Astral Foods Limited · JSE:ARL

Astral Foods — FY2013 Earnings Presentation

67 slides from Astral Foods's earnings presentation, November 2013

  1. Slide 1: Annual Results presentation for the year ended 30 September 2013

    Annual Results presentation for the year ended 30 September 2013 1

  2. Slide 2: Agenda

    AGENDA  Business Overview  Poultry Industry Trends  Financial Overview  Industry Matters  Prospects  Q&A 2

  3. Slide 3: Business Overview

    Business Overview Poultry Industry Trends Financial Overview Industry Matters Prospects Q&A 3

  4. Slide 4: The Period in Perspective: Financial Indicators

    THE PERIOD IN PERSPECTIVE  The past twelve months to end September 2013 reflect one of the worst trading periods experienced by the poultry industry  Revenue 4%  Operating profit 43% Financial Indicators  Earnings per share 26%  Headline earnings per share 44% 4

  5. Slide 5: The Period in Perspective: Key negative factors

    THE PERIOD IN PERSPECTIVE  Key factors that negatively impacted the business: • Record high poultry imports in October and November 2012 culminating in excessive industry poultry stock levels • Depressed sales in December 2012 followed by intense retail promotional activity and price discounting in

  6. Slide 6: The Period in Perspective

    THE PERIOD IN PERSPECTIVE  Violent strike action at Earlybird Olifantsfontein and County Fair resulted in a direct cost of R37 million in 1H2013  Astral’s balance sheet remains healthy with a net debt to equity ratio of 15% (30 September 2012: 7%)  The Group’s integrated best cost business model

  7. Slide 7: Poultry Division

    a \ASTRAL | Poultry Division

  8. Slide 8: Poultry Division - Overview

    POULTRY DIVISION - OVERVIEW (Revenue - R million) (Operating profit - R million) 6 000 130 6 001 137 5 835 5 000 80 4 000 30 3 000 (20) 2 000 1 000 (70) -109 - (120) F2012 F2013 F2012 F2013  Revenue up 2.8%  Operating loss Broiler volumes down 5.4% Profit margin negative Broiler realisations up 8.

  9. Slide 9: Poultry Division - Overview

    POULTRY DIVISION - OVERVIEW  Average broiler feed prices increased year-on-year by R563 per ton (up 14%)  Broiler selling prices increased year-on-year by 8.4%  Record levels of poultry imports in November 2012 ≈ 8 million birds per week  Record high poultry stock levels in December 2012  Plann

  10. Slide 10: Poultry Division - Sales

    POULTRY DIVISION – SALES Product Mix 21% 5% 5% 56% 10% 3% IQF Mixed Portions IQF Single Portions Fresh Value Added Frozen Tertiary 10

  11. Slide 11: Broiler Production Performances

    BROILER PRODUCTION PERFORMANCES 120% 115% 110% 105% 100% 95% 90% 85% 80% 75% Key indicators base-lined to 100% in 2008 70% F2008 F2009 F2010 F2011 F2012 F2013 Mortality Feed conversion (FCR) Efficiency factor (PEF) 11

  12. Slide 12: Broiler Production Performances

    BROILER PRODUCTION PERFORMANCES 104% 102% (37.0 days) 100% 98% 96% 94% (34.3 days) 92% Key indicators base-lined to 100% in 2008 90% F2008 F2009 F2010 F2011 F2012 F2013 Slaughter age Live weight Processing yield 12

  13. Slide 13: Poultry Division - Prospects

    POULTRY DIVISION - PROSPECTS  Projected lower feed costs in comparative first half reporting period  Broiler production efficiency improvements expected to continue  Continued realignment of poultry production capacities to reduce costs  Reduced heating / energy costs at County Fair with LPG rep

  14. Slide 14: Feed Division

    2 \ASTRAL . = a | >) So WwW F E E D _ Feed Division 14

  15. Slide 15: Feed Division - Overview

    FEED DIVISION - OVERVIEW (Revenue - R million) (Operating profit - R million) 5 000 300 331 4 916 289 4 000 4 327 250 3 000 200 150 2 000 100 1 000 50 - - F2012 F2013 F2012 F2013  Revenue up 13.6%  Operating profit up 14.7% Volumes up 1% Profit margin 6.7% (unchanged) Realisations up 13.3% Rand /

  16. Slide 16: Feed Division - Overview

    FEED DIVISION - OVERVIEW  Lower in-house feed volumes (down 3%) due to lower broiler placements  External feed volumes increased by 4%  Rand per ton margin increased on prior year despite a competitive landscape  The division has shown good cost control for the reporting period  Inflationary co

  17. Slide 17: Feed Division - Sales

    FEED DIVISION – SALES Meadow Feeds - Sales Mix 18% 22% 11% 49% Dairy Poultry Integrated Poultry External Other 17

  18. Slide 18: Feed Division - Prospects

    FEED DIVISION - PROSPECTS  Projected lower maize plantings in new season  Normal rainfall could lead to 12,6 million ton crop in 2014  External feed sales drive to continue in the face of lower internal volumes  Continued focus to implement new cost saving technologies  Focus on Rand per ton ma

  19. Slide 19: Other Africa Division

    tL _ \ASTRAL | Other Africa Division 19

  20. Slide 20: Other Africa Division - Overview

    OTHER AFRICA DIVISION - OVERVIEW (Revenue - R million) (Operating profit - R million) 400 442 40 45 341 38 300 30 200 20 100 10 - - F2012 F2013 F2012 F2013  Revenue up 29.5%  Operating profit up 19.5% Volumes up 14.2% Profit margin 10.2% Realisations up 13.4% New Moz hatchery included 20

  21. Slide 21: Other Africa Division - Overview

    OTHER AFRICA DIVISION - OVERVIEW Zambia  Feed sales from Tiger Animal Feeds increased by 17% year-on-year through a recovery in the small scale farming sector  Feed mill efficiencies have improved with the replacement of ageing process equipment  The double up of the Tiger Chicks broiler breeder

  22. Slide 22: Other Africa Division Profit Segmentation

    OTHER AFRICA DIVISION PROFIT SEGMENTATION F2012 Country PBIT Contribution F2013 Country PBIT Contribution 14% 20% 22% R45 million R38 million 55% 25% 64% Zambia Mozambique Swaziland 22

  23. Slide 23: Other Africa Division - Prospects

    OTHER AFRICA DIVISION - PROSPECTS Zambia  Tiger Animal Feeds holds good maize and soya positions into the new financial year  Increased sales of day old chicks from the double up of the hatchery and broiler breeder operation will be realised in December 2013  The continued expansion of feed and d

  24. Slide 24: Poultry Industry Trends

    Business Overview Poultry Industry Trends Financial Overview Industry Matters Prospects Q&A 24

  25. Slide 25: Safex Yellow Maize Price

    SAFEX YELLOW MAIZE PRICE F2009 F2010 F2011 F2012 F2013 Source: CJA Strategic Risk Brokers 25

  26. Slide 26: Safex Soya Beans Price

    SAFEX SOYA BEANS PRICE F2009 F2010 F2011 F2012 F2013 Source: CJA Strategic Risk Brokers 26

  27. Slide 27: Industry Broiler Selling Prices

    11.00 12.00 14.00 15.00 16.00 17.00 13.00 Source: Oct-08 15.44 15.81 Dec-08 16.28 Industry 13.95 Feb-09 13.78 14.06 Rand per kilogram Apr-09 14.60 14.04 Jun-09 13.41 13.81 Aug-09 13.09 13.12 Oct-09 13.22 13.47 SAPA trends and statistics | Dec-09 13.41 12.70 Feb-10 11.96 11.95 Apr-10 11.75 12.22 Jun-

  28. Slide 28: Broiler Price vs Food Price Inflation

    BROILER PRICE VS FOOD PRICE INFLATION 130 130 125 125 120 120 115 115 110 110 105 105 100 100 95 95 90 90 85 85 80 80 75 75 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Dec-08 Aug-09 Dec-09 Aug-10 Dec-10 A

  29. Slide 29: Change in Broiler Selling Price vs Feed Price

    10.00% 20.00% 30.00% 40.00% 0.00% -30.00% -20.00% -10.00% Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Source: SAPA & Own Data Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 % Change in feed price Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 CHANGE IN BROILER SELLING PRICE VS FEED P

  30. Slide 30: Poultry Imports per Month

    Tons - 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000 45 000 50 000 Oct-08 Source: SAPA Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Total poultry imports Aug-10 Oct-10 Dec-10 POULTRY IMPORTS PER MONTH Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Au

  31. Slide 31: Broiler Price vs Feed Price vs Imports

    BROILER PRICE VS FEED PRICE VS IMPORTS Index 250 250 225 225 200 200 175 175 150 150 125 125 100 100 75 75 50 Indicators base-lined to 100% in October 2008 50 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Feb-09 Apr-09 Feb-10 Feb-11 Feb-12 Feb-13 Apr-10 Apr-11 Apr-12 Apr-13 D

  32. Slide 32: Financial Overview

    Business Overview Poultry Industry Trends Financial Overview Industry Matters Prospects Q&A 32

  33. Slide 33: Abridged Statement of Comprehensive Income

    ABRIDGED STATEMENT OF COMPREHENSIVE INCOME 2013 2012 Year ended 30 September % change R million R million Revenue 8 524 8 160 4% Operating profit 272 477 43% Operating profit margin 3.2% 5.8% Profit on sale of business unit 79 36 Profit before interest and tax 351 513 32% Net finance costs (27) (18)

  34. Slide 34: Group Annual Revenue

    GROUP ANNUAL REVENUE 12.000 (R billion) 10.000 8.524 8.160 8.000 7.407 7.227 6.852 7.006 6.329 4.327 4.916 6.000 5.184 3.988 3.478 4.838 3.577 3.530 5.138 3.947 4.053 4.000 3.692 2.670 2.793 2.516 5.834 6.001 2.681 2.703 5.149 5.030 5.258 2.000 2.689 4.382 4.579 1.983 3.345 3.623 2.168 2.285 1.721 1

  35. Slide 35: Poultry - Annual Revenue

    POULTRY – ANNUAL REVENUE 4000 1.40000 (R million) 1.20000 3500 1.00000 3000 0.80000 2500 0.60000 2000 2 956 2 952 3 049 2 878 2 741 2 652 0.40000 2 581 2 606 2 408 2 449 1500 0.20000 1000 0.00000 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 Revenue Change in realisations (SAPA) Change in volume

  36. Slide 36: Feed - Annual Revenue

    FEED – ANNUAL REVENUE 3000 1.40000 (R million) 2800 1.20000 2600 1.00000 2400 2200 0.80000 2000 0.60000 1800 2 519 2 397 1600 2 238 2 175 2 152 0.40000 1400 1 847 1 750 1 730 1 708 1 770 0.20000 1200 1000 0.00000 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 Revenue Change in volumes Change in f

  37. Slide 37: Group Annual Operating Profit

    GROUP ANNUAL OPERATING PROFIT 375 (R million) 380 1.3 133 324 302 304 299 279 281 1.1 280 151 154 135 149 126 130 208 0.9 180 153 175 0.7 156 135 80 64 0.5 137 145 134 128 229 124 140 8 0.3 -20 -3 -117 0.1 -120 -0.1 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 Poultry Feed Services & Ventures O

  38. Slide 38: Group Annual Operating Profit

    GROUP ANNUAL OPERATING PROFIT 14.8% 809 (R million) 780 14.0% 12.8% 12.3% 766 674 680 12.0% 581 585 580 548 9.6% 597 272 333 9.3% 477 10.0% 480 8.3% 8.4% 214 261 380 7.3% 282 8.0% 389 6.6% 5.9% 280 328 281 5.8% 151 6.7% 6.0% 203 153 272 385 180 79 220 289 4.0% 130 3.2% 80 124 90 174 238 383 494 476

  39. Slide 39: Poultry Division Profit Impact

    POULTRY DIVISION PROFIT IMPACT Impact of poultry selling price, yield, poultry sales volumes, feed price, FCR and industrial action on the Poultry Division’s profitability 39

  40. Slide 40: Poultry Division Profit Sensitivity

    POULTRY DIVISION PROFIT SENSITIVITY Movement in Key Indicator Annual PBIT Impact (R million) Poultry selling price – 10 cents per kg 42,3 Poultry feed cost – R100 per ton 65,3 Poultry processing yield – 1% 54,5 Feed conversion ratio – 1 point 17,4 40

  41. Slide 41: Abridged Statement of Financial Position

    ABRIDGED STATEMENT OF FINANCIAL POSITION 2013 2012 At 30 September % change R million R million Non-current assets 2 016 1 840 10% Net working capital 486 333 46% Current assets (excl. cash) 1 845 1 648 12% Current liabilities (excl. borrowings) (1 359) (1 315) 3% Non-current liabilities (excl. borr

  42. Slide 42: Cash Flow

    CASH FLOW 2013 2012 For the year ended 30 September % change R million R million Cash operating profit 388 597 35% Working capital requirement (151) (119) 237 478 50% Tax paid (67) (142) Net interest paid (27) (18) Capital expenditure (241) (211) Finance received - loans 155 - Other cash flow items

  43. Slide 43: Capital Expenditure

    CAPITAL EXPENDITURE 2013 2012 Year ended 30 September R million R million Depreciation 123 119  Replacement capex 73 106  Expansion capex - other 32 100 - new feed mill 136 - Total capex spent 241 211 Commitments - other 111 - new feed mill 69 Total spent and committed 415 43

  44. Slide 44: Key Financial Ratios

    KEY FINANCIAL RATIOS 70 30.0 65 60 55 25.0 51 48 48 49 50 46 45 20.0 39 39 40 37 16.5 36 33 14.5 34 31 13.9 31 31 15.0 30 29 14.8 30 11.4 26 12.8 25 26 12.3 9.9 23 10.0 9.3 11.0 10.0 9.3 21 20 8.9 9.6 9.3 7.5 8.4 7.4 15 8.3 8.0 7.8 7.3 5.9 12 6.1 5.8 4.6 5.0 10 5.5 5.5 4.7 4.4 4.7 4.8 3.8 4.1 4.3 4.

  45. Slide 45: Key Financial Indicators

    KEY FINANCIAL INDICATORS 50.00 45.00 45.03 40.00 41.36 41.65 35.00 37.43 35.38 33.47 34.24 29 30.00 26 28.28 25.00 22 21 21 21 23 23.83 19 20.00 20 17 16 15 15.00 17.36 14 14.34 11 15 14 10 9 12 10.00 12 10.79 8.53 9 5.00 7 3 0.00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10

  46. Slide 46: Headline Earnings per Share & Dividend per Share

    HEADLINE EARNINGS PER SHARE & DIVIDEND PER SHARE 1600 (Cents per share) 1400 1381 1286 1200 1148 1000 958 960 890 840 810 787 800 760 700 700 700 631 656 600 585 487 443 400 380 326 272 230 222 200 168 90 108 0 F2001 F2002 F2003 F2004 F2005 F2006 F2007 F2008 F2009 F2010 F2011 F2012 F2013 Headline ea

  47. Slide 47: Industry Matters

    Business Overview Poultry Industry Trends Financial Overview Industry Matters Prospects Q&A 47

  48. Slide 48: Industry Matters

    INDUSTRY MATTERS  On 30 September 2013 a revised General Rate of Duty was introduced on all imported poultry products (EU exempt)  The new tariffs will go some way in correcting the “uneven playing field” that has existed for some time and severely damaged the local industry  Proposed brining lev

  49. Slide 49: Prospects

    Business Overview Poultry Industry Trends Financial Overview Industry Matters Prospects Q&A 49

  50. Slide 50: Prospects

    PROSPECTS Positive Negative  Implementation of a revised General  Lower maize plantings for the new Rate of Duty (which excludes the EU) season are projected on poultry imports  Projected lower feed costs in 1H2014  Lack of pricing power of the poultry over the comparable period in F2013 industr

  51. Slide 51: Astral's strategy statement

    — __ \ASTRAL “Astral’s strategy is to be the best cost integrated poultry producer in selected African countries”

  52. Slide 52: Q&A

    Business Overview Poultry Industry Trends Financial Overview Industry Matters Prospects Q&A 52

  53. Slide 53: Additional Information

    \ASTRAL ~ 2 =~ C E 2 s = c ~ 2 = x) S <x 53

  54. Slide 54: Labour Matters

    LABOUR MATTERS  Strike action (1H2013) Earlybird Olifantsfontein (Processing) – 9 week strike County Fair (Farms) – 8 week strike Direct cost of both strikes – R37 million In both instances the strikes were settled at a 0% increase in wages  Wage settlements (2H2013) All current annual wage negoti

  55. Slide 55: New Standerton Feed Mill

    NEW STANDERTON FEED MILL  Construction work commenced in November 2012  Equipment installation commenced in August 2013  Full feed production by May 2014  Budgeted cost of R197 million  DTI Manufacturing Investment Programme Grant – R30 m approved October 2013  Earnings contribution to the Gro

  56. Slide 56: South Africa - Total Maize Supply & Demand

    SOUTH AFRICA - TOTAL MAIZE SUPPLY & DEMAND Marketing year (May to April) 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14E 2014/15F '000 tons Actual Actual Actual Actual Actual Estimate Forecast Carry In (1 May) 1 049 1 584 2 134 2 340 994 1 416 1 030 Crop Estimate 12 121 11 723 12 567 Sagis Delivery

  57. Slide 57: RSA Maize Carry Out and Stock to Use Ratio

    RSA MAIZE CARRY OUT AND STOCK TO USE RATIO 2 500 24.24% 25% 22.87% 2 000 20% 17.42% 15.46% 14.83% 1 500 15% 10.56% 10.65% 1 000 10% 500 5% 0 0% 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14E 2014/15F Carry out ('000 tons) Total maize stock to use ratio Source: CJA Strategic Risk Brokers 57

  58. Slide 58: US Corn End Stocks and Stock to Use Ratio

    US CORN END STOCKS AND STOCK TO USE RATIO 50 000 16% 15.11% 13.91% 45 000 13.09% 14% 40 000 12% 35 000 8.66% 10% 30 000 7.92% 25 000 7.45% 8% 20 000 6% 15 000 4% 10 000 2% 5 000 0 0% 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14E Ending stock ('000 tons) Total maize stock to use ratio Source: CJA

  59. Slide 59: Safex Yellow Maize vs CBOT Corn in Rand Terms

    SAFEX YELLOW MAIZE VS CBOT CORN IN RAND TERMS F2009 F2010 F2011 F2012 F2013 Source: CJA Strategic Risk Brokers 59

  60. Slide 60: Local Broiler Production, Imports & Per Capita Consumption

    LOCAL BROILER PRODUCTION, IMPORTS & PER CAPITA CONSUMPTION Million birds per week / Rand per kg kg 28.0 26.0 40 24.0 36 22.0 20.0 32 18.0 28 16.0 14.0 24 12.0 10.0 20 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Jun-09 Feb-10 Jun-10 Jun-11 Jun-12 Jun-13 Feb-09 Apr-10 Feb-11 Feb-12 Feb-13 Apr-09 Apr-11 Apr-12

  61. Slide 61: Total Poultry Imports (Chicken, Turkey, MDM)

    TOTAL POULTRY IMPORTS (CHICKEN, TURKEY, MDM) Tons 450 000 F2010 F2011 F2012 F2013 +6% 400 000 350 000 300 000 250 000 200 000 150 000 100 000 50 000 0 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep F2010 20 093 40 735 60 774 77 813 97 763 124 813 142 226 160 940 185 290 209 164 229 951 252 485 F201

  62. Slide 62: Impact of New Poultry Import Tariff Codes

    IMPACT OF NEW POULTRY IMPORT TARIFF CODES August 2013 Upliftment Cost at Cost at Difference Product FOB Price charge - 10% previous duty revised duty R/kg R/kg R/kg R/kg R/kg Chicken 4.09 4.50 5.71 5.89 0.18 Carcasses Whole 14.15 15.57 19.77 28.33 8.56 Birds Boneless 23.04 25.34 26.61 28.39 1.77 Cut

  63. Slide 63: Brazil & Europe Product Cost Benchmark

    BRAZIL & EUROPE PRODUCT COST BENCHMARK Ex BRAZIL - November 2013 FROZEN LEG QUARTERS BULK PACKED CIF DBN US$ per ton TON 1 600.00 1 600.00 1 600.00 SA COST R/$ exchange rate R$ 9.00 9.50 10.00 Rand per ton TON 14 400.00 15 200.00 16 000.00 20 540.00 Rand per kg KG 14.40 15.20 16.00 20.54 Duty per kg

  64. Slide 64: Total Poultry Imports - Country Split

    TOTAL POULTRY IMPORTS – COUNTRY SPLIT 2012 2013 YTD 14% 12% 5% 6% 7% 10% 52% +6% 49% 14% 16% 7% 8% Brazil Argentina Netherlands UK Germany Other Source: SAPA 64

  65. Slide 65: Total Poultry Imports - Product Split

    TOTAL POULTRY IMPORTS – PRODUCT SPLIT 2012 2013 YTD 7% 1% 35% 39% 44% 41% 8% 6% 14% 5% Whole chicken Leg quarters Chicken fillets Chicken offal MDM Source: SAPA 65

  66. Slide 66: Producer Price Comparison - SA Protein

    PRODUCER PRICE COMPARISON – SA PROTEIN Cents per kg 5 500 5 000 Sheep 4 500 4 000 3 500 Beef 3 000 2 500 Pork 2 000 1 500 Chicken 1 000 Jun-08 Sep-08 Jun-09 Sep-09 Jun-10 Sep-10 Jun-11 Sep-11 Jun-12 Sep-12 Jun-13 Sep-13 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Dec-12 Dec-08 Dec-09 Dec-10 Dec-11 Chi

  67. Slide 67: Contacts

    CONTACTS Astral Foods Limited Chris Schutte Tel: +27 (0) 12 667 5468 Chief Executive Officer Fax: +27 (0) 86 504 2002 Tel : +27 (0) 12 667 5468 Astral Foods Corporate Office Fax : +27 (0) 86 504 2002 92 Koranna Avenue, Email: ces@astralfoods.com Doringkloof Centurion, 0157, Gauteng, South Africa Daa

Astral Foods — FY2013 Earnings Presentation on 6ix