Rcl Foods Limited · JSE:RCL
Rcl Foods — FY2019 Earnings Presentation
53 slides from Rcl Foods's earnings presentation, Sep 2, 2019
Slide 1: Investor Presentation: Results for the Year Ended June 2019
2019 INVESTOR PRESENTATION: 2 SEPTEMBER 2019 RESULTS FOR THE YEAR ENDED JUNE 2019
Slide 2: Miles Dally, Chief Executive Officer
MILES DALLY CHIEF EXECUTIVE OFFICER
Slide 3: Headlines – Results for the Twelve Months Ended June 2019
Salient features | Strategic overview | Financial review | Operational reviews | Prospects HEADLINES – RESULTS FOR THE TWELVE MONTHS ENDED JUNE 2019 CONTEXT: RCL FOODS SIGNIFICANTLY IMPACTED BY SUGAR AND CHICKEN INDUSTRY HEADWINDS Subdued economic growth, rising unemployment rates and declining real
Slide 4: Headlines – Performance Headlines
Salient features | Strategic overview | Financial review | Operational reviews | Prospects HEADLINES – RESULTS FOR THE TWELVE MONTHS ENDED JUNE 2019 PERFORMANCE HEADLINES: RESULTS MATERIALLY DISTORTED BY SUGAR AND CHICKEN DECLINES Revenue up 5.5% driven by volume growth REVENUE R25.9bn 5.5% EBITDA d
Slide 5: Focus on Sustainable Quality of Earnings
Salient features | Strategic overview | Financial review | Operational reviews | Prospects FOCUS ON SUSTAINABLE QUALITY OF EARNINGS DOUBLE DIGIT GROWTH IN GROCERIES AND MILLBAKE OFFSET BY CRISES EXPERIENCED IN SUGAR AND CHICKEN EBITDA (Rm) & GROWTH (%) PER CATEGORY CLUSTER Market share growth in key
Slide 6: Twelve Months to June 19 Results
Salient features | Strategic overview | Financial review | Operational reviews | Prospects TWELVE MONTHS TO JUNE 2019 RESULTS EBITDA MARGIN ROIC Groceries: Continued growth driven by market share SUMMARY SUMMARY gains in key categories, improved volumes and gross margins 10.6% 10.7% MillBake: Turn-a
Slide 7: 1. Grow Through Strong Brands
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 1. GROW THROUGH STRONG BRANDS KEY ACHIEVEMENTS Groceries volumes demonstrated solid growth, driving an improved Groceries profitability performance ahead of the market Our brand strategies and investment in br
Slide 8: 2. Partner with Strategic Customers
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 2. PARTNER WITH STRATEGIC CUSTOMERS KEY ACHIEVEMENTS We leveraged our capabilities to provide both our retail and foodservice customers with a growing and profitable portfolio of solutions These achievements i
Slide 9: 3. Extend Our Leading Value Chain
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 3. EXTEND OUR LEADING VALUE CHAIN KEY ACHIEVEMENTS We assumed the shared services responsibility for the Spreads business of Siqalo Foods Proprietary Limited (a 100% owned subsidiary of Remgro Limited). Our si
Slide 10: 4. Inspire Great People
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 4. INSPIRE GREAT PEOPLE KEY ACHIEVEMENTS We continued to progress towards improving diversity and inclusion in the organisation. Employment equity candidates made up 80% of external hires at executive level an
Slide 11: 5. Expand into the Rest of Africa
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 5. EXPAND INTO THE REST OF AFRICA KEY ACHIEVEMENTS We narrowed our focus to Southern Africa, paired with our ambition to grow exports. We adopt a low-risk expansion strategy in Africa via only acquiring or est
Slide 12: 6. Drive Sustainable Business
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 6. DRIVE SUSTAINABLE BUSINESS KEY ACHIEVEMENTS We continue to lead the transformation agenda in our Sugar operations. 1.8 million tons of sugarcane were delivered by small-scale farmers, joint ventures and lan
Slide 13: Key Deliverables: Sustainable Quality of Earnings
Salient features | Strategic overview | Financial review | Operational reviews | Prospects KEY DELIVERABLES: SUSTAINABLE QUALITY OF EARNINGS In Sugar, we will accelerate stakeholder engagement to strive for industry wide interventions, including a review of industry structures. Internally, we will a
Slide 14: Rob Field, Chief Financial Officer
ROB FIELD CHIEF FINANCIAL OFFICER
Slide 15: Operating Environment
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING ENVIRONMENT Health Promotion Levy (sugar tax) and changing consumer perceptions of sugar place local sugar industry in crisis Oversupplied chicken market due to the impact of dumped imports stemming
Slide 16: Financial Summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects FINANCIAL SUMMARY DESPITE A 5.5% INCREASE IN REVENUE, EBITDA DECLINED 25.4%, WHILST HEADLINE EARNINGS WAS DOWN 60.7% INCOME STATEMENT JUNE 2019 JUNE 2018 % VAR Revenue* Rm 25 887.5 24 528.0 5.5 EBITDA Rm 1 525
Slide 17: Operating Results Summary (Rm)
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY (Rm) EBITDA DOWN 25.4% DRIVEN BY DECLINES IN SUGAR & CHICKEN 25.4% 80.8 33.1% 2 046.0 78.2 2 004.0 334.3 101.4 62.0 UNDERLYING EBITDA DOWN 33.1% Refer slides 6 and 7 of the Appendices
Slide 18: Headline Earnings Waterfall (Rm)
Salient features | Strategic overview | Financial review | Operational reviews | Prospects HEADLINE EARNINGS WATERFALL (Rm) 1 525.7 1 555.0 JUNE 2019 R761.9m Sugar Impairment Materially impacted by: • Unrecognised deferred tax assets (R51.8m) • Non-deductible IFRS 2 expenses (R38.9m) 553.9 19.8 94.0
Slide 19: Operating Results Summary – Segmental Analysis
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY SEGMENTAL ANALYSIS – REVENUE AND EBITDA REVENUE (Rm) JUNE 2019 JUNE 2018* % VAR Consumer 12 965.0 12 752.9 1.7 Sugar & Milling 14 935.3 13 668.9 9.3 Logistics 2 182.8 1 980.0 10.2 Gro
Slide 20: Operating Results Summary – ex Sugar & Chicken
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY – ex Sugar & Chicken SUGAR & CHICKEN RESULTS SEVERELY IMPACTED BY MARKET CONDITIONS. GROUP EBITDA EX SUGAR & CHICKEN UP 7.8% EBITDA JUNE 2019 JUNE 2018 % VAR Consumer (Ex Chicken) Rm
Slide 21: Sugar Impairment
Salient features | Strategic overview | Financial review | Operational reviews | Prospects SUGAR IMPAIRMENT Non-cash impairment loss of R761.9m recognised for the The following table highlights the range of key Sugar cash-generating unit assumptions applied in the impairment calculation that gave ri
Slide 22: Cash Flow Summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects CASH FLOW SUMMARY CASH DOWN R1 373.8M (108.7%) LOWER PROFITS, R502M DEBT REPAYMENT & HIGHER WORKING CAPITAL REQUIREMENTS DROVE DECLINE Rm JUNE 2019 JUNE 2018 % VAR Opening balance* 1 263.4 1 053.8 19.9 Operati
Slide 23: Working Capital
Salient features | Strategic overview | Financial review | Operational reviews | Prospects WORKING CAPITAL WORKING CAPITAL UP 28.3%, DRIVEN BY A DECREASE IN SHORT-TERM FUNDING FROM SASA AND HIGHER STOCKS WORKING CAPITAL (Rm) JUNE 2019 JUNE 2018 % VAR NET WORKING CAPITAL AS A % OF REVENUE TRADE RECEI
Slide 24: Working Capital – Trade and Other Receivables and Payables
Salient features | Strategic overview | Financial review | Operational reviews | Prospects WORKING CAPITAL – TRADE AND OTHER RECEIVABLES AND PAYABLES ADJUSTING FOR THE ITEMS BELOW, RECEIVABLES AND PAYABLES ARE REASONABLE IN RELATION TO THE PRIOR YEAR TRADE AND OTHER RECEIVABLES (Rm) JUNE 2019 JUNE 2
Slide 25: Capital Expenditure
Salient features | Strategic overview | Financial review | Operational reviews | Prospects CAPITAL EXPENDITURE TOTAL CAPEX SPEND UP R302.3M EXPANSION (Rm) REPLACEMENT (Rm) Capital expenditure (including intangibles) was R1 151.4m (2018: R849.1m) Major spend items in the current period included: • Co
Slide 26: Return on Invested Capital (ROIC) at June
Salient features | Strategic overview | Financial review | Operational reviews | Prospects RETURN ON INVESTED CAPITAL (ROIC) AT JUNE GROUP ROIC DECLINES TO NEGATIVE 0.8% MAINLY DRIVEN BY DECLINE IN SUGAR & CHICKEN PROFITABILITY Reported Group Consumer Sugar & Milling Logistics Ex Sugar & Chicken ROI
Slide 27: Debt Package
Salient features | Strategic overview | Financial review | Operational reviews | Prospects DEBT PACKAGE DEBT PACKAGE RESTRUCTURED IN DECEMBER 2018 AT LOWER INTEREST RATES INTEREST RATE OF 3M JIBAR + MARGIN OF 1.5% TO 1.55% OVER 5 YEAR TERM TERM VALUE (Rm) YEAR 1 (DEC 19)* YEAR 2 (DEC 20) YEAR 3 (DEC
Slide 28: Debt Covenants
Salient features | Strategic overview | Financial review | Operational reviews | Prospects DEBT COVENANTS DESPITE THE DECLINE IN PROFITABILITY, RCL FOODS STILL REMAINS WELL WITHIN COVENANT REQUIREMENTS Required covenant ratios were revised on restructuring of the debt package in December 2018 COVENA
Slide 29: David Tubb, Commercial Director, Consumer Division
DAVID TUBB COMMERCIAL DIRECTOR CONSUMER DIVISION
Slide 30: Operational Review: Consumer
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CONSUMER REVENUE (Rm) JUNE 2019 JUNE 2018* % VAR Consumer 12 965.0 12 752.9 1.7 Sugar & Milling 14 935.3 13 668.9 9.3 Logistics 2 182.8 1 980.0 10.2 Group** 101.6 Sales between segments (4
Slide 31: Operational Review: Consumer – Groceries Ahead of the Market
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CONSUMER GROCERIES PERFORMANCE AHEAD OF THE MARKET REVENUE (Rm) JUNE 2019 JUNE 2018 % VAR Groceries1 5 399.8 5 244.9 3.0 HEADLINES • Market pressures faced by Chicken more than Chicken 6 73
Slide 32: Operational Review: Consumer – Underlying EBITDA
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CONSUMER UNDERLYING EBITDA RESULT OF R699.0M, DOWN 30.4% ON PRIOR YEAR GROCERIES (Rm) JUNE 2019 JUNE 2018 % VAR EBITDA 639.6 518.4 23.4 HEADLINES • Underlying EBITDA removes the impact IFRS
Slide 33: Operational Review: Groceries – Culinary Market Share
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES GROCERY: CULINARY MARKET SHARE 12MM 12MM (VOLUME) JUNE 2018 JUNE 2019 Our Culinary brands continue to power ahead, delivering 43.2% 48.6% a strong set of results on the back of so
Slide 34: Operational Review: Groceries – Pet Food Market Share
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES GROCERY: PET FOOD MARKET SHARE 12MM 12MM (VOLUME) JUNE 2018 JUNE 2019 Our investment in a new, state of the art pet food 32.7% 34.1% facility enabled the category to roll out an e
Slide 35: Operational Review: Groceries – Pies
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES PIES Despite the impact of a fire at the Pies bakery, the business unit delivered another outstanding year of growth Strong demand was driven by a clear front-end investment plan
Slide 36: Operational Review: Groceries – Beverages
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES BEVERAGES 2019 was a year focused on reviving the core in an extremely competitive beverage market Whilst strong front-end support coupled with a revised pricing strategy were ins
Slide 37: Operational Review: Groceries – Speciality
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES SPECIALITY A restructure of the Speciality business in 2019 to focus on Bakery capability resulted in the disposal of our Bronkhorstspruit Prepared plant and the relocation of des
Slide 38: Operational Review: Chicken – Imports
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CHICKEN CHICKEN IMPORTS – BONE-IN PORTIONS – TONS PER MONTH 40 000 35 000 Chicken’s decline in performance was a result of a tough trading year underpinned by muted retail demand 30 000 ste
Slide 39: Operational Review: Chicken
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CHICKEN CHICKEN Whilst the mainstream category remains volatile, we remain committed to growing the more stable Foodsolutions and Retail Added-Value channels The Foodsolutions channel has c
Slide 40: Paul Cruickshank, Managing Director, Sugar & Milling Division
PAUL CRUICKSHANK MANAGING DIRECTOR SUGAR & MILLING DIVISION
Slide 41: Operational Review: Sugar & Milling
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR & MILLING REVENUE (Rm) JUNE 2019 JUNE 2018* % VAR Consumer 12 965.0 12 752.9 1.7 Sugar & Milling 14 935.3 13 668.9 9.3 Logistics 2 182.8 1 980.0 10.2 Group** 101.6 Sales between segme
Slide 42: Operational Review: Sugar & Milling – Divisional Results
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR & MILLING SUGAR’S ADVERSE PERFORMANCE CASTS A SHADOW OVER DIVISIONAL RESULTS REVENUE (Rm) JUNE 2019 JUNE 2018* % VAR Sugar 5 692.8 5 419.9 5.0 HEADLINES • A structural change in the s
Slide 43: Operational Review: Sugar & Milling – Underlying EBITDA
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR & MILLING UNDERLYING EBITDA RESULT OF R488.8M, DOWN 39.5% ON PRIOR YEAR (UP 9.6% EXCLUDING SUGAR) ANIMAL FEED (Rm) JUNE 2019 JUNE 2018 % VAR EBITDA 295.8 319.5 (7.4) HEADLINES IFRS 9
Slide 44: Operational Review: Sugar
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR Reduced demand, stemming from the Health Promotion Levy (sugar tax), batters sugar industry Tariff has slowed deep-sea imports, however Eswatini imports continue growing and prove tro
Slide 45: Operational Review: MillBake
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: MILLBAKE SAFEX WHEAT PRICE (R/ton) A solid performance in Baking with improved volume and 44 900.0 900.0000 F18 F19 margins despite 9.8% wheat price increase AVG Price R4 000 9.8% AVG Price
Slide 46: Operational Review: Animal Feed
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: ANIMAL FEED YELLOW MAIZE PRICE (R/ton) The market remained fiercely competitive into the second half of the year 3100 3 100.0 F18 F19 AVG Price 25.2% AVG Price 2900 2 900.0 R2 014 R2 522 Ra
Slide 47: Chris Creed, Managing Director, Logistics Division
CHRIS CREED MANAGING DIRECTOR LOGISTICS DIVISION
Slide 48: Operational Review: Logistics
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: LOGISTICS LOGISTICS EBITDA MARGIN NEGATIVELY IMPACTED BY COST HEADWINDS FACED REVENUE (Rm) JUNE 2019 JUNE 2018* % VAR HEADLINES Consumer 12 965.0 12 752.9 1.7 • Pleasing revenue performance
Slide 49: Pleasing Revenue Performance in Line with Mitigation Strategy
Salient features | Strategic overview | Financial review | Operational reviews | Prospects PLEASING REVENUE PERFORMANCE IN LINE WITH MITIGATION STRATEGY SOLID RETAIL REVENUE PERFORMANCE DUE TO NEW Good progress has been made on the mitigation strategy to BUSINESS DESPITE MUTED RETAIL VOLUMES offset
Slide 50: Cost Pressures Erode Logistics Margin
Salient features | Strategic overview | Financial review | Operational reviews | Prospects COST PRESSURES ERODE LOGISTICS MARGIN EBITDA declined 42.0% to R118.5m as a result of the cost pressures faced during the period under review Fuel costs increased well above expected levels with a spate of pri
Slide 51: Logistics Well Positioned for the Future
Salient features | Strategic overview | Financial review | Operational reviews | Prospects LOGISTICS WELL POSITIONED FOR THE FUTURE Logistics implemented a mitigation strategy to offset the Chicken restructure during the 2018 financial year, with focus on winning new business and cost optimisation i
Slide 52: Prospects
PROSPECTS
Slide 53: Prospects
Salient features | Strategic overview | Financial review | Operational reviews | Prospects PROSPECTS Sugar expects to remain under significant pressure with local market demand in decline, urgent interventions are required at an industry level to ensure local industry’s sustainability Sugar’s focus