Tiger Brands Limited · JSE:TBS
Tiger Brands — FY2022 Earnings Presentation
53 slides from Tiger Brands's earnings presentation, Dec 2, 2022
Slide 1: Tiger Brands Year-End Results Presentation
TIGER BRANDS YEAR-END RESULTS PRESENTATION 2 December 2022
Slide 2: Index
Index Executive Financial summary review Strategic Operational update & review outlook 2
Slide 3: Disclaimer
Disclaimer Forward-looking statement This document contains forward looking statements that, unless otherwise indicated, reflect the company’s expectations as at 2 December 2022. Actual results may differ materially from the company’s expectations if known and unknown risks or uncertainties affect t
Slide 4: Executive Summary of Performance
EXECUTIVE SUMMARY OF PERFORMANCE Noel Doyle | CEO
Slide 5: Solid full year result underpinned by strong second half performance
Solid full year result underpinned by strong second half performance • Focus in H2 was on margin recovery and category specific price/volume management • Performance enhanced by successful recovery in S&T, Bakeries and Exports which helped offset pressure in HPC • Volumes were well managed amid sign
Slide 6: Sequential improvement in underlying trading while strategic initiatives position the group for future stability
Sequential improvement in underlying trading while strategic initiatives position the group for future stability Revenue (Rbn) Gross margin (%) 2020 2021 2022 34,0 29,8 31,2 30,9% 30,6% 29,2% 29,2% 30,0% 31,4% 30,1% 30,3% 30,3% 16,4 16,8 17,2 15,2 14,6 14,8 H1 H2 FY H1 H2 FY Operating income** (Rbn)
Slide 7: Constrained consumer leading to category volume declines
Constrained consumer leading to category volume declines while increasingly discerning in terms of spend with a bias towards essentials • Sustained pressure on household incomes impacted by: - low economic growth - high unemployment - comparatively low wage growth - higher interest rates • Resulting
Slide 8: Volume shares prove resilient in the long-term
Volume shares prove resilient in the long-term with gains driven by Rice, Beverages, and Groceries Total data set - volume share of basket 12MM TY vs LY 6MM TY vs LY 3MM TY vs LY -1,6 -0,6 -0,4 All Other 18,4 16,8 16,6 16,2 0,4 0,0 -0,1 -0,1 Competitor 8 0,4 0,4 0,4 1,4 1,5 1,6 1,5 3,4 3,4 3,5 3,2 0
Slide 9: Value shares reflect judicious price/volume management
Value shares reflect judicious price/volume management without over-extending price premiums 12MM TY vs LY 12MM TYvs 6MM TY vs LY LY 6MM TY vs LY 3MM 3MM TY vs LY • Mix changes drive value -0,4 -0,6 All Other share losses in the medium- 18,9 18,7 -0,2 20 19,8 term -0,1 -0,3 -0,2 Competitor 8 • Own B
Slide 10: Billion Rand Brands remain firm favourites despite a tough trading environment
Billion Rand Brands remain firm favourites despite a tough trading environment EQUITY RANK VOLUME SHARE VOLUME RANK VALUE SHARE VALUE RANK BRAND Sept 21 Sept 22 Sept 21 Sept 22 Sept 21 Sept 22 Sept 21 Sept 22 Sept 21 Sept 22 #1 #1 25,7% 32,9% #2 #1 29,7% 35,6% #1 #1 #1 #1 32,3% 29,8% #1 #1 33,3% 30,
Slide 11: Financial Review
FINANCIAL REVIEW Deepa Sita CFO
Slide 12: Second half driven by improved category performance and revenue management
Second half driven by improved category performance and revenue management Highlights Headwinds • Significantly improved underlying performance in H2 in select • Global supply and logistics constraints categories; boosted by roll-out of revenue management - Impacted budgeted procurement savings and
Slide 13: Full year gross margins maintained through margin recovery initiatives in H2
Full year gross margins* maintained through margin recovery initiatives in H2 as well as cost savings, supply chain efficiencies and revenue management Pricing 11% Revenue Volumes 1% Revenue 10% to Gross profit 17% to Operating income** 53% at R34,0bn R10,3bn R3,4bn Total gross margin 18
Slide 14: Revenue in H2 reflects astute price/volume management
Revenue in H2 reflects astute price/volume management in the domestic business with a boost from Export volumes Revenue* H1 F21 vs H1 F22 3% (1%) - H2 F21 vs H2 F22 18% (1%) - 16,4 17,3 16,8 14,8 H2 FY21 H1 FY21 H2 FY22 H1 FY22 * Excluding the impact of the product recall and civil unrest in FY21 14
Slide 15: Revenue management initiatives contribute a cumulative R300 million
Revenue management initiatives contribute a cumulative R300 million, after marketing, to bottom line Consumer price Pack-price architecture Commercial policy Trade-terms Promotions • Developed a Price, Volume & • Used consumer data to identify • Capture incremental profits by • Improved application
Slide 16: Group operating income increased 53% to R3,4bn
Group operating income increased 53% to R3,4bn, earnings further boosted by insurance proceeds and an increase in associate income Rm FY22 FY21 Total revenue 34 029 30 954 • Insurance proceeds amounting to R218m Cost of Sales (23 713) (22 144) included in sundry income Gross profit 10 316 8 810 Gros
Slide 17: Significant operating improvement in H2 reflects sustained investment in self-help initiatives
Significant operating improvement in H2 reflects sustained investment in self-help initiatives Rm H1 H2 FY22 Total revenue 16 758 17 271 34 029 • Roll out of revenue management initiatives gain traction Cost of Sales (11 870) (11 843) (23 713) • Positive contribution of R387 million from cost Gross
Slide 18: Solid Consumer Brands performance and recovery in Exports drives segmental performance
Solid Consumer Brands performance and recovery in Exports drives segmental performance Grains (R’m) Consumer Brands (R’m) FY21 FY22 12 415 11 080 14 590 15 496 1 131 1 413 1 369 1 272 Revenue Operating profit Revenue Operating profit Home and Personal Care (R’m) Exports and International (R’m) 4 261
Slide 19: Net cash reflects deliberate investment in raw materials and stock build
Net cash reflects deliberate investment in raw materials & stock build in Groceries, S&T as well as completion of share buy-back programme of ~R1.5 billion Major contributors to decrease in cash for the period (R’m) 4 271 372 2 641 (1 630) (1 386) 2 162 143 (962) (61) (998) (1 453) (172) Cash Workin
Slide 20: Capex spend impacted by supplier constraints; FY23 capex guidance R1,6 billion
Capex spend impacted by supplier input constraints; FY23 capex guidance at R1,6 billion Capex spend by category (R’m) FY23 Capital Commitments Capex plan 1 615 • R1,2bn of total FY23 capex plan subject to 1 600 prerequisite approvals 1 400 403 - After considering a number of metrics including ROIC 1
Slide 21: Looking ahead: Fine balancing act between volumes and margins
Looking ahead: Fine balancing act between volumes and margins while internal programmes and initiatives provide positive forward momentum targeting R460 million in savings Current headwinds likely to persist… …compounded by sensitivities to However, we remain focused on external factors finding miti
Slide 22: Grains
GRAINS Yokesh Maharaj Chief Growth Officer
Slide 23: Grains performance reflective of deliberate strategy to recover cost push
Grains performance reflective of deliberate strategy to recover cost push at the expense of volumes, except in Rice Grains (R’m) Milling & baking (R’m) Other Grains (R’m) FY21 FY22 • Grains revenue reflects price 10 119 10 642 inflation of 9% offset by overall 14 590 15 496 4 471 4 853 volume declin
Slide 24: Significant progress made on strategy to arrest volume declines
Significant progress made on previously communicated strategy to arrest volume declines and accelerate cost efficiencies Bakeries volume growth vs. revenue growth Volume growth Revenue growth Premium 14,4% 7,5% 4,8% 4,7% 1,5% 2,0% -4,6% -4,9% -11,2% H1 H2 FY22 Continued focus on quality – sustain
Slide 25: Milling and Baking
5% 21% 249 bps Milling and Baking R10,6bn R803m 7,5% Revenue Operating profit Operating margin Looking ahead • Bakeries benefited from successful planned volume recovery • Continued focus on initiatives in H2 volume/value dynamics in bakeries - Premium maintained albeit at a lower level to rem
Slide 26: Other Grains
9% 33% 177 bps Other Grains R4,9bn R469m 9,7% Revenue Operating profit Operating margin Looking ahead • Rice benefited from category deflation relative to other carbohydrates • Continued investment in pasta - Further benefited by successful brand and customer initiatives plant to improve - Pri
Slide 27: Solid pipeline of innovation aimed at higher margin products
Plans include a solid pipeline of innovation aimed at higher margin products informed by consumer insights – good progress to date Milling and Baking Other Grains Wraps Tastic Rice Cakes and Crisps Albany’s entry into the specialised wrap A better-for-you snacking option bread market Tinkies Cruncha
Slide 28: Consumer Brands
CONSUMER BRANDS Thushen Govender Chief Growth Officer
Slide 29: Leveraging the Tiger consumer basket to respond to consumer trends
Leveraging the Tiger consumer basket to respond to consumer trends, drive volumes and grow market share #1 #2 #3 #4 Combo’s/ Meal occasions Snackification Health & Wellbeing Channel Development 1 4 • 3.3bn meal occasions per annum • 1.7bn snack occasions per • Remains a growing trend • Customised pl
Slide 30: Innovation gains traction focused on health and nutrition trends
Innovation gains traction this year focused on health & nutrition trends as well as value propositions Beverages Groceries Baby Roses Watermelon Roses Carbonated mixers Kasi Magic Sauces Purity Baby Oats A new flavour of mixer to tap Entering the carbonated mixer A reduced-oil value offering A healt
Slide 31: Strong performances across the segments, facilitated by recovery in Snacks & Treats
Strong performances across the segments, facilitated by recovery in Snacks & Treats in H2 and a solid Groceries performance Groceries (R’m) Snacks & Treats (R’m) Beverages (R’m) Baby (R’m) FY21 FY22 6 377 2 298 2 392 1 842 1 097 1 136 5 533 1 656 597 234 263 261 269 143 147 397 Revenue Operating pro
Slide 32: Groceries
15% 51% 220 bps Groceries R6,4bn R597m 9,4% Revenue Operating profit Operating margin Looking ahead • Top-line driven by price (11%) and volumes gains (4%) • Partner with - Solid growth in pilchards, beans, mayo, chakalaka and salads procurement and logistics to deliver • Solid delivery across
Slide 33: Snacks & Treats
4% 12% 81 bps Snacks & Treats R2,4bn R263m 11,0% Revenue Operating profit Operating margin Looking ahead • Recovery boosted by significant recovery in H2 trading • Fixing and optimizing the - H2 revenue increased 24% on H1 supply chain • Price and promotional management prioritised to address
Slide 34: Beverages
11% 3% 113 bps Beverages R1,8bn R269m 14,6% Revenue Operating profit Operating margin Looking ahead • Significant supply chain challenges and abnormal inflation impact on • Optimisation of KVI’s operating model to reflect seasonal - Astute PVM management in order to deliver profitable market s
Slide 35: Baby
4% 3% - bps Baby R1,1bn R147m 13,0% Revenue Operating profit* Operating margin Looking ahead • Top line price inflation offset by volume declines • Continued brand investment • The wellbeing portfolio experienced significant cost push • Optimal revenue - Optimal pricing allowed for marginal shar
Slide 36: Home and Personal Care (HPC)
5% 29% 563 bps Home and Personal Care (HPC) R1,9bn R308m 16,6% Revenue Operating profit Operating margin Looking ahead • Overall segment impacted by lower category demand • Execution of key capex projects • Lower demand due to adverse weather conditions impacted Home Care - Warehouse upgrade -
Slide 37: Exports and International
19% >100% 554 bps Exports and International R4,3bn R350m 8,2% Revenue Operating profit Operating margin Looking ahead • Good performances in all three segments of the portfolio • Deciduous Fruit (LAF) performance benefits from product range • Business stabilised rationalisation and higher inte
Slide 38: Conclusion
NOURISH AND NURTURE MORE LIVES EVERYDAY CONCLUSION Noel Doyle CEO
Slide 39: Cost inflation may be nearing its peak but unlikely to provide relief
Cost inflation may be nearing it’s peak but, unlikely to provide significant relief in the short to medium-term White maize (R/t) Wheat (R/t) 5 500 +51% 8 500 +49% 7 500 4 500 6 500 5 500 3 500 4 500 2 500 3 500 Nov 21 May 21 Jul 21 Sep 21 May 22 Jul 22 Sep 22 Jan 21 Mar 21 Jan 22 Mar 22 Nov 21 May
Slide 40: Consumer outlook is not encouraging
Consumer outlook is not encouraging with trougher trading environment anticipated Constrained consumer Increasingly competitive retail environment • Demanding more • Strengthened analysis of shopper behaviour - Affordability, convenience and quality • Leveraging data to segment stores • Changing pur
Slide 41: Significant investments made to drive predictable earnings growth
Significant investments have been made to help drive predictable earnings growth and stable returns ahead of the cost of capital Challenge Our strategic pillars Our strategic response Constrained consumer and Market-leading contribution of innovation to market share MEET THE NEEDS OF competitive l
Slide 42: Significant investments made to drive predictable earnings growth (continued)
Significant investments have been made to help drive predictable earnings growth and stable returns ahead of the cost of capital | continued Challenge Our strategic pillars Our strategic response Constrained consumer and BUILD A GROWTH More disciplined capital allocation with share buy-back an opt
Slide 43: Progress made on stabilising the core and building agility
Progress made on stabilising the core and building agility – positioned to take calculated risk to drive growth • Greatest progress made where measures are tangible and solutions more formulaic • Slower on solutions that require more risk-taking • While improvement in EBIT is modest relative to 2019
Slide 44: Tiger Brands Q&A
TIGER BRANDS NOURISH AND NURTURE MORE LIVES EVERYDAY Q&A
Slide 45: Price inflation across all segments and astute volume management boosts revenue growth
Price inflation across all segments and astute volume management boosts revenue growth Revenue Price inflation 11% R34bn R31bn Volume (1%) Total Price Volume Forex Grains (6%) 9% (3%) - Consumer Brands 15% 13% 2% - HPC (5%) 9% (14%) - Domestic operations 9% 11% (2%) - Exports & International 19% 12%
Slide 46: Summary of ratios
Summary of ratios Cash generated from operations (R’m) 33% Cash and cash equivalents (R’m) 48% Rm FY22 FY21 Net cash (R’m) 143,1 2 161,8 RONA 23,4% 17,0% 3 954,8 Return on equity (ROE) 19,3% 12,4% 2 161,8 Return on invested capital (ROIC) 16,4% 11,7% WACC rate 13,6% 12,2% Working capital per R1
Slide 47: Income from associate companies
Income from associate companies Rm FY22 FY21 Carozzi 337,7 296,0 National Foods Holdings Ltd 140,5 31,0 Other (0,2) 18,9 Total 478,0 345,9 47
Slide 48: Segmental contribution to revenue and operating income
Segmental contribution to revenue and operating income Revenue* Operating Income ** 34% 32% 32% FY21 FY22 25% 18% 19% 18% 15% 14% 15% 14% 13% 12% 11% 11% 13% 9% 8%8% 9%8% 5%4% 7% 7% 6% 5% 3%4% 3% 5% 5% 4% 3% 2% 2% -1% Persoal Care -2% Snacks & International Out of Home Other Grains Beverages Milling
Slide 49: Overall Groceries performance indicative of value focused consumer
Overall Groceries performance indicative of value focused consumer with value propositions likely to close the gap 66,0 67,5 61,1 60,2 38,8 37,9 32,8 30,1 29,5 29,9 Groceries Beans Tomato Sauce Peanut Butter Mayo & Salad Cream 12MM LY 12MM TY Source: IRI Tiger value share F22 September performance 4
Slide 50: Snacks & Treats volumes recover in H2
Volumes facilitated by recovery in demand in H2 following prolonged strike action; growth in health bars indicative of brand strength 43,3 42,4 28,7 21,2 22,3 19,9 12,2 10,6 8,9 5,9 Snacks & Treats Chocolate Candy Novelty & Speciality Health Bars 12MM LY 12MM TY Source: IRI Tiger value share F22 Sep
Slide 51: Beverages share growth attributable to top brands
Beverages share growth attributable to top brands, including new innovations and pack sizes 53,1 54,3 47,7 49,0 48,3 45,0 22,9 20,1 Beverages Dilutables Sports Drinks RTD Juice 12MM LY 12MM TY Source: IRI Tiger value share F22 September performance 51
Slide 52: Baby nutrition impacted by lower demand for jars and pouches
Baby nutrition impacted by lower demand for jars and pouches particularly in H2 while Baby Care improvement driven by optimal pricing 60,6 59,1 7,5 8,1 Baby Nutrition Baby Care 12MM LY 12MM TY Source: IRI Tiger value share F22 March 2022 performance 52
Slide 53: Home Care gains reflect strong brand equity
Home Care gains reflects strong brand equity; Personal Care impacted by lower overall category demand 59,6 60,6 7,5 7,3 Home Care (Pest) Personal Care 12MM LY 12MM TY Source: IRI Tiger value share F22 September 2022 performance 53