Bega Cheese Limited · ASX:BGA
Bega Cheese — H1 2019 Earnings Presentation
29 slides from Bega Cheese's earnings presentation, 2019
Slide 1: 1H FY2019 Half Year Results Presentation
1H FY2019 Half Year Results Presentation • Barry Irvin – Executive Chairman • Paul van Heerwaarden – CEO • Colin Griffin – CFO
Slide 2: Barry Irvin, Executive Chairman
Barry Irvin Executive Chairman
Slide 3: Value Proposition
Value Proposition High quality infrastructure Iconic brands Well established operating model Diversified and balanced customer portfolio Strong supplier relationships and reputation Continued business growth PAGE 3 Bega Cheese Limited
Slide 4: The Bega Integrated Business Model
The Bega Integrated Business Model PAGE 4 Bega Cheese Limited
Slide 5: Key Messages
Key Messages Acquisition of Koroit Successful milk acquisition program Lactoferrin investment Contract manufacturing mozzarella and cheddar Coburg closure Bega Foods business stabilising Challenging first half Sales timing impacting 1H performance and inventory levels Drought impacting farm gate mil
Slide 6: Financial Performance
Financial Performance Revenue $0.65 billion up 6% Normalised EBITDA $57.9 million Statutory EBITDA $39.6 million Normalised net profit after tax $18.9 million Statutory net profit after tax $5.0 million (impacted by higher effective tax rate due to corporate activity) 1H FY2019 dividend 5.5 cents pe
Slide 7: Strategic Focus
Strategic Focus Sustainable and diversified milk supply Execute lactoferrin expansion Ingredients product mix and infrastructure uilisation Diversify nutritional customer base and product range Leverage consumer goods capability New ventures and innovation PAGE 7 Bega Cheese Limited
Slide 8: Paul van Heerwaarden, CEO
Paul van Heerwaarden CEO
Slide 9: Delivering to Strategy
Delivering to Strategy Koroit acquisition Milk procurement program Lactoferrin expansion Organic and goat milk usage in infant formula New product launches in spreads category Third party manufacturing agreement (cheddar and mozzarella) PCA integration into Bega Foods Coburg rationalisation Continuo
Slide 10: Business Highlights and Challenges
Business Highlights and Challenges Continued revenue growth Record milk intake Drought impact and milk price Koroit integration on target Inventory management Timing of nutritionals and ingredients sales Input cost increases (energy, insurances) Kraft and Fonterra legal cases PAGE 10 Bega Cheese Lim
Slide 11: Financial Performance
Financial Performance Revenue $0.65 billion up 6% Normalised EBITDA $57.9 million Statutory EBITDA $39.6 million Normalised net profit after tax $18.9 million Statutory net profit after tax $5.0 million (impacted by higher effective tax rate due to corporate activity) 1H FY2019 dividend 5.5 cents pe
Slide 12: 1H FY2019 Results
1H FY2019 Results Koroit Koroit Per Financial Acquisition Fair Value Normalised Change from Consolidated Statements Costs Adjustments Legal Costs Other Costs Result prior period Period Ending 31 December 2018 $’000 $’000 $’000 $’000 $’000 $’000 $’000 % Revenue 649,164 - - - - 649,164 35,697 5.8 Cost
Slide 13: Balance Sheet
Balance Sheet 1H FY2019 1H FY2018 FY2018 Balance sheet growth with Dec $m Dec $m Jun $m acquisition of Koroit Cash and cash equivalents 40.6 18.7 21.7 Capital raising of $202 Trade and other receivables 285.1 215.5 200.6 million and increased Inventories 398.8 272.5 232.1 borrowings Property, plant
Slide 14: The Bega Integrated Business Model
The Bega Integrated Business Model Scale and efficiency in bulk ingredient processing Provenance and control from farm gate through the supply chain to the customer Market facing business units to best understand and serve customer needs Constantly looking over the horizon for innovation and investm
Slide 15: Bulk Ingredient and Nutritional Products
Bulk Ingredient and Nutritional Products Lactoferrin product supply capacity increases NUTRITIONALS Manufacture and Strong global lactoferrin pricing market specialised nutrition products Increased innovation and new customer demand Slower first half in infant formula and GUMP Bega’s milk supply inc
Slide 16: Dairy Commodity and Farm Gate Milk Price
Dairy Commodity and Farm Gate Milk Price Milk supply competition strong particularly in northern Victoria National milk supply lower 5.1% primarily due to impact from drought Domestic milk prices are a premium to commodity returns Butter prices decreased 30% and SMP prices improved 6% in 1H FY2019.
Slide 17: Branded and Third Party Packaged Product
Branded and Third Party Packaged Product Expanded range of retail products available following acquisition of Koroit CONTRACT MANUFACTURING Secured private label butter and powder sachet contracts Private label and third party cheese Expanded export product portfolio and customer base Sector remains
Slide 18: Domestic Retail Market
Domestic Retail Market Retail cheese category now $1.6 billion growing at 3.7% annually Private label cheese now up to 49% volume share Bega brand growing with 15.7% market share Vegemite consumption soft in 1H but gaining momentum 2H Bega holding 60% share of peanut butter category despite competit
Slide 19: Corporate Social Responsibility
Corporate Social Responsibility Total recordable injury frequency rate reduced by 53% SAFETY Safety investment continues to focus on eliminating risks ALWAYS Year 2 of our behavioral safety program Sustainability report released, incorporating plans for 2019 Sustainable Energy management program est
Slide 20: Infrastructure
Infrastructure Bega – Ridge Street Bega – Lagoon Street Tatura Koroit • Established 1997 • Established 1900 • Acquired in 2007 • Acquired 2018 • Cut and pack natural • Milk processing into • Milk processing into • Milk and nutritional cream cheese, powder, powders and butter cheese and cheese and by
Slide 21: Infrastructure
Infrastructure Vegemite Way Strathmerton Kingaroy Tolga • Acquired 2017 • Acquired 2009 • Acquired 2018 • Acquired 2018 • Vegemite, Bega • Cut and pack natural • Peanut processing • Processing and peanut butter, Zoosh, cheese and into blanched, storage Dairylea and Bonox processed cheese roasted and
Slide 22: Business Priorities
Business Priorities Manufacturing footprint and cost structure Milk volume and product mix Inventory management New retail product launches Legal cases ERP system implementation PAGE 22 Bega Cheese Limited
Slide 23: Growth Horizons
Growth Horizons Ongoing innovation in consumer spreads and dairy category Diversify nutritional product range and channels to customers Bionutrients (including lactoferrin) Domestic and international food service channels particularly for dairy (Cream cheese, mozzarella, butter and processed cheese)
Slide 24: Barry Irvin, Executive Chairman
Barry Irvin Executive Chairman
Slide 25: Where are we today
Where are we today Expand infrastructure and product range Rationalising capacity Record milk intake in difficult supply circumstances Regional supply challenges and competition Business integration impacting sales timing Challenging 1H FY2019 PAGE 25 Bega Cheese Limited
Slide 26: Outlook
Outlook Global dairy supply and demand more balanced Weather conditions impacting all raw material supply (milk, peanuts) Execution of lactoferrin expansion and contract manufacturing agreement contributing to FY2020 Koroit integration at expectation Confident of demand and inventory sales process f
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Slide 29: Disclaimer
Disclaimer The following disclaimer applies to this presentation and any information provided in this presentation (Information). You are advised to read this disclaimer carefully before reading or making any other use of this presentation or any Information. This presentation has been prepared by B