Synlait Milk Ltd. · NZX:SML
Synlait Milk — Investor Presentation (September 2016)
46 slides from Synlait Milk's investor presentation, September 2016
Slide 1: Rising to the Opportunity
RISING TO THE OPPORTUNITY Synlait Milk Limited Market Announcements September 2016 Not for release or distribution in the United States of America
Slide 2: Disclaimer
DISCLAIMER This presentation has been prepared by Synlait Milk Limited (Synlait). This presentation has been prepared in relation to the pro rata accelerated entitlement offer of new shares in Synlait (New Shares) to be made to: - Eligible institutional shareholders of Synlait (Institutional Entitle
Slide 3: Disclaimer
DISCLAIMER - Past performance: Past performance information given in this presentation is given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance. - Future performance: This presentation contains certain “forward-looking statements” such
Slide 4: Disclaimer
DISCLAIMER - Not an offer. This presentation is not a product disclosure statement or other disclosure document under New Zealand law (and will not be lodged with the Registrar of Financial Service Providers) or any other law. This presentation is for information purposes only and is not an invitati
Slide 5: Disclaimer
DISCLAIMER - Financial data: All dollar values are in New Zealand dollars (NZ$ or NZD) unless otherwise stated. Any financial information included in this presentation may include non-GAAP financial measures and information. Not all of the financial information (including any non-GAAP information) w
Slide 6: Our Progress
OU ROG ESS
Slide 7: Well Established After Ten Years
WELL ESTABLISHED AFTER TEN YEARS Demonstrated value added strategy based on differentiated milk streams - Synlait is a B2B manufacturing company focussed on making more from milk. - Over the past 10 years we have grown from start up to annual production volumes of 125,000MT. - Synlait listed in July
Slide 8: IPO Growth Capex Programme
IPO GROWTH CAPEX PROGRAMME ROCE improved to 13.5% at the conclusion of the growth programme Investments announced at IPO totalling $174.0m now completed are: — Dryer three — Consumer Packaging Facility — Lactoferrin recovery facility — Drystore — Administration building & Quality Testing Laboratory
Slide 9: Our FY16 Financial Results
OU R FYI6 FINANCIAL ESULTS
Slide 10: Overview: Underlying Net Profit After Tax
OVERVIEW Underhng net pot ater tox (NPAT - Our value added strategy has enabled Synlait to make more from milk and 60) nese | a _ 8) continue our growth. LL. & - Underlying earnings after taxation for FY16 80 oss improved $20.5m on prior year, to $32.7m. We 10 ~~ -- nnn nnn nnnnnnenenen nner cece nc
Slide 11: Sales
SALES - Capital projects funded by the 2013 IPO are now complete, allowing the business to concurrently focus MT Sales volume by product category on external growth opportunities, customer development and major internal system and process 140,000 ~~~ = nn ne improvements. 120,000 - Since IPO, volume
Slide 12: − 70.0 − 60.0 50.0 40.0 − 30.0 20.0 10.0 − -
− 70.0 − 60.0 50.0 40.0 − 30.0 20.0 10.0 − -
Slide 13: Base Synlait milk price and average premium
10.00 9.00 − 8.00 7.00 6.00 − 5.00 4.00 3.00 2.00 1.00 0.00 − Base Synlait milk price Average premium 100% 95% − 90% 85% 80% 75% 70% 65% 60%
Slide 14: Milk Premiums
MILK PREMIUMS Milk premium 6,000 ----------------2 22-22-2222 enn ene een ee ee ence ence ce ee ee ee cee e7ay- - Milk premiums offered to suppliers support differentiation behind the farm gate. 5000. <--2---222 22 ceee eee eee eee eee eee eee eee eee _ - $5.7m additional premiums paid in FY16. C0 -
Slide 15: Gross Profit per Metric Tonne
GROSS PROFIT PER METRIC TONNE Gross profit per metric tonne - Continued growth in underlying earnings driven by improved margins. Gross profit per MT increased to $859/MT from $567/MT last year. NZD/ MT - Improvement driven by a favourable change in product mix, with sales growth in the higher margi
Slide 16: Powders and Cream Gross Profit / MT
POWDERS AND CREAM GROSS PROFIT / MT Powders and cream gross profit per MT - Powders and cream include all dairy ingredient products and infant base powders. This includes margins attributable to infant base powders packaged and sold as canned infant formula. - Improved gross profit per MT due to inc
Slide 17: Consumer Packaged Gross Profit / MT
CONSUMER PACKAGED GROSS PROFIT / MT (CANNED INFANT FORMULA) Margin attributable to this category is calculated based on a toll manufacturer methodology with transfer revenue based on market pricing. Margin only attributed to this category from FY15 following commissioning of the gonsumer packaging f
Slide 18: Specialty Ingredients Gross Profit / MT
SPECIALTY INGREDIENTS GROSS PROFIT / MT (LACTOFERRIN) Lactoferrin gross profit per metric tonne - Lactoferrin is the most important 600,000 product in our specialty ingredients 00 000 product range. 400,000 ---. - This is a high value product group & 20000 -—- with a large proportion of cost being S
Slide 19: Overheads
OVERHEADS os - FY16 overheads increased by $9.1m compared to prior year. - Synlait is reinvesting strongly in people, systems and processes with a focus on customer development, operational planning and associated process development. This has increased employee and consultancy costs with spend expe
Slide 20: Net Operating Assets and ROCE
Net operating assets NET OPERATING ASSETS - The commissioning and capitalisation of our third spray dryer in September 2015 has been the major driver in the increase of Net Operating Assets in FY16. - Reduction in net operating working capital of $7.4m driven by the OW" WI8Net Capltalsaionut NelOpei
Slide 21: Operating Cash Flow
OPERATING CASH FLOW - Operating cash flow was greater than EBITDA following the expansion of the receivables assignment programme and 2 higher customer deposits. a - This has enabled our continued support of milk supplier farmers through the payment of higher advance rates through the season. , - Gr
Slide 22: Debt / EBITDA
− − − 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Debt / EBITDA
Slide 23: Gearing
− − − 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Gearing
Slide 24: Our Expectations
OU ECTATIONS
Slide 25: Proposed Chinese Regulations
PROPOSED CHINESE REGULATIONS - Manufacturers of infant formula for export to China must register their recipes with Chinese Authorities by 1 January 2018; current rules apply until then (though some labelling and e-trade requirements now apply). - Upto 9 recipes can be registered (stages 1, 2 & 3) u
Slide 26: FY17/FY18 Expectations
FYT7/FY18 EXPECTATIONS - Proposed Chinese regulations likely to moderate canned infant formula growth in FY17 as MT Sales - Canned Infant Formula disruption works through industry wide supply chains but normalise in the longer term. - Investment in customer and market development (e.g. Munchkin Inc)
Slide 27: Our Future
OU R FUTU
Slide 28: Introduction
INTRODUCTION - Synlait has completed a review of its growth plans that is expected to result in a spend of approximately $300m over the next three years. - This includes investment in additional capacity for: — Infant formula manufacturing capability (including a new wet mix kitchen) — Consumer pack
Slide 29: Our Growth Strategy
OUR GROWTH STRATEGY - Synlait is, and will remain to be, a growth company focused on making more from milk. - Powders and Cream - Synlait will continue to focus on differentiated milk streams to grow and defend value added product opportunities for infant formula applications. — Strong focus on grow
Slide 30: Execution of Strategy
EXECUTION OF STRATEGY - Total Shareholder Return (TSR) of 65% achieved from IPO to date. - Completion of a $250m expansion programme that has seen Return on Capital Employed improve to 13.5%, and growth exceed original expectations, all within three years of IPO. - Our capability now includes: — Thr
Slide 31: Execution of Strategy
EXECUTION OF STRATEGY - Exceptional People — Built a strong team now in excess of 400 on our Dunsandel site. - Grown Supplier Base — Grown a strong milk supplier base of 200 farmers with over a half supplying differentiated milk in challenging industry conditions. - Meaningful Customer Partnerships
Slide 32: New Growth Capex Plan
NEW GROWTH CAPEX PLAN ROCE forecast to improve to circa 16% in FY20, following the conclusion of the new growth plan Wet Mix Ki chen 2 to 80, OOOMT pa. “Cream M Manufacturing nt 40 oe : rye oe Manufacturing capability to support value added cream 7 : trategy Swerour cee tenet et neeeeee oe cette bet
Slide 33: Funding and Entitlement Offer
FUNDING AND ENTITI ENT OFF
Slide 34: Funding
FUNDING - Synlait is targeting a shadow BBB credit rating and leverage below 3x during the growth capex period and below 2.5x long term. - Synlait currently has term debt facilities of $175m, reducing by $30m each August, maturing 1 August 2020. - Synlait also has working capital facilities totallin
Slide 35: ASX Dual Listing
ASX DUAL LISTING - The Board has approved Synlait to pursue an ASX Foreign Exempt Listing - Synlait expects to commence trading on the ASX during 2016 - Increasing interest from Australian investors makes the ASX listing a logical move - More Australian investors will help broaden and diversify Synl
Slide 36: aNIDIIC
aNIDIIC © Syniait 2016
Slide 37: Appendix
APPENDIX 1 © Syniait 2016
Slide 38: IPO Growth Capex Programme
IPO GROWTH CAPEX PROGRAMME Dryer 3 - Actual spend $132.1m* (IPO budget $103.5m). - Increased capacity to 8.5MT/hr of infant powder from 5-6MT/hr. - Commissioned on time in September 2015, within revised budget for larger dryer of $135m. First full year of production will be FY17. * Actual spend excl
Slide 39: IPO Growth Capex Programme
IPO GROWTH CAPEX PROGRAMME Drystore Actual spend $17.1m* (IPO budget $19.5m). Accelerated programme to build one 22,500m2 drystore ahead of original plans to build two 10,000m2 drystores over time. Saving $2.5m. Commissioned on time and ahead of budget and operating at capacity. * Actual spend exclu
Slide 40: Appendix
APPENDIX 2 © Syniait 2016
Slide 41: Appendix: International Offer Restrictions
APPENDIX International Offer Restrictions This presentation does not constitute an offer of New Shares in any jurisdiction in which it would be unlawful. In particular, this presentation may not be distributed to any person, and the New Shares may not be offered or sold, in any country outside New Z
Slide 42: Appendix: European Economic Area
APPENDIX European Economic Area — Luxembourg and Netherlands The information in this presentation has been prepared on the basis that all offers of New Shares will be made pursuant to an exemption under the Directive 2003/71/EC ("Prospectus Directive"), as amended and implemented in Member States of
Slide 43: Appendix: Hong Kong
APPENDIX No advertisement, invitation or document relating to the New Shares has been or will be issued, or has been or will be in the possession of any person for the purpose of issue, in Hong Kong or elsewhere that is directed at, or the contents of which are likely to be accessed or read by, the
Slide 44: Appendix: Singapore
APPENDIX Singapore This presentation and any other materials relating to the New Shares have not been, and will not be, lodged or registered as a prospectus in Singapore with the Monetary Authority of Singapore. Accordingly, this presentation and any other document or materials in connection with th
Slide 45: Appendix: United Kingdom
APPENDIX United Kingdom Neither the information in this presentation nor any other document relating to the offer has been delivered for approval to the Financial Conduct Authority in the United Kingdom and no prospectus (within the meaning of section 85 of the Financial Services and Markets Act 200
Slide 46: Thank You
synlait’ THANK YOU Visit our Investor Centre at www.synlait.com for more information. Media or investor queries can be directed to: Dan Walraven Communications Manager Synlait Milk Limited P: +64 3 373 3069 E: daniel.walraven@synlait.com © Syniait 2016
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