Synlait Leadership Model providing - Strengthened employee communication increased expectations of People Leaders (Team Briefing) - Leadership Talent Review - Increased investment in leade
Slide 38: Closing the gap between current talent and talent needed
CLOSING THE GAP BETWEEN THE CURRENT TALENT AND THE TALENT SYNLAIT WILL EVENTUALLY NEED FLOWS OF HIGH POTENTIAL TALENT – BUY VERSUS BUILD ANNUAL TALENT REVIEW PROCESS The recruitment, development, ANNUAL promotion, retention of people, PERFORM AND TALENT planned and executed in ELT GROW END REVIEW OF
Slide 39: Leadership competency model
LEADERSHIP COMPETENCY MODEL Y A N D A CC I T OU I L N I B TA S N BI PO LIT RES Commercial People Y Acumen Leadership RES TY Technical LI Excellence PO BI N A IB S T IL N IT O U Y AN C C D A INVESTOR DAY I Synlait Milk Limited 2017 I Page 39
Slide 40: Manufacturing
MANUFACTURING Antony Moess GM MANUFACTURING
Slide 41: Unlocking infant formula dryer capacity
UNLOCKING INFANT FORMULA DRYER CAPACITY WETMIX THREE HIGH SPECIFICATION KITCHENS SPRAY DRYERS 80,000 MT 120,000 MT CONTRACTED FARMS MILK SOLIDS MAX. CAPACITY MAX. CAPACITY CONSUMER PACKAGING APPROX 200 (FY17) 65.0m kgMS (FY17) 87,000 MT TOTAL CAPACITY BASE POWDER 40,000MT - November 2017 D3 (INFANT
Slide 42: Quality is designed into our factories
QUALITY IS DESIGNED INTO OUR FACTORIES - State-of-the-art equipment. Dryers <6 years old, canning <3 years old - The RMP (risk management program). Spans on-farm practices, milk collection, material sourcing and manufacturing processes through to laboratory testing, warehousing and logistics. All ex
Slide 43: Reliability packed into every can
RELIABILITY PACKED INTO EVERY CAN - Synlait has licensed Proctor and Gamble’s manufacturing system and is deploying it across all factories as a standard way of working. Refined over the past 30 years and deployed across more than 200 sites globally – both within P+G and externally - It contains an
Slide 44: Manufacturing excellence focusses on a few key metrics
MANUFACTURING EXCELLENCE FOCUSSES ON A FEW KEY METRICS TO DRIVE IMPROVED RELIABILITY #STOPS PER DAY OVERALL EQUIPMENT EFFECTIVENESS MEAN TIME BETWEEN FAILURES INVESTOR DAY I Synlait Milk Limited 2017 I Page 44
Slide 45: Manufacturing reliability enables end to end supply chain improvements
MANUFACTURING RELIABILITY ENABLES END TO END SUPPLY CHAIN IMPROVEMENTS - Improved manufacturing reliability over time enables a lower level of direct labour, lower inventory holding and the ability to focus on end to end lead time - Short-term focus is on planned and unplanned downtime in order to m
Slide 46: Investors and media contacts
INVESTORS MEDIA Casey Blatch, Strategic Finance Manager Dan Walraven, Communications Manager +64 3 373 3091 +64 373 3069 Casey.Blatch@synlait.com Daniel.Walraven@synlait.com