Oceana Group Limited · JSE:OCE
Oceana — H1 2018 Earnings Presentation
65 slides from Oceana's earnings presentation, May 2018
Slide 1: Investor Presentation for the Six Months Ended 31 March 2018
INVESTOR PRESENTATION FOR THE SIX MONTHS ENDED 31 MARCH 2018
Slide 2: Legal Disclaimer and Basis of Preparation
LEGAL DISCLAIMER AND BASIS OF PREPARATION • For the purposes of this notice, the presentation (the “Presentation”) shall mean and include the slides that follow, the oral presentation of the slides by Oceana Group Limited (the “Company”) and/or its advisers, any question-and-answer session that foll
Slide 3: Agenda
AGENDA 01 GROUP OVERVIEW 02 FINANCIAL & OPERATING PERFORMANCE 03 STRATEGIC OVERVIEW & OUTLOOK 04 GUIDANCE 3
Slide 4: 100 Year Journey
100 YEAR JOURNEY Oceana had its origins in Oceana acquired the the west coast town of canned fish marketing Lamberts Bay. When it was Blue Continent compay, Federal Acquisition of Lusitania’s incorporated it was known Products (Pty) Ltd Marine Ltd, Lucky Star hake business, increasing as Lamberts Ba
Slide 5: Group Overview
GROUP OVERVIEW • Largest fishing company in • Incorporated 1918 • Most empowered fishing Africa company on the JSE • Important participant in South • Customers in 49 countries African, Namibian, Angolan and • 5,565 employees globally US fishing industries • 440,000 tons of fish landed • 50% black –
Slide 6: Group Overview
GROUP OVERVIEW 9 4 8 3 5 steel refrigerated steel refrigerated vessels, wholly canneries fishmeal plants seawater vessels seawater vessels owned, co-owned or in South Africa in Namibia joint ventures 11 1 12 fishing vessels production facility spotter planes 1 2 4 1 2 horse mackerel horse mackerel h
Slide 7: Performance Summary
PERFORMANCE SUMMARY TAILWINDS • Recovery of canned fish volumes • Frozen fish procurement at improved exchange rates • SA Horse mackerel landings • Hake vessel utilisation • FMO (Africa) pricing • USA tax rate HEADWINDS • FMO (US) pricing • Exchange rate • Angolan fish landings • CCS occupancy (Gaut
Slide 8: Performance Highlights
PERFORMANCE HIGHLIGHTS TURNOVER OPERATING PROFIT AFRICA OPERATING PROFIT 11% Year-on-year increase 9% Year-on-year increase 51% Year-on-year increase Operating profit before associate, Operating profit before associate, JV income and FV adjustments JV income and FV adjustments INTERIM DIVIDEND AVERA
Slide 9: 5 Year Performance
5 YEAR PERFORMANCE 5 YEAR REVENUE* 4 542 3 667 3 478 2 548 3 465 3 141 3 489 2 222 2 437 2014 2015 2016 2017 2018 First half Second half 5 YEAR HEADLINE EARNINGS* 548 308 385 231 265 310 246 221 226 2014 2015 2016 2017 2018 First half Second half *Excluding Lamberts Bay Foods effect 9
Slide 10: Agenda
AGENDA 01 GROUP OVERVIEW 02 FINANCIAL & OPERATING PERFORMANCE 03 STRATEGIC OVERVIEW & OUTLOOK 04 GUIDANCE 10
Slide 11: Income Statement - Group
INCOME STATEMENT - GROUP MARCH Var MARCH R'000 2018 % 2017 Revenue 3 489 151 11% 3 140 602 Cost of sales (2 176 284) -13% (1 918 812) Gross profit 1 312 867 7% 1 221 790 GP margin 38% 39% Foreign exchange loss (21 414) 52% (44 677) Operating profit before assoc/JV income FV adjustment on 559 845 9%
Slide 12: Income Statement – Africa
INCOME STATEMENT – AFRICA MARCH Var MARCH R'000 2018 % 2017 Revenue 2 874 790 18% 2 435 868 Cost of sales (1 773 927) -16% (1 534 802) Gross profit 1 100 863 22% 901 066 GP margin 38% 37% Foreign exchange loss (21 414) 52% (44 677) Operating profit before assoc/JV income 437 123 51% 287 140 Associat
Slide 13: Income Statement – USA
INCOME STATEMENT – USA MARCH Var MARCH $'000 2018 % 2017 Revenue 47 642 -8% 51 825 Cost of sales (31 036) -10% (28 226) Gross profit 16 606 -29% 23 599 GP margin 35% 46% Operating profit before assoc/JV income 9 926 -41% 16 749 Associate and JV income (1 345) 2% (1 383) Operating profit before fair
Slide 14: Foreign Exchange
FOREIGN EXCHANGE ZAR STRENGTH AVERAGE FEC RATE 15 15 14 14 13 13 12 11 12 Sep-16 Mar-17 Sep-17 Mar-18 Jan Dec Mar Oct Nov Feb Dec Mar Sep H1 2017 H1 2018 14
Slide 15: Foreign Exchange
FOREIGN EXCHANGE EFFECT OF EXCHANGE RATE ON OPERATING PROFIT (R’000) 25,000 14.5 20,000 14.0 15,000 13.5 10,000 13.0 5,000 12.5 0 12.0 -5,000 11.5 -10,000 11.0 -15,000 -20,000 10.5 -25,000 10.0 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Monthly foreign exchange movement Cumulative foreign exchange mo
Slide 16: Revenue Group
REVENUE GROUP GROUP (Rm) 31 7 51 166 50 245 3,489 3,141 3,091 March 2017 Exchange rate Comparative Canned fish Fishmeal and Horse mackerel Lobster and Commercial March 2018 business and fishmeal fish oil (USA) and hake squid Cold Storage (Africa) Decrease Increase 16
Slide 17: Revenue Africa
REVENUE AFRICA PRICE, VOLUME & EXCHANGE RATE (Rm) 10 162 407 347 78 102 2,875 2,759 2,436 March 2016 Price Volume Exchange March 2017 Price Volume Exchange March 2018 effect rate effect rate Decrease Increase 17
Slide 18: Revenue USA
REVENUE USA PRICE & VOLUME ($m) 2 3 3 7 4 1 52 48 46 March 2016 Fishmeal Fish oil Price March 2017 Fishmeal Fish oil Price March 2018 volumes volumes volumes volumes Decrease Increase 18
Slide 19: Operating Profit
OPERATING PROFIT REVENUE DRIVERS OTHER DRIVERS MARCH MARCH R’000 2017 VOLUMES PRICE FOREX TOTAL COSTS 2018 Total 515 532 20.4% 1.3% 8.4% -2.1% 559 845 Canned fish (Africa) 22.2% 2.4% 38.5% 20.7% 119 053 190 160 Fishmeal (Africa) -27.2% 3.7% -16.7% -14.8% Fishmeal & fish oil 228 393 -0.1% -8.0% -0.6%
Slide 20: Canned Fish and Fishmeal - Africa
CANNED FISH AND FISHMEAL - AFRICA REVENUE DRIVERS OTHER DRIVERS MARCH MARCH R’000 2017 VOLUMES PRICE FOREX TOTAL COSTS 2018 Canned fish (Africa) 22.2% 2.4% 38.5% 20.7% 119 053 190 160 Fishmeal (Africa) -27.2% 3.7% -16.7% -14.8% TOTAL H1 CANNED FISH SALES (CTNS’000) TOTAL H1 CANNED FISH SALES - NORMA
Slide 21: Canned Fish and Fishmeal - Africa
CANNED FISH AND FISHMEAL - AFRICA REVENUE DRIVERS OTHER DRIVERS MARCH MARCH R’000 2017 VOLUMES PRICE FOREX TOTAL COSTS 2018 Canned fish (Africa) 22.2% 2.4% 38.5% 20.7% 119 053 190 160 Fishmeal (Africa) -27.2% 3.7% -16.7% -14.8% INDUSTRIAL FISH LANDINGS (TONS) 200,000 180,709 180,000 MAR 16 MAR 17 MA
Slide 22: Canned Fish and Fishmeal - Africa
CANNED FISH AND FISHMEAL - AFRICA REVENUE DRIVERS OTHER DRIVERS MARCH MARCH R’000 2017 VOLUMES PRICE FOREX TOTAL COSTS 2018 Canned fish (Africa) 22.2% 2.4% 38.5% 20.7% 119 053 190 160 Fishmeal (Africa) -27.2% 3.7% -16.7% -14.8% FISHMEAL AND FISH OIL PRICE COMPARISON (USD/TON) 1,900 1,800 1,700 1,600
Slide 23: Fishmeal and Oil - USA
FISHMEAL AND OIL - USA REVENUE DRIVERS OTHER DRIVERS MARCH MARCH R’000 2017 VOLUMES PRICE FOREX TOTAL COSTS 2018 Fishmeal & fish oil 228 393 -0.1% -8.0% -0.6% -7.2% 126 146 (USA) US SALES (TONS) 8 423 10 357 23 066 21 150 Mar-17 Mar-18 Fishmeal Fish oil 23
Slide 24: Fishmeal and Oil - USA
FISHMEAL AND OIL - USA REVENUE DRIVERS OTHER DRIVERS MARCH MARCH R’000 2017 VOLUMES PRICE FOREX TOTAL COSTS 2018 Fishmeal & fish oil 228 393 -0.1% -8.0% -0.6% -7.2% 126 146 (USA) FISHMEAL AND FISH OIL PRICE COMPARISON (USD/TON) 1,900 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1,000 Oct-16 Nov-1
Slide 25: Horse Mackerel and Hake
HORSE MACKEREL AND HAKE REVENUE DRIVERS OTHER DRIVERS MARCH MARCH R’000 2017 VOLUMES PRICE FOREX TOTAL COSTS 2018 Horse mackerel 33.8% 4.7.% -8.1% 3.0% 101 329 175 768 Hake 22.6% 5.7% -11.5% 5.2% H1 DESERT DIAMOND LANDINGS NAMIBIA LANDINGS CATCH RATE CATCH RATE 55% 13% 2003 2004 2005 2006 2007 2008
Slide 26: Horse Mackerel and Hake
HORSE MACKEREL AND HAKE REVENUE DRIVERS OTHER DRIVERS MARCH MARCH R’000 2017 VOLUMES PRICE FOREX TOTAL COSTS 2018 Horse mackerel 33.8% 4.7.% -8.1% 3.0% 101 329 175 768 Hake 22.6% 5.7% -11.5% 5.2% HORSE MACKEREL AVERAGE EX HATCH PRICES (USD/TON) 1,200 1,100 980 1,000 850 880 900 800 750 700 640 650 6
Slide 27: Horse Mackerel and Hake
HORSE MACKEREL AND HAKE REVENUE DRIVERS OTHER DRIVERS MARCH MARCH R’000 2017 VOLUMES PRICE FOREX TOTAL COSTS 2018 Horse mackerel 33.8% 4.7.% -8.1% 3.0% 101 329 175 768 Hake 22.6% 5.7% -11.5% 5.2% VESSEL UTILISATION HAKE SEA DAYS 130 120 110 100 90 65% 69% 80 70 60 50 40 70% 64% 70% 30 20 10 0 2016 2
Slide 28: Lobster and Squid
LOBSTER AND SQUID REVENUE DRIVERS OTHER DRIVERS MARCH MARCH R’000 2017 VOLUMES PRICE FOREX TOTAL COSTS 2018 Lobster and squid 19 731 11.8% 18.4% -4.2% -16.3% 27 005 LOBSTER AND SQUID (TONS) 700 0% +13% 600 500 485 400 486 548 300 200 -15% 100 205 -16% 174 146 - 2016 2017 2018 Lobster Squid 28
Slide 29: Commercial Cold Storage
COMMERCIAL COLD STORAGE REVENUE DRIVERS OTHER DRIVERS MARCH MARCH R’000 2017 VOLUMES PRICE FOREX TOTAL COSTS 2018 Commercial Cold 47 026 -5.2% 6.7% 1.1% -11.3% 40 766 Storage OPERATING PROFIT (R’000) 55,000 50,000 744 5 897 12 901 45,000 40,000 35,000 30,000 25,000 47 026 20,000 40 766 15,000 10,000
Slide 30: Balance Sheet (Key Items)
BALANCE SHEET (KEY ITEMS) MARCH MARCH R'000 2018 2017 Property, plant and equipment 1 444 943 1 616 962 Intangible assets 3 901 285 4 448 917 Current assets 2 464 747 2 749 868 Other assets 2018 2017 386 688 448 370 Net cash Africa R532m R249m 856 737 983 467 USA $27m $61m 9 054 400 10 247 584 Total
Slide 31: Cash Flow
CASH FLOW GROUP (R’000) 156 253 208 60 1 222 857 September 2017 Cashflow from Cashflow from Cashflow from Exchange difference March 2018 operating activities investing activities financing activities Decrease Increase 31
Slide 32: Working Capital
WORKING CAPITAL 120 120 115 115 100 110 103 105 80 100 60 95 115 112 90 102 56 90 40 85 69 80 20 44 39 38 36 33 75 0 70 2016 2017 2018 Inventory days Debtors days Creditors days Cash conversion cycle Creditors days excl raw fish 32
Slide 33: Dividend
100 YEARS ce Ao our 7) DIVIDEND . SiN YY Ny ARAN Wk |
Slide 34: Dividends
DIVIDENDS INTERIM HEPS AND DPS 310.4 252.6 224.2 230.8 193.8 106.0 106.0 112.0 112.0 90.0 2014 2015 2016 2017 2018 HEPS DPS 34
Slide 35: Strategic Overview & Outlook
STRATEGIC OVERVIEW & OUTLOOK OVERVIEW CANNED FISH FISHMEAL & FISH OIL • Canned fish demand and supply • Demand and supply • Cannery efficiencies • Global view • Water mitigation • Daybrook update HORSE MACKEREL & HAKE LOBSTER & SQUID CCS LOGISTICS • Horse mackerel SA and Namibia • Divisional outlook
Slide 36: Strategic Objectives & Core Deliverables
STRATEGIC OBJECTIVES & CORE DELIVERABLES STRATEGIC OBJECTIVE CORE DELIVERABLE • Achieving growth in headline earnings Generating sustained financial • Delivering superior returns to shareholders returns • Identifying opportunities for acquisitive and organic growth • Driving effectiveness and effici
Slide 37: Canned Fish
roy 100 OCEANA/GROUP CANNED FISH
Slide 38: Canned Fish Supply
CANNED FISH SUPPLY DEMAND Volume growth expected to continue • Price • Value and affordability increasingly a driver for strained consumers • The brand continues to demand a price premium of between 8 and 10% • Food groceries showing volume recovery ahead of price inflation • Local canned fish compe
Slide 39: Strong Performance vs Total Food
STRONG PERFORMANCE VS TOTAL FOOD LUCKY STAR VOLUME GROWTH VS TOTAL FOOD 24.0% 20.0% 16.0% 12.0% 8.0% 4.0% 0.0% 12MM Mar-18 6MM Mar-18 3MM Mar-18 Copyright © 2018 ask'd cc Lucky Star Total Ask'd Basket Confidential and Proprietary 39
Slide 40: Market Share and Growth by Region
MARKET SHARE AND GROWTH BY REGION 12 MONTHS ENDING MARCH 2018 91.7% (+2.3) 88% 93.7% 95.6% (+2.6) (+2.6) (+1.5) 86.4% 90.8% (+2.9) 83.6% (+2.8) 83.7% (+1.7) TOTAL PILCHARDS 87.8% (+0.5) TOTAL RSA MAT TY* 3MM MAR 2018 52.8% VALUE GROWTH 13.7% -0.2% 0.1% (+6.9) UNIT GROWTH 8.8% -4.6% -5.6% *moving ann
Slide 41: Canned Fish Demand
CANNED FISH DEMAND SA SALES (CTNS’000) 1,400 5,000 4,500 1,200 4,000 1,000 3,500 3,000 800 2,500 600 2,000 400 1,500 1,000 200 500 - 0 Sep Oct Nov Dec Jan Feb Mar April 2017 Monthly 2018 Monthly 2017 Cumulative 2018 Cumulative 41
Slide 42: Canned Fish Supply
CANNED FISH SUPPLY SUPPLY • Local landings still under pressure • Volume expectations marginally up on PY • Procurement well established, material increase in volumes of frozen fish 42
Slide 43: Canned Fish Supply
CANNED FISH SUPPLY 10,000 9,000 8,000 26% 33% 7,000 4% 6,000 3% 34% 5,000 34% 3% 4,000 54% 3,000 54% 2,000 36% 1,000 10% 9% 0 2016 2017 2018 Planned Own fresh Own frozen Procured SA Procured internationally 43
Slide 44: Canned Fish
CANNED FISH CANNERY • Update on efficiencies project • Commenced February 2018 • Projected savings of R40-R45m annually • Focus on throughput, efficiencies and yields WATER CRISIS MITIGATION • Reduced municipal water usage by 36% • Desalination plant – supplies between 80-95% of water requirements •
Slide 45: Water Crisis Mitigation
WATER CRISIS MITIGATION 2 X 1 MILLION LITRE TANKS AT ST HELENA BAY 45
Slide 46: Fishmeal and Fish Oil
OCEANA/GROUP FISHMEAL AND FISH OIL
Slide 47: Fishmeal and Oil
FISHMEAL AND OIL PERU • General expectation of 5 million ton quota for 2018 year • 3.3 million ton quota for April 2018 announced and current speculation of 1.5 to 2 million ton for November 2018 • Fishing commenced early April, 50% of quota landed to date, expect full quota could be landed by early
Slide 48: World Fishmeal Production
FISHMEAL AND FISH OIL WORLD FISHMEAL PRODUCTION X 1 000 TONS 6,000 5,000 4,000 3,000 2,000 1,000 - 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018e Peru China,PR Other 48
Slide 49: World Fish Oil Production
FISHMEAL AND FISH OIL WORLD FISH OIL PRODUCTION X 1 000 TONS 1,200 1,000 800 600 400 200 - 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018e Peru China,PR Other 49
Slide 50: Fishmeal and Fish Oil Prices
50 800 1,000 1,200 1,400 1,600 1,800 2,000 1,000 1,200 1,400 1,600 1,800 2,000 800 Oct-16 Oct-16 Nov-16 Nov-16 Fishmeal Fishmeal Dec-16 Dec-16 Jan-17 Jan-17 Feb-17 Feb-17 Fish oil Fish oil Mar-17 Mar-17 Apr-17 Apr-17 May-17 May-17 Jun-17 Jun-17 Jul-17 Jul-17 Aug-17 Aug-17 FISHMEAL AND FISH OIL PRICE
Slide 51: Daybrook
HF OCEANA/GROUP DAYBROOK
Slide 52: Daybrook
DAYBROOK LANDINGS • Westbank partnership concluded – following 92% shareholder approval • Season commenced 15 April - record landings in week 4 OPERATIONS • Focus on plant capacity during the closed season • Expectation of improved plant efficiencies and increasing throughput • Oil yield improvement
Slide 53: Daybrook Landings
DAYBROOK LANDINGS 180,000 160,000 140,000 120,000 Million Fish 100,000 80,000 60,000 40,000 20,000 0 1 2 3 4 5 6 7 Week 2015 2016 2017 2018 53
Slide 54: Horse Mackerel and Hake
HORSE MACKEREL AND HAKE 54
Slide 55: Horse Mackerel SA
HORSE MACKEREL SA LANDINGS • Desert Diamond improvement in landings expected to continue but remain inconsistent • Poor weather conditions affecting performance • Dry dock scheduled for June/July • New West Coast permit issued which has resulted in improved landings • FRAP appeal process still outst
Slide 56: Horse Mackerel South Africa
HORSE MACKEREL SOUTH AFRICA CATCH RATE 56
Slide 57: Horse Mackerel Namibia
HORSE MACKEREL NAMIBIA LANDINGS • Improvement in fleet utilisation to drive volume growth offset by changes in size mix • 30% of 2018 quota unallocated • Government quota remains unresolved • Rights allocation process not yet communicated HARAMBEE TRUST • First pay-out made out in April 57
Slide 58: Hake
HAKE LANDINGS • Vessel utilisation improvements • Cost efficiency driven by improved catch rates PRICING • Size mix affecting overall sales price • Good demand for white fish particularly Europe and China 58
Slide 59: Lobster and Squid
100 YEARS OCEANA/GROUP LOBSTER AND SQUID Niamey ou ji } e
Slide 60: Lobster and Squid
LOBSTER AND SQUID LOBSTER • Remains red listed • WWF intent on engaging DAFF on TAC determination • FRAP appeals yet to be assessed • Future of Lobster division being reviewed SQUID • Demand strong • Solid 6 months performance expected to continue 60
Slide 61: CCS Logistics
roy 100 OCEANA/GROUP CCS LOGISTICS
Slide 62: CCS Regional Revenue Occupancy
CCS REGIONAL REVENUE OCCUPANCY COASTAL • Coastal will be positively affected by high volumes of frozen fish imports • Strong demand in Namibia and Angola • Strong growth in reserve space customers GAUTENG • Concluded new long term contracts • Favourable movements in April and May including chicken v
Slide 63: Agenda
AGENDA 01 GROUP OVERVIEW 02 FINANCIAL & OPERATING PERFORMANCE 03 STRATEGIC OVERVIEW & OUTLOOK 04 GUIDANCE 63
Slide 64: Guidance
GUIDANCE OPERATING PERFORMANCE • Continued improvement driven by solid Africa performance and growth of Daybrook AFRICA • Efficiencies in production process at canneries • Target canned fish volumes of H2:2017 • Consistent hake landings and continued improvement in SA horse mackerel landings • Namib
Slide 65: Questions
SF | 100 /EARS OCEANA, GROUP = QUESTIONS