RCL Foods Limited · JSE:RCL
RCL Foods — H1 2009 Earnings Presentation
32 slides from RCL Foods's earnings presentation, November 2008
Slide 1: Interim Results 6 months ended 30 September 2008
Interim Results 6 months ended 30 September 2008
Slide 2: 2008 highlights
2008 highlights Revenue + 15.9% Operating profit - 44.6% 3326,7 2871,4 315,7 2177,8 256,9 1915,2 214,2 174,8 2005 2006 2007 2008 2005 2006 2007 2008 Headline earnings - 39.6% Interim dividend maintained 208,3 24,0 24,0 172,4 20,0 151,6 17,0 125,8 2005 2006 2007 2008 2005 2006 2007 2008 1
Slide 3: 2008 highlights
2008 highlights 2007 2008 Trading Days 129 125 - 3.1 Revenue Rm 2 871,4 3 326,7 + 15.9 Headline EBITDA Rm 378,7 247,5 - 34.6 Operating profit Rm 315,7 174,8 - 44.6 Effective tax rate % 36.0 33.0 - 3.0 Capex Spend Rm 116,4 138,5 + 19.0 Headline earnings Rm 208,3 125,8 - 39.6 HEPS - diluted cents 71,1
Slide 4: Strategic framework
Strategic framework Vision Rainbow Chicken will be at the heart of every meal. We will achieve this by creating innovative solutions and strong brands. Key to our success is consistent, profitable, sustainable demand. Strategic Drivers Consumers Customers Supply Chain Sustainability Culture The sing
Slide 5: Strategy
Strategy Strategy proving itself in the face of extreme input cost pressure Better placed to deliver sustainable earnings but still exposed when commodity input costs rise so significantly and quickly (feed cost 97% higher in only two years) Current chicken product and customer mix much better
Slide 6: Strategy into action
Strategy into action Notable initiatives: • Product innovation and value added growth • Re-engineered existing product range • New business tools to analyse profitability • Low cost production focus, challenge of current feed specification • Sales & Operation Planning (S&OP) • Hammarsdale PBCS • Vec
Slide 7: Market conditions
Market conditions Economic growth slowing High inflation and interest rates Exchange rate volatility Consumers disposable income impacted significantly Food inflation impacted by higher commodity raw material and fuel costs Reducing import volumes 6
Slide 8: Feed raw material costs
Feed raw material costs Market Conditions Maize and soya prices peaked at historically high levels during this period Supported by fundamentals of low international stock levels US Ethanol policy has meant 102m tons of their 310m ton maize crop no longer available for the food industry Specu
Slide 9: Global maize stocks
Global maize stocks Global Stocks : Use Ratio 30.0% 25.0% 20.0% % 15.0% 10.0% 5.0% 0.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 Stock 10.1 8.5 6.0 4.9 10.3 9.1 6.0 5.8 7.0 (Weeks) 8
Slide 10: SAFEX yellow maize
SAFEX yellow maize R/Ton 2,500 Average increase over + 8.4% + 32.4% comparable period 2,000 + 99.4% 1,500 1,000 500 2006 2007 2008 2009 - Financial years to March 9
Slide 11: CBOT soya meal
CBOT soya meal $/Ton 450.0 + 57.4% 400.0 350.0 Average increase over + 50.6% comparable period 300.0 - 2.0% 250.0 200.0 150.0 100.0 50.0 2006 2007 2008 2009 - Financial years to March 10
Slide 12: R/$ exchange rate
R/$ exchange rate R/$ 9.00 Average increase over + 9.5% comparable period 8.00 + 10.4% + 0.8% 7.00 6.00 2006 2007 2008 2009 5.00 Financial years to March 11
Slide 13: Feed cost vs sales realisation growth
Feed cost vs sales realisation growth % Growth Feed Cost Sales realisation 40.0 + 37.9% + 35.7% 35.0 30.0 25.0 20.0 + 14.9% + 15.4% 15.0 10.0 + 6.4% + 5.2% 5.0 - 2006 2007 2008 12
Slide 14: Feed cost vs headline EBIT
Feed cost vs headline EBIT Rm Feed Cost Headline EBIT pre IAS 39 2005 2006 2007 2008 13
Slide 15: Financial review
Financial review Revenue (Rm) + 15.9% 3326,7 Chicken sales + 15.5% 765,6 2871,4 • Volumes up marginally despite 654,1 4 less trading days (3.1% impact) 2561,1 2177,8 • Average price realisation growth of 2217,3 450,4 15,4% Total 1915,2 370,2 External 1727,4 1545,1 Chicken External sales (Cobb, Epol,
Slide 16: Financial review
Financial review Feed cost growth + 38% Headline EBITDA - 34.6% + 38% Headline EBITDA Margin % 14.4% 13.2% + 36% 12.2% 8.6% 378,7 314,3 265,5 Headline 247,5 EBITDA Rm 2005 2006 2007 2008 2005 2006 2007 2008 • Significant growth over the last two • Higher feed raw material costs not interim periods b
Slide 17: Financial review
Financial review Headline earnings - 39.6% Dividends per share 68,0 68,0 Effective 36.1% tax rate 36.0% 48,0 44,0 % 33.0% Total 57,0 30.3% 40,0 210,5 Final 171,0 149,2 24,0 24,0 Headline 125,8 Earnings 20,0 Rm Interim 17,0 2005 2006 2007 2008 2005 2006 2007 2008 • Lower effective tax rate due to 1%
Slide 18: Financial review
Financial review Cash generated by ops - 33.0 % Capex spend R138,5m Depreciation & 72,3 Amortisation Rm 65,2 56,0 48,9 252,2 248,7 138,5 210,7 141,1 166,6 Capex 116,4 Spend 99,3 Rm 76,4 2005 2006 2007 2008 2005 2006 2007 2008 • Working capital requirements 2005 includes R64,7m spent in respect of
Slide 19: Financial review
Financial review Reporting the financial effects of only certain procurement instruments in terms of IAS39 introduces volatility to statutory results Margin in 2008 impacted by significant input cost pressure 13.4 12.0 Headline EBIT 11.3 margin 11.9 (%) 10.9 344,7 10.0 313,2 Pre IAS39 292,4 6.9
Slide 20: Moving Rainbow to Sustained, Profitable Demand
Moving Rainbow to Sustained, Profitable Demand 1. Growing Added Value : Our new vision 2. Growing Food Service 3. Re-engineering the Core 19
Slide 21: 1. Growing Added Value
1. Growing Added Value 1. Frozen Meal ideas : “Bigger than fish 2012” > Consumers prefer chicken to fish > The real volume opportunities are still untapped 2. Mass volume frozen chicken : “Make added value 1/3 of the freezer” > The target consumer here is middle/low income South Africans > The volum
Slide 22: 1. Growing Added Value….Progress
1. Growing Added Value….Progress 1. Frozen Meal ideas : “Bigger than fish 2012” 2. Mass volume frozen chicken : “Make added value 1/3 of the freezer” 3. Chilled Processed Meats: “R300m by 2010” 21
Slide 23: 2. Growing Food Service
2. Growing Food Service 1. Focused around long standing partnerships with most of the food service industry 2. We have developed a strong, credible food service brand, called capable of delivering high spec, customised, guaranteed supply products 3. Have averaged over 20% growth per annum for the la
Slide 24: 3. Re-engineering the Core
3. Re-engineering the Core 23
Slide 25: Some consequential facts
Some consequential facts • Our added value products launched in the last 3 years will turn over R250m in FY 09 • 16% of our retail sales are in added value • Over 40% of our sales to PnP are in Added Value products • The % of our total business with a ‘sustainable margin’ is now at 47% of our turnov
Slide 26: Conclusion
Conclusion Summary Prospects • Consumer spending is expected to continue to soften over the next six months • Maize and soya prices and the exchange rate are likely to remain volatile over the next few months. Prices are expected to remain at the current higher levels translating into significantly
Slide 27: Appendix
RAINBOW Appendix
Slide 28: Background Infrastructure
Background Infrastructure South Africa’s largest processor and marketer of chicken Windhoek Northern 7,653 employees Province 4 processing plants 5 feed mills Botswana Mpumalanga 22 distribution facilities Pretoria 190 farms / hatcheries Rustenburg Carolina North Gauteng Swaziland West K
Slide 29: Background Complex business chain
Background Complex business chain GP OPERATION AGRICULTURE PROCESSING Grandparent Grandparent farms Parent Parent farms Broiler Broiler farms Broilers chicks chicks chicks Processing Rearing Laying Hatching Rearing Laying Hatching Growing 3 plants + FP 22 wks 40 wks 3 wks 21 wks 40 wks 3 wks 35 days
Slide 30: Rainbow past
Rainbow past 1991 - 1998 1999 - 2003 2004 - 2008 2004 - 2008 6,0 Fundamental restructure and elimination of major business risks 4,7 4,0 4,1 Revenue 3,7 3,8 Restructure (Rbn) 3,0 Regional to Functional 2,3 2,5 Significant board changes 2,1 2,2 2,2 1,6 1,7 1,9 Route to market 1,5 1,5 R455m
Slide 31: Industry perspective
Industry perspective Average broiler production per week by producer • Increased competitor supply into the market Million broilers per week as at March 2008 • 14,6m broilers produced per week • 1,3m tons per annum 3% • Astral = Earlybird Farms + County Fair 4,2 18% • Others = approximately 50 small
Slide 32: Industry perspective
Industry perspective Total poultry imports (‘000 tons) • Imports continued to decrease during the past six months • Chicken products mainly dark meat and offal 289 decreased by 42,0% over 2007. 84 279 98 225 69 198 35 60 Origin of poultry imports 37 169 September 2007 - August 2008 24 145 75 27 144