Slide 1: Growing your Diversified Agribusiness
Scales Corporation Limited Growing your Diversified Agribusiness Annual Results Presentation For the year ended 31 December 2018 27 February 2019
Slide 2: Agenda
Agenda 1. 2018 Highlights 2. Financials 3. Divisional Performance & Strategy 4. Capital Management 5. Investment Strategy 6. Sustainability, Governance and Outlook 7. Appendices Scales Corporation Limited – 2018 Full Year Results 2
Slide 3: 2018 Highlights
2018 Highlights 1
Slide 4: Strategic & Operating Highlights
Strategic & Operating Highlights • Underlying EBITDA $67.1m, up 8% on 2017. Underlying NPAT $35.8m, up 9% on 2017 • Statutory Profit for the Year $45.5m (2017: $31.6m) • Storage businesses (Polarcold & Liqueo) sold for combined proceeds of $171.4m. Sale of Polarcold remains subject to OIO approval (
Slide 5: Scales by the Numbers
Scales by the Numbers 5,831,000 3 35,210 $464.7m TCEs of apples exported Signed acquisition or sale TEU equivalents Underlying Revenue (Mr Apple, Longview, outside growers of business contracts freighted (new Revenue record) & Fern Ridge Fresh) (Polarcold, Liqueo, Shelby) (up 19% on 2017) 18.5 cents
Slide 6: Financials
“Fan i Is quent Ho A we wat
Slide 7: Group Financial Performance
Group Financial Performance • New record revenue, Underlying Revenue Income Statement 2018 2017 $464.7m, up 18% on 2017: $Millions Actual Actual Growth ▪ Solid revenue growth from all divisions Reported Financials* Restated ▪ Reported revenue (excluding discontinued Revenue 402.5 335.5 20% operation
Slide 8: Trends in Financial Performance
Trends in Financial Performance • Underlying EBITDA and NPAT have increased at CAGRs of 14% and 16% respectively Underlying EBITDA Underlying NPAT $67.9m $67.1m $38.6m CAGR 14% $35.8m $61.4m $62.0m $34.8m CAGR 16% $32.7m $39.8m $19.8m 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Scales Corporat
Slide 9: Trends in Divisional Performance
Trends in Divisional Performance • Underlying divisional EBITDAs have increased at CAGRs of between 14% and 16% as presented below Horticulture EBITDA Storage & Logistics EBITDA Food Ingredients EBITDA $45.3m $42.6m $21.1m $10.2m $40.0m $38.9m $19.1m $9.2m CAGR 16% CAGR 14% CAGR 16% $8.0m $16.3m $16
Slide 10: Balance Sheet
Balance Sheet Balance Sheet 2018 2017 $Millions Actual Actual • Capital employed increased by $52.7m in Current Assets (excluding Cash) 2018, principally due to: Trade Debtors 22.9 23.4 Inventory 45.4 22.2 ▪ The acquisition of Shelby in December 2018, Unharvested Agricultural Produce 20.5 20.2 resul
Slide 11: Balance Sheet (continued)
Balance Sheet (continued) Balance Sheet (continued) 2018 2017 $Millions Actual Actual Non-Current or Other Liabilities • At December 2018, Net Debt was $62.2m. Deferred Tax Liabilities (15.6) (28.2) The increase in Net Debt on 2017 was due Other Financial Liabilities (7.5) (4.0) to settling the Shel
Slide 12: Divisional Performance & Strategy
Divisional Performance & Strategy 3
Slide 13: Horticulture – Financial Performance
Horticulture – Financial Performance Strong performance from a record crop • Record revenue of $255m, up 15% on 2017 Financial Performance - Horticulture 2018 2017 • Underlying EBITDA of $42.6m, up 9% on $Millions Actual Actual Growth 2017 Revenue 254.6 222.0 15% Underlying Horticulture EBITDA 42.6
Slide 14: Horticulture – Own-Grown Volumes
Horticulture – Own-Grown Volumes Significant increase in export crop • Total own grown export volumes of nearly 3.9m TCEs, up 9% on 2017 • Volume growth concentrated in premium varieties, up 18% on 2017, with strong growth across all premium varieties Mr Apple Own Export Volumes (TCE 000s) Growth in
Slide 15: Horticulture – Prices & Other KPIs
Horticulture – Prices & Other KPIs • Weighted average FOB price up 7% on 2017 Horticulture KPIs 2018 2017 reflecting: Actual Actual Growth ▪ Improved pricing for Premium and Traditional Apple Prices by Variety (NZD / TCE, FOB) Varieties Premium Varieties 38.8 36.8 5% ▪ Mix changes, with Premium vari
Slide 16: Horticulture – Strategy
Horticulture – Strategy Continuing to invest in new, premium varieties • The next exciting step in Mr Apple’s strategy is to increasingly grow and market apples for which we own (outright or collaboratively) the underlying variety. With 1,155 hectares of our own planted orchards, Mr Apple is uniquel
Slide 17: Horticulture – Strategy (continued)
Horticulture – Strategy (continued) Replanting profile; future volumes and apple pricing • Mr Apple has begun the next phase of its orchard redevelopment programme. During the 2018 winter, nearly 67 hectares of new orchard were developed (of which 41 hectares is in Dazzle®). 58 hectares of establish
Slide 18: Storage & Logistics
Storage & Logistics • Revenues up 22% due mostly to strong Financial Performance - Storage & Logistics growth in performance of Scales Logistics 2018 2017 $Millions Actual Actual Growth ▪ Scales Logistics arranged ocean freight for the equivalent of 35,210 TEUs, up 19% on 2017, and Underlying Revenu
Slide 19: Food Ingredients
Food Ingredients • Solid growth in revenues and profitability Financial Performance & KPIs - Food Ingredients 2018 2017 from Food Ingredients. Increased $Millions Actual Actual Growth profitability from both Meateor and Financial Performance Profruit Revenue 83.1 68.9 21% ▪ Total sales volumes >29,0
Slide 20: Food Ingredients – Strategy & Synergies
Food Ingredients – Strategy & Synergies Meateor Group will have substantial interests in three territories • Our petfood investments are focused principally on three objectives: ▪ Improving our relevance to customers. Shelby increased our scale, breadth and diversity of proteins. The combined Meateo
Slide 21: Capital Management
Capital Management 4
Slide 22: Performance Against Benchmarks
Performance Against Benchmarks • Return on Capital Employed (ROCE) Capital Management 2018 2017 maintained at 2017 levels at the Group $Millions Actual Actual level, above our long-run objective Return on Capital Employed • EBITDA margins remain strong. A decrease Horticulture 21% 21% in Group EBITD
Slide 23: Capital Expenditure
Capital Expenditure • Total capital expenditure was higher than Capital Management 2018 2017 2017 due to growth projects at both Mr Apple $Millions Actual Actual and Polarcold. Operational capital Operational Capital Expenditure expenditure was in line with 2017 Horticulture 3.5 3.8 • During the yea
Slide 24: Investment Strategy
= sfavgstmont. Ps ee vaieee
Slide 25: Delivering on Strategy Refresh
Delivering on Strategy Refresh Recap on progress to date • Project Refresh was about refreshing our group investment and growth strategy, adopting a greater focus on pure-agribusinesses • We have, and will continue to focus on opportunities that play well to our strengths: ▪ Fully-vertically integra
Slide 26: Agri-Business
Agri-Business This is an exciting time to be a diversified investor in New Zealand agribusiness • New Zealand stakeholders expect the agriculture sector to embrace environmentally friendly, sustainable and high value production - making best use of current natural resources and creating long lasting
Slide 27: Sustainability, Governance and Outlook
Sustainability, Governance and Outlook 6
Slide 28: Sustainability
Sustainability We take seriously our obligation to be a responsible corporate citizen • Environment: ▪ Mr Apple completed its first CEMARs certification process to determine its carbon footprint (results not yet available). We will be implementing plans to reduce our carbon footprint ▪ Waste audits
Slide 29: Governance
Governance Scales is pleased to announce two new additions to its Board • Nadine Tunley ▪ The Board of Scales is pleased to announce the appointment of Nadine Tunley as a Non-Executive Independent Director of the company. Nadine’s appointment is effective from 26 February 2019 ▪ Nadine is currently
Slide 30: What We Know About 2019
What We Know About 2019 • Horticulture: ▪ Apple harvest underway, early crop indications support a return to long-run average packout rates ▪ First commercial sales of our new premium proprietary varieties Dazzle® and Posy® will take place this season ▪ Focused marketing and branding efforts to expa
Slide 31: Appendices
Appendices 7
Slide 32: Reconciliation to Statutory Accounts
Reconciliation to Statutory Accounts Reconciliation to Reported Financials • This table reconciles Underlying EBITDA and Group Hortic Underlying Net Profit to “Profit for the $000s 2018 2017 Year” as reported in our Financial Reported EBITDA 51,744 45,305 Statements Change in fair value gain on appl
Slide 33: Disclaimer
Disclaimer The information in this presentation has been prepared by Scales Corporation Limited with due care and attention. However, neither Scales Corporation Limited nor any of its directors, employees, shareholders nor any other person shall have any liability whatsoever to any person for any lo