Rcl Foods Limited · JSE:RCL
Rcl Foods — FY2018 Earnings Presentation
49 slides from Rcl Foods's earnings presentation, Aug 29, 2018
Slide 1: Investor Presentation: Results for the Year Ended June 2018
2018 INVESTOR PRESENTATION: 29 AUGUST 2018 RESULTS FOR THE YEAR ENDED JUNE 2018
Slide 2: Miles Dally, Chief Executive Officer
MILES DALLY CHIEF EXECUTIVE OFFICER
Slide 3: Headlines – Results for the Year Ended June 2018
Salient features | Strategic overview | Financial review | Operational reviews | Prospects HEADLINES – RESULTS FOR THE YEAR ENDED JUNE 2018 PERFORMANCE HEADLINES FINANCIAL HEADLINES EBITDA growth of 17.1% HEPS growth 52.4% REVENUE EBITDA R24.4bn R2.0bn Cash generated R1.8 billion 2.1% 17.1% Chicken
Slide 4: Moving Towards a More Balanced Portfolio – Foundation for Growth
Salient features | Strategic overview | Financial review | Operational reviews | Prospects MOVING TOWARDS A MORE BALANCED PORTFOLIO – FOUNDATION FOR GROWTH Our more balanced portfolio helped shield us against some key industry challenges and unfavourable macro-economic conditions EBITDA AND GROWTH P
Slide 5: 1. Grow Through Strong Brands
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 1. GROW THROUGH STRONG BRANDS KEY ACHIEVEMENTS • RCL FOODS Consumer basket volumes grew at 4.1%, ahead of market growth of 1.6%* • Our brand strategies and investment in brands have strengthened our market sha
Slide 6: 2. Partner with Strategic Customers
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 2. PARTNER WITH STRATEGIC CUSTOMERS KEY ACHIEVEMENTS We leveraged our capabilities to provide both our retail and our foodservice customers with a growing and profitable portfolio of solutions Strategic custom
Slide 7: 3. Extend Our Leading Value Chain
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 3. EXTEND OUR LEADING VALUE CHAIN KEY ACHIEVEMENTS We continued our focus on IT as a key driver in unlocking business value through multi-year initiatives aimed at integrating business platforms and profitabil
Slide 8: 4. Expand into the Rest of Africa
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 4. EXPAND INTO THE REST OF AFRICA KEY ACHIEVEMENTS We narrowed our current geographical focus to mainly SADC countries for potential acquisitions We have restructured our activities to increase alignment betwe
Slide 9: 5. Inspire Great People
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 5. INSPIRE GREAT PEOPLE KEY ACHIEVEMENTS Our continuous efforts to accelerate diversity has earned us recognition from the Commission for Gender Equality for being a leader in our sector with a strong focus on
Slide 10: 6. Drive Sustainable Business
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 6. DRIVE SUSTAINABLE BUSINESS KEY ACHIEVEMENTS We achieved 25% energy self-sufficiency through the co-generation of energy at our Sugar mills, waste-to-value energy production in Chicken operations, and solar
Slide 11: Key Deliverables for 2018
Salient features | Strategic overview | Financial review | Operational reviews | Prospects KEY DELIVERABLES FOR 2018 Continue to invest behind brands and systems Continue to sharpen customer relationships and strategic focus by category Continue with implementation of revised Chicken business model
Slide 12: Next Chapter: Sustainable Quality of Earnings – 2019 Key Deliverables
Salient features | Strategic overview | Financial review | Operational reviews | Prospects NEXT CHAPTER: SUSTAINABLE QUALITY OF EARNINGS 2019 KEY DELIVERABLES Maximise ROIC across category clusters Capitalise investment behind brands and systems Leverage customer relationships and drive strategic fo
Slide 13: Rob Field, Chief Financial Officer
ROB FIELD CHIEF FINANCIAL OFFICER
Slide 14: Financial Summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects FINANCIAL SUMMARY EBITDA UP 17.1%. HEADLINE EARNINGS UP 52.7% INCOME STATEMENT JUNE 2018 JUNE 2017 % VAR Revenue Rm 24 426.0 24 950.7 (2.1) EBITDA Rm 2 046.0 1 747.6 17.1 EBITDA margin % 8.4 7.0 1.4 Net financ
Slide 15: Operating Environment
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING ENVIRONMENT Muted market volume growth of 1.6%* Lower soft commodity prices provide input cost relief High levels of sugar imports placed pressure on local market forcing two price decreases and a hi
Slide 16: Operating Results Summary (Rm)
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY (Rm) EBITDA JUNE 2017 TO 2018 UP 17.1% DRIVEN BY CHICKEN AND GROCERIES 17.1% 16.4% 97.6 84.8 101.4 78.2 10.5 334.6 13.3 1.2 42.5 80.8 2 046.0 62.0 2 004.0 51.9 138.1 1 747.6 UNDERLYIN
Slide 17: Headline Earnings Waterfall (Rm)
Salient features | Strategic overview | Financial review | Operational reviews | Prospects HEADLINE EARNINGS WATERFALL (Rm) 2 046.0 775.6 JUNE 2018 Includes Down benefit of R80.2m R64m S12L energy allowance 252.5 219.6 44.1 6.1 76.6 14.3 80.1 837.7 17.1% 52.7% EBITDA Depreciation, Net finance Taxati
Slide 18: Operating Results Summary – Segmental Analysis
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY SEGMENTAL ANALYSIS – REVENUE AND EBITDA REVENUE (Rm) JUNE 2018 JUNE 2017 % VAR Consumer 12 752.9 13 474.0 (5.4) Sugar & Milling 13 566.9 14 467.4 (6.2) Logistics 1 980.0 2 033.1 (2.6)
Slide 19: Cash Flow Summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects CASH FLOW SUMMARY IMPROVED UNDERLYING PROFITABILITY AND WELL CONTROLLED INTEREST COSTS DRIVES CASH UP 19.9% LOWER CASH CONVERSION RATIO OF 87% VS 131% IN PRIOR YEAR DUE MAINLY TO RELEASE OF WORKING CAPITAL IN
Slide 20: Working Capital
Salient features | Strategic overview | Financial review | Operational reviews | Prospects WORKING CAPITAL HIGHER SUGAR PRODUCTION VOLUMES DRIVE 14.3% INCREASE IN NET WORKING CAPITAL WORKING CAPITAL (Rm) JUNE 2018 JUNE 2017 % VAR NET WORKING CAPITAL AS A % OF REVENUE Trade and other receivables 4 25
Slide 21: Return on Invested Capital (ROIC)
Salient features | Strategic overview | Financial review | Operational reviews | Prospects RETURN ON INVESTED CAPITAL (ROIC) GROUP ROIC IMPROVES TO 8.1% DRIVEN BY HIGHER NET OPERATING PROFIT AFTER TAX Reported Group Consumer Sugar & Milling Logistics NOPAT 5.6% NOPAT 75.4% NOPAT 9206.7% NOPAT 16.3%
Slide 22: Capital Expenditure
Salient features | Strategic overview | Financial review | Operational reviews | Prospects CAPITAL EXPENDITURE TOTAL CAPITAL SPEND IN LINE WITH PRIOR YEAR EXPANSION (Rm) REPLACEMENT (Rm) Capital expenditure (including intangibles) was R849.1m (2017: R834.5m) 521.8 Major spend items in the current pe
Slide 23: Debt Package
Salient features | Strategic overview | Financial review | Operational reviews | Prospects DEBT PACKAGE NET FINANCE COSTS PAID DECLINE 20.7% TERM VALUE (Rm) YEAR 1 YEAR 2 YEAR 3 (FEB 18) YEAR 4 (FEB 19) 1 355 5 year 400 847 4 year 250 3 year – RCF 498 Total 3 350 Hedged % 77% 77% 53% 53% Hedged (fix
Slide 24: Debt Covenants
Salient features | Strategic overview | Financial review | Operational reviews | Prospects DEBT COVENANTS RCL FOODS REMAINS WELL WITHIN COVENANT REQUIREMENTS COVENANT REQUIRED JUNE 2018 DEC 2017 JUNE 2017 Senior leverage ratio (Net senior debt*/pre-IAS 39 HEBITDA) <2.75 1.1 1.7 1.4 Repricing (a step
Slide 25: Scott Pitman, Managing Director Consumer Division
SCOTT PITMAN MANAGING DIRECTOR CONSUMER DIVISION
Slide 26: Operational Review: Consumer
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CONSUMER EBITDA result up 94.5% on prior year REVENUE (Rm) JUNE 2018 JUNE 2017 % VAR Consumer 12 752.9 13 474.0 (5.4) Sugar & Milling 13 566.9 14 467.4 (6.2) Logistics 1 980.0 2 033.1 (2.6)
Slide 27: Operational Review: Consumer
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CONSUMER Outstanding Groceries growth and a solid chicken result, drove a 94.5% increase in Consumer’s EBITDA REVENUE (Rm) JUNE 2018 JUNE 2017 % VAR Groceries1 5 244.9 4 955.3 5.8 HEADLINES
Slide 28: Material Adjustments to Derive Underlying Result
Salient features | Strategic overview | Financial review | Operational reviews | Prospects MATERIAL ADJUSTMENTS TO DERIVE UNDERLYING RESULT Underlying EBITDA result of R1 004.9 million, up 75.5% on prior year GROCERIES (Rm) JUNE 2018 JUNE 2017 % VAR HEADLINES EBITDA 518.4 449.4 15.4 • Underlying EBI
Slide 29: Operational Review: Groceries – Share and Margin
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES SHARE AND MARGIN Groceries had another exceptional year, delivering a NEW MARKET LEADERS strong set of results on the back of solid volume and market share growth Underlying Groce
Slide 30: Operational Review: Groceries – Innovation
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES INNOVATION Innovation has been a key part of the brand successes with pet food leading the charge. The new factory enables intrinsic product differentiation which is unique in SA
Slide 31: Operational Review: Groceries – Front End
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES FRONT END Customer relationships, partnerships and joint planning have been core to the success of groceries, with clear benefits for all Despite significant step changes in marke
Slide 32: Operational Review: Groceries – Turnaround
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES TURNAROUND Significant focus & investment in innovation, revised front end strategy and manufacturing efficiencies were poured into re-establishing our Pieman’s brand. This has yi
Slide 33: Operational Review: Groceries – Turnaround
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES TURNAROUND Speciality saw satisfying underlying profit growth (although muted by the retrenchment provision) with substantial focus and re-engineering of processes and ways of wor
Slide 34: Operational Review: Chicken – Added Value
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CHICKEN CHICKEN ADDED VALUE FOODSOLUTIONS This priority area of the chicken business saw significant growth in customer volumes in the second half of the financial year. RCL FOODS continues
Slide 35: Operational Review: Chicken – Mainstream
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CHICKEN CHICKEN MAINSTREAM IMPORTS - LEG QUARTERS – TONS PER MONTH Whilst Chicken import levels remain high, local supply and demand has largely been in balance, mainly thanks 38 000 to Rai
Slide 36: John du Plessis, Managing Director Sugar & Milling Division
JOHN DU PLESSIS MANAGING DIRECTOR SUGAR & MILLING DIVISION
Slide 37: Operational Review: Sugar & Milling
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR & MILLING EBITDA result down 16.1% on prior year REVENUE (Rm) JUNE 2018 JUNE 2017 % VAR Consumer 12 752.9 13 474.0 (5.4) Sugar & Milling 13 566.9 14 467.4 (6.2) Logistics 1 980.0 2 03
Slide 38: Operational Review: Sugar & Milling
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR & MILLING Sugar & Milling EBITDA down 16.1% driven mainly by declines in Sugar and Baking REVENUE (Rm) JUNE 2018 JUNE 2017 % VAR Animal Feed 4 589.4 5 667.9 (19.0) MillBake 3 646.5 3
Slide 39: Material Adjustments to Derive Underlying Result
Salient features | Strategic overview | Financial review | Operational reviews | Prospects MATERIAL ADJUSTMENTS TO DERIVE UNDERLYING RESULT Underlying EBITDA result of R807.3 million, with decline moderating to 12.3% ANIMAL FEED (Rm) JUNE 2018 JUNE 2017 % VAR EBITDA 319.5 245.4 30.2 HEADLINES IAS39
Slide 40: Operational Review: Animal Feed
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: ANIMAL FEED Underlying EBITDA decreased by R10.6m (3.9%) to YELLOW MAIZE PRICE (R/ton) R257.8m driven primarily by the reduction in internal volume F17 F18 4 000 AVG Price AVG Price R2 773
Slide 41: Operational Review: MillBake
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: MILLBAKE EBITDA decreased by R18.3m (6.5%) to R265.4m primarily SAFEX WHEAT PRICE (R/ton) as a result of challenges in Baking F17 F18 5 000.0 4.0% Volume gains in Milling, combined with imp
Slide 42: Operational Review: Sugar
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR Underlying EBITDA decreased by R84.8m (23.0%) to GLOBAL SUPPLY/DEMAND BALANCE (OCT/SEPT BASIS) R284.1m as a result of the disruptive impact of imports on 200 15 local market sales 195
Slide 43: Chris Creed, Managing Director Logistics Division
CHRIS CREED MANAGING DIRECTOR LOGISTICS DIVISION
Slide 44: Operational Review: Logistics
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: LOGISTICS EBITDA result in line with prior year REVENUE (Rm) JUNE 2018 JUNE 2017 % VAR HEADLINES Consumer 12 752.9 13 474.0 (5.4) • Despite the significant impact of the Sugar & Milling 13
Slide 45: Logistics Impacted by Chicken Restructure, Subdued Economic Conditions and Listeria
Salient features | Strategic overview | Financial review | Operational reviews | Prospects LOGISTICS IMPACTED BY CHICKEN RESTRUCTURE, SUBDUED ECONOMIC CONDITIONS AND LISTERIA The Chicken restructure (only in the base for H2 of F17) has had a material impact on the Logistics division Retail volumes r
Slide 46: Mitigation Strategy Successfully Implemented
Salient features | Strategic overview | Financial review | Operational reviews | Prospects MITIGATION STRATEGY SUCCESSFULLY IMPLEMENTED Logistics successfully implements mitigation strategy to offset the Chicken restructure, with focus on winning new business and cost optimisation in the warehouse a
Slide 47: Targeted New Business Achieved
Salient features | Strategic overview | Financial review | Operational reviews | Prospects TARGETED NEW BUSINESS ACHIEVED Planned take-on of the full Pick n Pay cold chain on track laying the foundation for a sound future partnership Take-on includes new retail principals in the frozen foods busines
Slide 48: Prospects
PROSPECTS
Slide 49: Prospects
Salient features | Strategic overview | Financial review | Operational reviews | Prospects PROSPECTS Recent modest recovery in market volumes expected to continue, though trading conditions will continue to be challenging and fight for market share will remain fierce Focus on Groceries brands remain