Synlait Milk Ltd. · NZX:SML
Synlait Milk — Shareholder Meeting (November 2017)
37 slides from Synlait Milk's shareholder meeting presentation, Nov 29, 2017
Slide 1: Delivering 2017 Annual Meeting of Shareholders
DELIVERING 2017 ANNUAL MEETING OF SHAREHOLDERS 29 NOVEMBER 2017
Slide 2: Agenda
AGENDA - WELCOME AND INTRODUCTIONS - CHAIRMAN'S ADDRESS - CHIEF EXECUTIVE OFFICER’S ADDRESS - OUR FINANCIAL RESULTS FY17 - OUR EXPECTATIONS AND FUTURE - QUESTIONS - FORMAL RESOLUTIONS - ANY OTHER BUSINESS - ANNUAL MEETING CONCLUDES ANNUAL MEETING OF SHAREHOLDERS I Synlait Milk Limited 2017 I Page 2
Slide 3: Chairman's Address
CHAIRMAN’S ADDRESS Graeme Milne CHAIRMAN ANNUAL MEETING OF SHAREHOLDERS I Synlait Milk Limited 2017 I Page 3
Slide 4: Leadership Update
LEADERSHIP UPDATE - Long-time Chief Executive Officer and founder John Penno intends to step down from his position in the next 12 months - This is part of an orderly transition to position Synlait for its next phase of growth - This is timed well with Synlait being in very healthy shape with a stro
Slide 5: Board of Directors
BOARD OF DIRECTORS Graeme Milne John Penno Hon. Ruth Richardson Bill Roest Sam Knowles Sihang Yang Qikai (Albert) Lu Min Ben CHAIR (INDEPENDENT) MANAGING DIRECTOR AND CEO NON-EXECUTIVE, BRIGHT DAIRY NON-EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR BRIGHT DAIRY APPOINTED DIRECTOR BRIGHT DAIRY APPOINTED
Slide 6: We Are a Growth Company
WE ARE A GROWTH SYNLAIT IS A B2B OVER THE PAST 1O YEARS MANUFACTURING WE HAVE GROWN FROM COMPANY FOCUSSED START-UP TO ANNUAL COMPANY ON MAKING THE MOST PRODUCTION VOLUMES OF FROM MILK. 140,000 METRIC TONNES (MT) 2006 2017 ANNUAL MEETING OF SHAREHOLDERS I Synlait Milk Limited 2017 I Page 6
Slide 7: Financial Success
FINANCIAL SUCCESS EBIT INCREASED TO NET DEBT DECREASED FROM $65.8m $214m NPAT UP $38.2m 11% TOTAL SHAREHOLDER RETURNS 34.1% (FY16: $61.1m) $83m TO GEARING DOWN FROM LEVERAGE FROM 2.6X DOWN TO 0.9X(1) 46.8% ROCE OF 13.9% (FY16: 13.5%)(2) TO 18.0% (3) Notes: (1) Leverage = net debt / EBITDA; (2) Retur
Slide 8: We Have: We Are:
- Deepening partnerships with leading brand owners. - Strong support from our 200 contracted milk suppliers. - High specification plant with high utilisation. WE HAVE: - Rigorous quality control and on-site testing. WE ARE: - Growing our well established infant formula business. New infant formula s
Slide 9: FY17 Highlights
FY17 HIGHLIGHTS SML.NZ SHARE PRICE PERFORMANCE (FY17) - Total Shareholder Return (TSR) of 34.1% achieved $4.50 during FY17 $4.30 - Key initiatives during the year included: $4.10 NZDC ACQUISTION - $98m equity raise ANNOUNCED $3.90 A2 INFANT FORMULA - Dual-listing on ASX SUPPLY AGREEMENT $3.70 ANNUAL
Slide 10: Proven Ability to Create Shareholder Value
PROVEN ABILITY TO CREATE SHAREHOLDER VALUE SML.NZ SHARE PRICE PERFORMANCE (SINCE LISTING) - Synlait has significantly outperformed the $9.00 NZX50 since listing in July 2013, up 250% whilst the NZX50 is up 77% over the same period $8.00 - Share price has increased 143% over the last $7.00 12 months(
Slide 11: In Summary
IN SUMMARY - Synlait has had a solid 12 months, delivering on many of the growth strategies established at the start of the year - Balance sheet provides a platform for future growth with capacity to undertake value enhancing opportunities and ~$300m investment programme - Continue to see significan
Slide 12: Chief Executive Officer's Address
CHIEF EXECUTIVE OFFICER’S ADDRESS John Penno MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER ANNUAL MEETING OF SHAREHOLDERS I Synlait Milk Limited 2017 I Page 12
Slide 13: Update on Strategic Targets
UPDATE ON STRATEGIC TARGETS - Investment into a second site to support future growth and initiate mitigation of single site risk with the acquisition of NZDC and establishment of Synlait Auckland. - Significant investments made: into our people with the recruitment of five new roles in the Senior Le
Slide 14: 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 15: Increasing Our Capacity and Reducing Risk
INCREASING OUR CAPACITY AND REDUCING RISK GIVEN STRONG CURRENT AND EXPECTED CUSTOMER DEMAND, WE CHOSE TO ACQUIRE 100% OF THE SHARES IN THE NEW ZEALAND DAIRY COMPANY LIMITED (NZDC). NZDC WAS CONSTRUCTING AN INFANT FORMULA-CAPABLE BLENDING AND CONSUMER PACKAGING OPERATION IN AUCKLAND. - The acquisitio
Slide 16: 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 - Second state-of-the-art canning line being
Slide 17: Unlocking Infant Formula Dryer Capacity
UNLOCKING INFANT FORMULA DRYER CAPACITY WETMIX THREE HIGH SPECIFICATION KITCHENS SPRAY DRYERS 80,000 MT 80,000 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 F
Slide 18: Improving a World Class Team
IMPROVING A WORLD CLASS TEAM - Our team has grown from 436 to nearly 600 in FY17 - Two additional shifts in the consumer packaging facility - Technical roles for the quality testing laboratory - New roles to support Integrated Business Planning (IBP) - Lifting the experience profile of our people in
Slide 19: 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 20: Our Financial Results FY17
OUR FINANCIAL RESULTS FY17 Nigel Greenwood CHIEF FINANCIAL OFFICER ANNUAL MEETING OF SHAREHOLDERS I Synlait Milk Limited 2017 I Page 20
Slide 21: Profit Growth
PROFIT GROWTH $MILLIONS - Net profit after tax was $38.2m, 10.0 (6.0) up from $34.4m in FY16. 38.2 (0.2) - Increased infant sales volumes 34.4 drove gross profit growth of $10.0m (before tax). - $6.0m was reinvested into business development and planning capabilities for future growth. 19.6 11.5 10.
Slide 22: Higher Volumes Drive Revenue Growth
HIGHER VOLUMES DRIVE REVENUE GROWTH - Revenue at $759.0m was up 39% on last year’s $546.9m, driven by increased sales volumes and improved MT SALES VOLUME BY PRODUCT CATEGORY dairy commodity prices. 18,776 - Total sales volume at 141,393 MT was 21% above last year’s 116,402 MT, due to increased milk
Slide 23: Gross Profit per MT Marginally Lower
GROSS PROFIT PER MT MARGINALLY LOWER $MILLIONS GROSS PROFIT - Continued growth in earnings driven by 110.4 100.4 improved volumes. Gross profit was up GROSS PROFIT 10% to $110.4m. - Our overall gross profit per MT at $781 was $82 per MT down on last year. $110.4m 51.0 64.2 55.5 This was due to highe
Slide 24: Continued Cash Flow Growth
CONTINUED CASH FLOW GROWTH $MILLIONS OPERATING CASH FLOW 115.2 - Operating cash flow increased by 104.4 $10.8m from FY16, to $115.2m in FY17. OPERATING CASH FLOW 58.7 - Operating cash flow was greater than EBITDA given rising milk prices, relative to the advance rates paid. $115.2m 16.4 - An offsett
Slide 25: Debt Reduction
DEBT REDUCTION $MILLIONS NET DEBT - Net debt has decreased from $213.9m in FY16 to $82.6m. (213.9) 115.2 (12.1) 96.1 - The capital raise of $97.6m completed in October 2016 and (33.9) strong operating cash flows of $115.2m were the main drivers. (33.1) - These factors vastly outweighed the investmen
Slide 26: Our Expectations and Future
OUR EXPECTATIONS AND FUTURE ANNUAL MEETING OF SHAREHOLDERS I Synlait Milk Limited 2017 I Page 26
Slide 27: Going Forward
GOING FORWARD - We see considerable opportunities to solidify our current ingredient and infant formula positions and to enter new categories. - To date our strategy has been exclusively business to business. In future, we may consider the establishment of branded positions, where: - there is no con
Slide 28: 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 29: Questions
QUESTIONS Graeme Milne CHAIRMAN ANNUAL MEETING OF SHAREHOLDERS I Synlait Milk Limited 2017 I Page 29
Slide 30: Formal Resolutions
FORMAL RESOLUTIONS Graeme Milne CHAIRMAN ANNUAL MEETING OF SHAREHOLDERS I Synlait Milk Limited 2017 I Page 30
Slide 31: Formal Resolutions: Resolution 1 Auditor's Remuneration
FORMAL RESOLUTIONS RESOLUTION 1: To consider and, if thought fit, pass the following as an ordinary resolution: AUDITOR’S “That the Board be authorised to determine the auditor’s fees and expenses REMUNERATION. for the 2018 financial year.” ANNUAL MEETING OF SHAREHOLDERS I Synlait Milk Limited 2017
Slide 32: Formal Resolutions: Resolution 2 Election of Director
FORMAL RESOLUTIONS RESOLUTION 2: To consider and, if thought fit, pass the ELECTION OF following as an ordinary resolution: DIRECTOR. “That Bill Roest be re-elected as a Director.” Bill Roest ANNUAL MEETING OF SHAREHOLDERS I Synlait Milk Limited 2017 I Page 32
Slide 33: Formal Resolutions: Resolution 3 Directors' Remuneration
FORMAL RESOLUTIONS RESOLUTION 3: To consider and, if thought fit, pass the following as an ordinary resolution: DIRECTORS’ “That the annual fee for each Director be $80,000, except for the annual REMUNERATION. fees of each of the two Committee Chairs which will be $92,000 and the Chairman of the Boa
Slide 34: Any Other Business
ANY OTHER BUSINESS Graeme Milne CHAIRMAN ANNUAL MEETING OF SHAREHOLDERS I Synlait Milk Limited 2017 I Page 34
Slide 35: Investor 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 ANNUAL MEETING OF SHAREHOLDERS I Synlait Milk Limited 2017 I Page 35
Slide 36: Appendix
APPENDIX ANNUAL MEETING OF SHAREHOLDERS I Synlait Milk Limited 2017 I Page 36
Slide 37: Director Remuneration and Attendance
DIRECTOR REMUNERATION AND ATTENDANCE The total remuneration and other benefits to Directors (and past Directors) for services to the company and the subsidiaries for the year ended 31 July 2017 are stated in the following table. There were 7 Board meetings, 5 Audit and Risk (A&R), and 3 Remuneration