Sanford Limited · NZX:SAN
Sanford — H1 FY2022 Earnings Presentation
37 slides from Sanford's earnings presentation, May 19, 2022
Slide 1: Results Briefing for the Six Months Ended 31 March 2022
RESULTS BRIEFING FOR THE SIX MONTHS ENDED 31 MARCH 2022 19.05.22
Slide 2: Disclaimer
DISCLAIMER Important Notice This presentation contains not only a review of operations and information about Sanford Limited (the Company), but also contains some forward-looking statements about the Company and the environment in which it operates. This disclaimer applies to this presentation and a
Slide 3: Half Year (HY22) Results Summary
HALF YEAR (HY22) RESULTS SUMMARY
Slide 4: H1 FY22 Summary
H1 FY22 SUMMARY Market Conditions Have Improved • In-Market conditions are improving with pricing and demand lifting across most categories • Revenue up 16% to $271m from $234m last half year • NPAT of $6.1m vs $13.8m for last year, which included a $13.4m one off gain • Adjusted EBIT of $19.2m, a 7
Slide 5: HY22 Results Snapshot
HY22 RESULTS SNAPSHOT Recovery in challenging conditions Catch/Harvest Volume Sales Volume Revenue Adjusted EBIT1 51.6k GWT 48.6k GWT $270.9M $19.2M flat -11% 16% 79% 1 Adjusted EBIT / GW kg Adjusted EBITDA NPAT EPS No Interim 39₵ $32.5M $6.1M 7CPS Dividend 20₵/kg 26% -56%2 -8₵2 flat Note: Comparati
Slide 6: Improved Profitability Driven by Wildcatch
IMPROVED PROFITABILITY DRIVEN BY WILDCATCH Key drivers of Adjusted EBIT change vs H1 FY21 NZD $M Wildcatch drivers +$12m Salmon drivers +$0.1m Mussel drivers +$0.1m Group drivers -$4.0m 6
Slide 7: Gross Margin Improving
GROSS MARGIN IMPROVING Gross Margin % • Gross margin is recovering • Rising global seafood prices key driver 21.0% of increase 19.0% 19.7% 19.4% • Growth constrained through rising 17.0% 17.8% costs 17.6% • Cost increases impacting business, 15.0% predominantly: 14.2% 14.6% 13.0% • labour costs, ove
Slide 8: HY22 Balance Sheet and Cash Flow
HY22 BALANCE SHEET AND CASH FLOW Balance Sheet remains strong, debt levels contained Gearing1 Net Debt Net Debt / Adjusted EBITDA4 $175.6M 3.0X 21.9% -3% vs Mar 21 Mar 21 | 3.3x Mar 21 | 23.8% Total Equity Return on Average Total Equity4 $646.1M 1.0% 1.7% vs Mar 21 Mar 21 | 2.2% Operating Cashflow O
Slide 9: Geographic Diversity of Sales by Revenue
GEOGRAPHIC DIVERSITY OF SALES BY REVENUE ($) Revenue by geographic distribution - H1 FY22 vs. H1 & H2 FY211 • Diverse footprint allows 42% 41% us to move sales around 39% as markets change • Australia impacted by Covid-19 lockdowns • Food services reopened and recovered in China 19% and North Americ
Slide 10: Seafood Inventory Trending Downward
SEAFOOD INVENTORY TRENDING DOWNWARD Inventory Volume (PWT) Inventory Value ($m)** H1 FY22 vs H1 FY21 decrease -18% H1 FY22 vs H1 FY21 YOY decrease -31% $74.8 $72.2 12.2 10.4 10.4 $58.9 8.5 $50.1 * Wildcatch Inventory includes stock on board vessels not yet available for sales 10 ** Inventory value d
Slide 11: Debt Well Managed in Challenging Times
DEBT WELL MANAGED IN CHALLENGING TIMES Net Debt ($m) • Successful management of debt 200 through Covid challenged trading period 180 • Strong headroom between debt used 184 181 179 176 and available facilities 160 • Certain facilities renewed in period 158 • Positive position for the funding of 140
Slide 12: Capital Expenditure in H1 FY22 vs FY21
CAPITAL EXPENDITURE IN H1 FY22 VS FY21 • Spend aligned to business performance for next 18 months, with integrity capex prioritised • We maintain an eye on the future and will respond accordingly H1 FY22 H1 FY21 Integrity $16m $15m Vessel surveys (incl. San Discovery) $11m Vessel surveys (incl. San
Slide 13: Environmental, Social, Governance (ESG) – H1 FY22 Summary
ENVIRONMENTAL, SOCIAL, GOVERNANCE (ESG) – H1 FY22 SUMMARY Climate Ocean and Environment • Seafood sector wide climate adaptation • Full support of cameras on fishing vessels to strategy (2021-2030) launched ensure transparency of our work to the • Mapped our own emissions reduction pathway community
Slide 14: People Engagement Score Improved Through Covid
PEOPLE ENGAGEMENT SCORE IMPROVED THROUGH COVID ‘Mullet Over’ engagement survey results Feb 20 – Mar 22 80% • More engaged staff are more 75% 77% 75% 76% 75% motivated and therefore safer and 70% 73% more productive • Drives higher returns 65% • Attracts and retains talent 60% • Engagement remains st
Slide 15: Update by Division
UPDATE BY DIVISION
Slide 16: Wildcatch H1 FY22
WILDCATCH H1 FY22 Decline in volume offset by improved pricing 16 * Profit contribution is Adjusted EBIT before head office overheads
Slide 17: Wildcatch H1 FY22
WILDCATCH H1 FY22 Positives Challenges Average wildcatch pricing +30% higher than 20% decrease in sales volumes impacted by a HY21, driving improved margin late start to the squid season and lapping Scampi performed strongly with volumes +22% clearance of a year ago and pricing +59% Impact o
Slide 18: Wildcatch H1 FY22
WILDCATCH H1 FY22 Pricing significantly improving across key species offsetting volume decline. Inventory normalised. INVENTORY GWT (000's) 18 16.4 16 15.1 14.3 14 12.6 13.0 11.9 12 11.3 11.5 10.2 10.4 9.6 9.0 9.4 9.0 GWT (000's) 10 8 6 4 2 - FY19 FY19 FY19 FY19 FY20 FY20 FY20 FY20 FY21 FY21 FY21 FY
Slide 19: Greenshell Mussels H1 FY22
GREENSHELL MUSSELS H1 FY22 Pricing improved as global food service channel recovering. Volume uplift partly restrained by processing capacity constraints. 19 * Profit contribution is Adjusted EBIT before head office overheads
Slide 20: Greenshell Mussels H1 FY22
GREENSHELL MUSSELS H1 FY22 Positives Challenges Pricing +28% on a product weight basis, as global Impact of Covid on processing capacity due to limited food service channels recover labour availability, impacting potential growth in half shell Halfshell (+21%) driving total volume recovery vol
Slide 21: Greenshell Mussels H1 FY22
GREENSHELL MUSSELS H1 FY22 Pricing uplift relative to Covid impacted lows. Inventory levels normalised. INVENTORY GWT 14 12.4 12.8 11.7 12 10 8.5 8.6 GWT (000's) 8 7.1 6 5.1 5.5 5.5 5.1 4.9 4.9 4.5 3.9 4 2 - FY19 FY19 FY19 FY19 FY20 FY20 FY20 FY20 FY21 FY21 FY21 FY21 FY22 FY22 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q
Slide 22: Salmon H1 FY22
SALMON H1 FY22 Sales and pricing continue to perform strongly. Profitability constrained by biomass YOY movements largely attributable to timing. 22 * Profit contribution is Adjusted EBIT before head office overheads
Slide 23: Salmon H1 FY22
SALMON H1 FY22 Positives Challenges Strong volume growth +17% mainly from Big Glory Elevated mortality and lower growth rates across the Bay branded products summer due adverse climatic conditions Pricing +16% compared to HY21 Increased feed cost due to inflation Installation of portioning
Slide 24: Salmon H1 FY22
SALMON H1 FY22 Pricing uplift driven by favourable mix/BGB growth. Inventory levels well managed. 24
Slide 25: Looking Forward
\ | , LOOKING FOWARD he a
Slide 26: Global Demand Now Back (Slightly Above) Pre 2019 Levels
GLOBAL DEMAND NOW BACK (SLIGHTLY ABOVE) PRE 2019 LEVELS 26 Data source: Open Table state-of-the-industry, sample of 20,000 restaurants
Slide 27: FY22 Business Plan – Steps to Enable Our Recovery
FY22 BUSINESS PLAN – STEPS TO ENABLE OUR RECOVERY Covid has been a shock to the Business, FY22 is about business recovery and investment for growth P R I O R I T I ES F O R F Y 2 2 1. Rebuild mussel profitability 2. Grow developing opportunities in wildcatch 3. Retain salmon profitability and prepar
Slide 28: Priority 1 – Rebuild Mussel Profitability
PRIORITY 1 – REBUILD MUSSEL PROFITABILITY • Demand has increased across all international markets and prices are lifting from Covid low towards pre-Covid highs • Alternate revenue streams - marine extracts facility under construction, completion expected 4th quarter 2022 • Lower value contracted sal
Slide 29: Priority 2 – Grow Developing Opportunities in Wildcatch
PRIORITY 2 – GROW DEVELOPING OPPORTUNITIES IN WILDCATCH • Development of direct scampi sales into China to fulfil strong latent demand • Focus on diversification of sales by country and channel, targeting the higher value foodservice market • Sanford and Sons frozen product development and channel d
Slide 30: Priority 3 – Retain Salmon Profitability and Prepare for Future Growth
PRIORITY 3 – RETAIN SALMON PROFITABILITY AND PREPARE FOR FUTURE GROWTH • Big Glory Bay investment and growth – now over 45% of salmon revenue • Channel diversification now allowing sizing matched to markets (helps with smaller fish) • Introduction of automation with deboning and portioning capabilit
Slide 31: Priority 4 – Establish Cross-Business Fundamentals
PRIORITY 4 – ESTABLISH CROSS-BUSINESS FUNDAMENTALS • Divisional management team introduced with increased accountability • Project management function implemented – promoting executional excellence • Developing a performance culture • Risk management part of all investment decisions 31
Slide 32: Looking Forward - Second Half 2022
LOOKING FORWARD - SECOND HALF 2022 Positives Challenges Strong export prices and demand continue Domestic labour challenges impacting ability to meet Leadership changes embedded increased demand Increased Snapper 8 quota Inshore Covid impact risk including operational/people Key capital
Slide 33: Looking Forward Questions?
LOOKING FOWARD QUESTIONS?
Slide 34: Looking Forward Close
LOOKING FOWARD CLOSE CLOSE
Slide 35: Appendix 1: USD FX Hedging Pattern for the Year
APPENDIX 1 : USD FX HEDGING PATTERN FOR THE YEAR USD EXCHANGE RATE 2022 HALF YEAR Actual Achieved 2021/2022 2021/2022 Spot Rates Ave Effective 2021/2022 0.7200 0.7100 0.7000 0.6900 0.6800 0.6700 0.6600 0.6500 0.6400 0.6300 0.6200 Sep Oct Nov Dec Jan Feb Mar 35
Slide 36: Appendix 2: HY22 Financial Results - GAAP to Non GAAP Reconciliation
APPENDIX 2 : HY22 FINANCIAL RESULTS - GAAP TO NON GAAP RECONCILIATION Non-GAAP Profit measures Sanford’s standard profit measure prepared under New Zealand GAAP is net profit. Sanford have used non-GAAP measures when discussing financial performance in this document. The Directors and management bel
Slide 37: Thank You
THANK YOU