Inghams Group Ltd. · ASX:ING
Inghams — H1 FY2023 Earnings Presentation
32 slides from Inghams's earnings presentation, Feb 17, 2023
Slide 1: Inghams Group Limited 2023 Interim Results Presentation
Inghams Group Limited 2023 INTERIM RESULTS PRESENTATION 17 FEBRUARY 2023
Slide 2: Important Notice and Disclaimer
IMPORTANT NOTICE AND DISCLAIMER The material in this presentation is general background information about the activities of Inghams Group Limited (Ingham’s) and its subsidiaries (Ingham’s Group), and is current at the date of this presentation, unless otherwise noted. It is information given in summ
Slide 3: Acknowledgement of Country
ACKNOWLEDGEMENT OF COUNTRY WE ACKNOWLEDGE THE GADIGAL PEOPLE OF THE EORA NATION, ON WHOSE LAND WE MEET TODAY. WE PAY OUR RESPECTS TO THEIR ELDERS PAST, PRESENT AND EMERGING, AND TO ALL ABORIGINAL AND TORRES STRAIT ISLANDER PEOPLES HERE TODAY. 3
Slide 4: Executive Summary
EXECUTIVE SUMMARY § HY23 results reflect ongoing business recovery - Results represent a significant improvement for the business over 2H22, with recovery strengthening as the HY progressed. Core poultry volume grew 3.2% versus 2H22 - Underlying EBITDA1 pre AASB 16 of $83.5M, down 16.2% on PCP and u
Slide 5: Overview & HY23 Update
OVERVIEW & HY23 UPDATE ANDREW REEVES CEO & MANAGING DIRECTOR
Slide 6: Highly Diversified Australia & New Zealand Network
HIGHLY DIVERSIFIED AUSTRALIA & NEW ZEALAND NETWORK LARGEST POULTRY COMPANY ACROSS AUSTRALIA AND NEW ZEALAND WITH SIGNIFICANT MARKET SHARE IN BOTH COUNTRIES § Geographically diverse network § Biosecurity import barrier § Ensures we can deliver continuity of supply to meet our customers’ needs § Abili
Slide 7: Vertically Integrated Operating Model
VERTICALLY INTEGRATED OPERATING MODEL OPTIMISING VALUE FROM OUR OPERATING MODEL THROUGH INTEGRATED PLANNING AND OPERATIONAL EXCELLENCE § Enables us to create value and realise efficiencies across a highly complex and large-scale supply chain § Balance and operational excellence are key to margin cap
Slide 8: Poultry Is an Attractive & Growing Sector
POULTRY IS AN ATTRACTIVE & GROWING SECTOR § Affordable – significant consumer price advantage over other meat proteins, and growing § Healthy – a lean and versatile protein that continually finds favour with consumers that is aligned to the macro-trend towards healthier options across all channels §
Slide 9: Group 1H23 Financial Summary
GROUP 1H23 FINANCIAL SUMMARY REFLECTING BENEFITS OF PRICE INCREASES & OPERATIONAL RECOVERY, OFFSET BY EFFECTS OF ONGOING MARKET-WIDE HEADWINDS § The business remains on a recovery path, while managing the ongoing effects of general market headwinds, including supply chain 1H23 1H22 Var ($) Var (%) 2
Slide 10: 1H23 Core Poultry Average Selling Prices
1H23 CORE POULTRY AVERAGE SELLING PRICES STRONG AVERAGE SELLING PRICE (ASP) GROWTH § Strong price growth reflects successful execution of price increases across all customers and channels in response to input cost pressures, and tightening in poultry supply and demand balance § Variations in ASP ove
Slide 11: Observations Across Our Channels
OBSERVATIONS ACROSS OUR CHANNELS GROUP CORE POULTRY VOLUME HAS GROWN BY 3.0% PER ANNUM SINCE 1H20 § Core poultry volume declined 0.6% on PCP, and increased 3.2% on 2H22 YoY change in volume by channel (Kt) Comments1 v's PCP (1H FY 22) v's prev. HY (2H FY22) • Retail volume contracted in 1H versus PC
Slide 12: Financial Results
FINANCIAL RESULTS GARY MALLETT CHIEF FINANCIAL OFFICER
Slide 13: Profit & Loss
PROFIT & LOSS BENEFIT OF PRICE INCREASES AND OPERATIONAL RECOVERY OFFSET SMALL VOLUME DECLINE § Volume: small decline in core poultry volume of 0.6% $M 1H23 1H22 Variance % − Australian volume declined 0.3% driven mainly by lower bird numbers processed as a result of operational farming challenges C
Slide 14: Balance Sheet
BALANCE SHEET HIGHER FEED COSTS AND AVERAGE SELLING PRICES INCREASING WORKING CAPITAL § Inventories: Increased $12.0M due largely to an increase in $M Dec-22 Jun-22 Variance Biological assets during the period, reflecting higher cost of feed Inventories/Biologicals1 396.0 384.0 12.0 − Feed inventori
Slide 15: Cashflow
CASHFLOW CASH CONVERSION IMPACTED BY HIGHER WORKING CAPITAL $M 1H23 1H22 Variance § Cash conversion ratio: declined to 74.8% due to an increase in EBITDA 197.0 220.4 (23.4) Biological assets as the higher cost of feed cycles through the Non-cash items (10.4) 3.1 (13.5) asset class, and an increase i
Slide 16: Capital Management Outcomes
CAPITAL MANAGEMENT OUTCOMES DISCIPLINED APPROACH TO CAPITAL MANAGEMENT DURING BUSINESS RECOVERY PHASE Cashflow from Cashflow from strategic Cashflow from Cashflow from operations of $140.3M, a decline of $46.3M on PCP due to a decline in 1H EBITDA pre AASB 16 on lower operations activities interest
Slide 17: External Feed Market Observations
EXTERNAL FEED MARKET OBSERVATIONS FEED COSTS HAVE INCREASED SUBSTANTIALLY DUE TO VOLATILITY IN INTERNATIONAL MARKETS § Delivered feed cost contains cereal grains, protein meals, vitamins and minerals. Feed cost also includes transport and milling cost § Grain imported into New Zealand operations is
Slide 18: Segment Performance
SEGMENT PERFORMANCE ANDREW REEVES CEO & MANAGING DIRECTOR
Slide 19: Australia
AUSTRALIA REDUCED FARMING PERFORMANCE AND COST GROWTH PARTIALLY OFFSET BY PRICE GROWTH & EFFICIENCY PROGRAMS § Core poultry volume declined 0.3% driven mainly by lower bird numbers processed as a result of a shortage of high-quality eggs, $M 1H23 1H22 Variance % attributable to a small reduction in
Slide 20: New Zealand
NEW ZEALAND LOWER VOLUMES DUE TO PRODUCTION CONSTRAINTS, WITH PRICE INCREASES REFLECTING COST INFLATION $M 1H23 1H22 Variance % § Core poultry volumes declined by 2.4%, with lower sales Core Poultry volumes (kt) 32.9 33.7 (0.8) (2.4) reflecting an adjustment to egg settings due to significant labour
Slide 21: Operations Update
OPERATIONS UPDATE ANDREW REEVES CEO & MANAGING DIRECTOR
Slide 22: Northern New South Wales Breeder Triangle
NORTHERN NEW SOUTH WALES BREEDER TRIANGLE INVESTING IN FUTURE NETWORK CAPACITY AND RESILIENCE § Located in the Casino area in Northern NSW, the ‘triangle’ will service the Queensland market (~3hrs from Brisbane) - Close to existing Inghams owned breeder farms, enabling sharing of resources and other
Slide 23: Investing in Automation: DSI Waterjet Cutters
INVESTING IN AUTOMATION DIRECT STREAM INJECTION (DSI) WATERJET CUTTERS § $30M to purchase four DSI 888 portion cutting machines and associated equipment, spread across FY23 – FY25, with installation expected through FY24 and FY25 - Significant efficiency and cost benefits expected to be realised § N
Slide 24: Investing in Automation: Automated Leg Deboning
INVESTING IN AUTOMATION AUTOMATED LEG DEBONING INVESTMENT § Network plan identified a reduction in whole leg and drumstick sales, and an increase in requirement for deboned thigh and drumstick meat, which attract higher margins § Inghams currently utilises various semi-automatic processes to harvest
Slide 25: New Zealand Acquisition: Bromley Park Hatcheries
NEW ZEALAND ACQUISITION ACQUISITION OF BROMLEY PARK HATCHERIES § Conditional purchase of the poultry meat business and assets of Bromley Park Hatcheries (BPH) for NZ$8.6M1 - Ingham’s to acquire the BPH business, working capital and fixed assets associated with the business, with 3rd party lessor to
Slide 26: Summary
SUMMARY OPERATIONS RECOVERING WELL BUT SOME MARKET-WIDE HEADWINDS REMAIN § Poultry is an attractive and growing sector with a significant consumer price advantage over red meat and seafood alternatives – poultry is a strategic focus area for our key customers, reaffirming our optimism for the catego
Slide 27: Appendix
APPENDIX
Slide 28: AASB 16 Lease Impact
AASB 16 LEASE IMPACT Balance Sheet: Balance Sheet $M 1H23 AU NZ 1H22 § Land and Buildings: Ingham’s has a large leased property Land & Buildings 832.2 714.8 117.4 849.4 portfolio. Average term remaining on the portfolio is 12.6 years Growers 409.1 336.4 72.7 494.7 § Contract Growers: are classified
Slide 29: Profit & Loss Reconciliation
PROFIT & LOSS RECONCILIATION Excluded 1H23 Underlying 1H22 Underlying 1H23 AASB 16 Profit & Loss $M 1H23 from (Pre AASB 16) (Pre AASB 16) Underlying Leases underlying (Reported) (Reported) Core Poultry volume (kt) 235.7 235.7 235.7 237.1 By-Products volume (kt) 59.0 59.0 59.0 58.8 Total Poultry volu
Slide 30: EBITDA & NPAT Reconciliation
EBITDA & NPAT RECONCILIATION $M 1H23 1H22 Var % Significant Items excluded from underlying results: EBITDA 197.0 220.4 (23.4) (10.6) § Restructuring: Business Transformation Project costs Restructuring 16.2 1.9 14.3 752.6 relating to program pre-implementation, design and costs Gain on assignment of
Slide 31: Segment Reconciliation
SEGMENT RECONCILIATION Group Group Australia Australia NZ NZ $M 1H23 1H22 Var 1H23 1H22 Var 1H23 1H22 Var EBITDA 197.0 220.4 (23.4) 168.8 183.1 (14.3) 28.2 37.3 (9.1) Restructuring 16.2 0.1 16.1 16.1 0.1 16.1 0.1 0.0 0.0 Gain on assignment of lease (3.0) 0.0 (3.0) (3.0) 0.0 (3.0) 0.0 0.0 0.0 (Profit
Slide 32: Definitions
DEFINITIONS CERTAIN NON-IFRS INFORMATION IS REFERRED TO IN THIS PRESENTATION AND ARE DEFINED BELOW § EBITDA: Earnings before Interest, Tax, Depreciation and Amortisation § EBIT: Earnings before Interest and Tax § Gross Profit: Revenue less cost of sales § Underlying Gross Profit pre AASB 16: Underly