Elders Limited · ASX:ELD
Elders — FY2019 Earnings Presentation
40 slides from Elders's earnings presentation, Nov 11, 2019
Slide 1: Elders Limited FY19 Year End Results Presentation
Elders Limited FY19 Year End Results Presentation 11 November 2019
Slide 2: Disclaimer and Important Information
DISCLAIMER AND IMPORTANT INFORMATION Forward looking statements This presentation is prepared for informational purposes only. It contains forward looking statements that are subject to risk factors associated with the agriculture industry many of which are beyond the control of Elders. Elders’ futu
Slide 3: Agenda
FY19 YEAR END RESULTS PRESENTATION AGENDA ▪ FY19 Summary…………………………………..…4 ▪ Delivery Against Our FY19 Priorities…………..…5 ▪ FY19 Financial Performance………………….…..6 ▪ By Product ▪ By Geography ▪ Capital ▪ Cash Flow ▪ Net Debt ▪ FY20 Market Outlook…………………………..…11 ▪ Strategic Priorities…………………………….…..12
Slide 4: FY19 Financial Performance: Summary
FY19 FINANCIAL PERFORMANCE: SUMMARY Underlying profit after tax in line with FY18, confirming the resilience of Elders’ business model across the agricultural cycle FY19 FY18 Year-on-Year Change Financial Metric Result ($m) Result ($m) Direction $m % Sales revenue 1,667.3 1,599.4 67.9 4% Underlying
Slide 5: Delivery Against Our FY19 Priorities
DELIVERY AGAINST OUR FY19 PRIORITIES During the past year, we remained focused on investing in our Eight Point Plan Safety Operational Key Efficiency and Performance Performance Relationships Growth ▪ 9 lost time injuries (LTI), ▪ $63.6m underlying NPAT, ▪ New and extended relationship ▪ Acquisition
Slide 6: FY19 Financial Performance: Product
FY19 FINANCIAL PERFORMANCE: PRODUCT Earnings from recent acquisitions offsetting lower Rural Products margin due to reduced summer cropping and reduced Agency margin from lower wool volumes Product margin 10.2 6.0 5.2 0.3 0.9 6.3 0.2 5.1 0.8 63.6 63.6 FY18 Agency Real Estate Financial Feed and Digit
Slide 7: FY19 Financial Performance: Geography
FY19 FINANCIAL PERFORMANCE: GEOGRAPHY Lower contribution from Northern and Southern Australia has been offset by acquisitions during the year 10.2 9.1 7.2 0.9 5.4 0.1 0.3 63.6 63.6 Northern Southern Western Interest, tax FY19 FY18 Acquisitions International Corporate and Australia1 Australia Austral
Slide 8: FY19 Financial Performance: Capital
FY19 FINANCIAL PERFORMANCE: CAPITAL ROC below 20% target, above on a rolling 3 year average ▪ Underlying return on capital was 18.2% as a result Underlying Return on Capital1 of: 22.8% (3yr rolling avg) o Lower earnings due to reduced wool volumes and poor summer cropping season 20% 28.6% o Increase
Slide 9: FY19 Financial Performance: Cash Flow
FY19 FINANCIAL PERFORMANCE: CASH FLOW Key drivers of operating cash flow in FY19 include the impact of acquisitions, and seasonal influences such as early timing of spring sales Working capital movements 0.4 19.5 1.0 2.5 2.2 19.0 72.1 3.3 15.0 26.3 5.5 11.2 5.6 Operating EBITDA Rural Agency Financia
Slide 10: FY19 Financial Performance: Net Debt
FY19 FINANCIAL PERFORMANCE: NET DEBT Average debt up due to increased acquisition activity and Rural Products capital usage Net Debt Net debt at balance date was $79 million lower than the prior year. This was mainly due to proceeds received from equity raised, net of transaction and capital raise c
Slide 11: FY20 Market Outlook
FY20 MARKET OUTLOOK We expect the full year impact of our acquisitions to lift company results ▪ Reduced summer cropping as dry conditions persist across north eastern and southern Australia, whilst winter cropping will increase but remain below long term average Rural Products ▪ TitanAg earnings to
Slide 12: Strategic Priorities
STRATEGIC PRIORITIES We continue to focus on executing against our second Eight Point Plan 12
Slide 13: Eight Point Plan: 3 Years to FY20 Goal
EIGHT POINT PLAN: 3 YEARS TO FY20 GOAL Deliver 5-10% growth through the cycles above 20% ROC (15-18% ROC post AIRR) EBIT FY17 to FY20 AIRR Livestock price Livestock price Other market Organic (50%) Organic (50%) Acquisition (50%) Acquisition (50%) Cost (0%) FY20 FY20 FY17 FY17 normalisation normalis
Slide 14: Balanced Growth Plan to FY20
BALANCED GROWTH PLAN TO FY20 Organic Acquisition Maintain Cost 50% 50% ▪ Capture more margin through backward ▪ Continue to evaluate acquisition opportunities ▪ Derive efficiency gains through active cost integration and stronger buying power post to expand our business, focusing on those management
Slide 15: Strategic Opportunities
STRATEGIC OPPORTUNITIES Stable platform geared for the next wave of growth, under the second Eight Point Plan, including 20 new branches Key gaps in market, geographical, product and service areas to be filled through organic growth and acquisition, with 20 new branches by 2020 Rural Products ▪ Incr
Slide 16: Appendix
APPENDIX
Slide 17: Business Model
BUSINESS MODEL Six major divisions make up the Elders business model Rural Products Digital and Feed and Agency Real Estate Financial Technical Processing Wholesale Services Services Services Retail Products Products Services Services Fee for Service Farm Supplies Farm Supplies Livestock Farmland Ag
Slide 18: Points of Presence
POINTS OF PRESENCE Over 460 points of presence in Australia and overseas (including AIRR); Key produce areas covered throughout, with target expansion to be driven by recruitment and acquisition 18
Slide 19: Australian Independent Rural Retailers (AIRR) Overview
AUSTRALIAN INDEPENDENT RURAL RETAILERS (AIRR) OVERVIEW AIRR is a national wholesale platform with scale Overview 8 Warehouses and 5 Retail locations ◼ Established in 2006 Head Office ◼ Member based buying and marketing group for independent rural Warehouses merchandise and pet and produce stores Ret
Slide 20: AIRR Overview Cont.
AUSTRALIAN INDEPENDENT RURAL RETAILERS (AIRR) OVERVIEW CONT. Strong track record of quality growth and financial discipline AIRR’s EBITDA profile ($m) AIRR’s growth strategy 22 21 ✓ Grow AIRR and Tuckers member base 19 ✓ Leverage buying, marketing and selling strengths to create sales and margin gro
Slide 21: AIRR Diversification
AUSTRALIAN INDEPENDENT RURAL RETAILERS (AIRR) DIVERSIFICATION By product, customer and geography FY18 Sales by Product Category FY18 Revenue by Geography FY18 Revenue by Customer Type Western Tasmania Retail Crop Australia 2% 4% protection 8% Other South Wholesale 22% Victoria 26% Australia 29% 28%
Slide 22: FY19 Results by Business Segmentation
FY19 RESULTS BY BUSINESS SEGMENTATION Rural Products and Agency Services account for over 75% of margin Avg. Northern Southern Western International Digital & FY19 Margin Working Australia Australia Australia Geographies Technical ($m) Capital ($m) Rural Farm Supplies and Fertiliser 152.5 207.8 Prod
Slide 23: FY19 Performance by Product
FY19 PERFORMANCE BY PRODUCT Acquisitions offsetting impacts of dry conditions Margin by product FY19 FY18 ▪ Rural Products: Improved mostly from the $ million acquisition of TitanAg, offset by dry conditions in key areas 3% (3%) ▪ Agency: Mainly attributable to lower Wool 152.5 148.5 activity, with
Slide 24: FY19 Performance by Geography
FY19 PERFORMANCE BY GEOGRAPHY Decline in Northern and Southern Australia has been offset by contribution of acquisitions during the year Margin by geography ▪ Northern Australia: Impacted by $ million FY19 FY18 dry conditions with reduced activity (0%) across mainly Wool and Rural (6%) Products 159.
Slide 25: Rural Products
RURAL PRODUCTS Continued growth in margin since FY14, spread across all three geographies Business description Rural Products margin ($m) Elders is one of Australia’s leading suppliers of rural farm inputs including seeds, fertilisers, agricultural chemicals, animal health products and general rural
Slide 26: Agency Services
AGENCY SERVICES South geography accounts for over 50% of margin; reduction in margin from FY17 onward due to easing cattle prices Business description Agency Services margin ($m) Elders provides a range of marketing options for livestock, wool, and grain. - Livestock: our livestock agents and employ
Slide 27: Real Estate Services
REAL ESTATE SERVICES Continued increase in margin from FY14 onward, with a fair spread across all geographies Business description Real Estate Services margin ($m) Elders’ real estate services include company owned rural agency services primarily involved in the marketing of farms, stations and life
Slide 28: Financial Services
FINANCIAL SERVICES Consistent growth in EBIT contribution since FY15; FY19 margin decreased ($6 million) in line with new Rural Bank distribution agreement, offset by personnel cost savings of $6 million Business description Financial Services margin ($m) Elders distributes a wide range of banking a
Slide 29: Feed & Processing Services
FEED & PROCESSING SERVICES Fluctuations in results since FY14, however FY19 was the best performing year to date Business description Feed & Processing Services margin In Australia, Elders operates Killara Feedlot, a beef cattle feedlot near Tamworth in ($m) New South Wales. Elders imports, processe
Slide 30: Elders Financial Progress Since FY14
ELDERS FINANCIAL PROGRESS SINCE FY14 Underlying EBIT has more than tripled since FY14, and has remained steady between FY18 and FY19 Underlying EBIT ($m) 75 74 Results driven by: 71 2H • Resetting of operational strategy, 1H focusing on running a pure-play agribusiness 29 56 30 40 • Favourable lives
Slide 31: Profit Sensitivity
PROFIT SENSITIVITY Underlying EBITDA $(10m) $(7.5m) $(5m) $(2.5m) EBITDA +$2.5m +$5m +$7.5m +$10m Sheep price -$20 -$10 +$10 +$20 Cattle price -$100 -$50 +$50 +$100 Sheep volume -1m head -500k head +500k head +1m head Cattle volume -200k head -100k head +100k head +200k head Retail sales -$50m -$25m
Slide 32: Industry Outlook
INDUSTRY OUTLOOK Seven key markets that the Elders business is operationally present within Agricultural ▪ The value of Australian agricultural production has increased steadily over recent years. It is estimated to be $59 billion in 2019- 20, increasing to a forecast $69 billion in 2023-24. product
Slide 33: Agricultural Production & Exports
Neutral AGRICULTURAL PRODUCTION & EXPORTS Gross value of Australian farm production Billion dollars, nominal Crops Gross volume of Australian farm production Index reference year 1997-98 Livestock -5% 180 66 69 62 62 62 63 160 57 60 59 55 54 140 Crops 36 37 34 30 30 29 33 35 120 28 27 28 Livestock 1
Slide 34: Cattle Outlook
Neutral CATTLE OUTLOOK Average saleyard cattle price Live Cattle exports Australian Cattle herd c/kg Thousand heads Million heads 30 600 1,400 +8% 550 -22% 28 1,200 500 -1% 26 450 1,000 400 24 350 800 300 22 600 250 20 200 400 14 15 16 17 18 19 20f 21f 22f 23f 24f 14 15 16 17 18 19 20f 21f 22f 23f 2
Slide 35: Sheep and Wool Outlook
Wool Sheep Neutral Neutral SHEEP AND WOOL OUTLOOK National Sheep flock Shorn wool production NTLI and EMI Million heads Thousand tonnes greasy Ac/kg cwt & Ac/kg clean -26.0% 100 450 10.7% 850 2,000 90 800 80 +2% 400 -6% 1,800 750 70 1,600 700 60 350 650 1,400 50 600 1,200 40 300 550 30 1,000 500 20
Slide 36: Dairy Outlook
DAIRY OUTLOOK Global dairy prices Australian Dairy Herd Australian Milk Production USD/tonne (nominal) Million heads Mega Litres Butter SMP 2,000 10,000 6,000 Cheese 1,800 -1% 9,500 5,000 1,600 1,400 9,000 4,000 1,200 8,500 1,000 3,000 800 8,000 600 2,000 7,500 400 1,000 200 7,000 14 15 16 17 18 191
Slide 37: Grains and Oilseeds Outlook
Neutral GRAINS AND OILSEEDS OUTLOOK Prices Planted Area Production A$/tonne Thousand hectares Million tonnes +10% 212 53 204 205 205 205 600 190 192 188 +9% 171 40 41 41 41 500 38 39 34 31 400 300 200 100 14 15 16 17 18 19 20f 21f 22f 23f 24f 16 17 18 19 20f 21f 22f 23f 24f 16 17 18 19 20f 21f 22f 2
Slide 38: Sugar and Cotton Outlook
Neutral SUGAR AND COTTON OUTLOOK Planted Area Sugar production & cane grower returns Cotton production & gin-gate returns Thousand hectares Thousand tonnes A$/tonne (real) Thousand tonnes A$/tonne (nominal) 557 526 -1% -6% 5.0 60 -58% 1,200 1,000 402 389 50 380 375 343 4.5 1,000 800 40 800 4.0 30 60
Slide 39: Horticulture
HORTICULTURE Other ▪ The gross value of horticulture production is projected to Gross Value of Horticulture Production Grapes increase to $11.3bn (6%) in 2018-19, underpinned by $ billion Vegetables favourable growing conditions in some areas and domestic Fruit & Nuts and export demands. Exports ▪ O
Slide 40: Slide 40