Slide 1: Inghams Group 2022 Annual Results Presentation
Inghams Group Limited 2022 ANNUAL RESULTS PRESENTATION 19 AUGUST 2022
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: Executive Summary
EXECUTIVE SUMMARY § FY22 impacted by COVID-19 and global events § COVID-19 related impacts on chicken supply/demand dynamics, COVID-related absenteeism, supplier shortages and other supply chain disruption, input cost inflation due to geopolitical events and weather event impacts § Operations commen
Slide 4: Overview & FY22 Update
OVERVIEW & FY22 UPDATE ANDREW REEVES CEO & MANAGING DIRECTOR
Slide 5: 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 § Ab
Slide 6: Vertically Integrated Operating Model
VERTICALLY INTEGRATED OPERATING MODEL § 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 capture § Cost, capability and complexity create barriers to entry § Diversified customers including
Slide 7: Poultry Is an Attractive & Growing Sector
POULTRY IS AN ATTRACTIVE & GROWING SECTOR § Affordable – significant price advantage over other meat proteins § 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 § Sustainable – chicken
Slide 8: Group FY22 Financial Summary
GROUP FY22 FINANCIAL SUMMARY CONDITIONS STARTING TO IMPROVE FOLLOWING A CHALLENGING YEAR § FY22 characterised by COVID-related impacts, effects of geopolitical events on feed/fuel costs and global supply chain FY22 FY21 Variance % § Operational efficiency programs helping offset some inflation Group
Slide 9: Operational Update
OPERATIONAL UPDATE RECOVERY UNDERWAY DURING 4Q § FY22 results were significantly impacted in 2H by the effects of the COVID-19 pandemic, floods, and global events driving increases in feed/fuel costs, and supply chain disruptions § Price increases are being achieved across all customers and channels
Slide 10: FY22 Core Poultry Average Selling Prices
FY22 CORE POULTRY AVERAGE SELLING PRICES GROUP AVERAGE SELLING PRICES HAVE RECOVERED STRONGLY FROM LOWS IN 3Q § Average Selling Price (ASP) decline in early 3Q driven by Omicron-related channel and product mix changes, with significant industry-wide increase in supply to Wholesale channel due to the
Slide 11: Supply Chain and Input Cost Challenges
SUPPLY CHAIN AND INPUT COST CHALLENGES A DETAILED REVIEW OF FY22 1H 2022 3Q 4Q • War in Ukraine effectively removes ~30% of • Prices increase due to tight global supply, Wheat and soymeal prices increasing due to Key feed • supply shortages arising from poor northern global wheat supply uncertainty
Slide 12: Observations Across Our Channels
OBSERVATIONS ACROSS OUR CHANNELS CORE POULTRY VOLUMES INCREASED 4.2% AND AVERAGE SELLING PRICE DECLINED 2.3% § Channel shift was required in dealing with the COVID-19 disruptions YoY change in volume by channel (Kt) Comments • Tray pack continues to grow but Retail volume declined due to processing
Slide 13: Financial Results
FINANCIAL RESULTS GARY MALLETT CHIEF FINANCIAL OFFICER
Slide 14: Profit & Loss
PROFIT & LOSS STRONG VOLUME GROWTH OFFSET BY REVENUE MIX AND INFLATIONARY PRESSURES § Volume: Growth in core poultry volume of 4.2% $M FY22 FY21 Variance % − Australian volume growth of 5.2% driven mainly by growth in Wholesale with a small contribution from Export as markets re- Core Poultry volume
Slide 15: Balance Sheet
BALANCE SHEET SOLID BALANCE SHEET POSITION DESPITE SOFTER 2H TRADING OUTCOME $M Jun-22 Jun-21 Variance Inventories/Biologicals1 384.0 328.5 55.5 § Inventories: Increased $55.5M due to an increase in the value of feed materials on hand as a result of cost increases Receivables1 223.6 224.7 (1.1) and
Slide 16: Cashflow
CASHFLOW CASH CONVERSION CONSISTENT WITH FY21 $M FY22 FY21 Variance Statutory EBITDA 370.4 443.9 (73.5) § Cash conversion ratio of 101.9%, in line with FY21, reflects good working capital management during softer trading Non-cash items (5.0) (3.3) (1.7) conditions EBITDA excluding non-cash items 365
Slide 17: Capital Management Outcomes
CAPITAL MANAGEMENT OUTCOMES CAPEX PROJECT DELAYS DUE TO COVID-19 IMPACTS; NET DEBT IN-LINE WITH 1H FY22 Cashflow from Cashflow from strategic Cashflow from Cashflow from operations of $372.5M, a decline of $77.9M on FY21, due to lower 2H profitability. Cash conversion ratio operations activities int
Slide 18: 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 19: Segment Performance
SEGMENT PERFORMANCE ANDREW REEVES CEO & MANAGING DIRECTOR
Slide 20: Australia
AUSTRALIA STRONG VOLUME GROWTH OFFSET BY PRODUCT/CHANNEL MIX SHIFT $M FY22 FY21 Variance % § Volume growth of 5.2% delivered against a backdrop of significant COVID-19 lockdowns and effects of Omicron in 3Q Core Poultry volumes (kt) 400.6 380.7 19.9 5.2 Total Poultry volumes (kt) 498.0 477.5 20.5 4.
Slide 21: New Zealand
NEW ZEALAND LOWER SALES VOLUMES DUE TO LOCKDOWNS OFFSET BY PRICE INCREASES ACROSS ALL CHANNELS $M FY22 FY21 Variance % § Trading patterns similar to Australia, however Omicron impacts experienced later in 3Q into early 4Q Core Poultry volumes (kt) 64.9 66.2 (1.3) (2.0) § Core poultry volumes decline
Slide 22: ESG
ESG ANDREW REEVES CEO & MANAGING DIRECTOR
Slide 23: Sustainability
SUSTAINABILITY KEY FOCUS AREAS ACROSS OUR OPERATIONS SHOWING GOOD PROGRESS § Continue to make good progress toward our Sustainability goals despite disruptions caused by COVID-19 § Our plan is to set concrete actions to deliver on our targets, whilst increasing our transparency with improved reporti
Slide 24: Operations & Strategy Update
OPERATIONS & STRATEGY UPDATE ANDREW REEVES CEO & MANAGING DIRECTOR
Slide 25: Continuous Improvement Initiatives
CONTINUOUS IMPROVEMENT INITIATIVES TWO EXAMPLES OF OVER 300 PROJECTS IDENTIFIED FOR FY22 Murarrie waterjet portioning system project Thomastown inline kiev rolling project § Site employees utilised Continuous Improvement tools § Improving two-step offline manual process of loading to identify and im
Slide 26: Refreshing Our Strategy
REFRESHING OUR STRATEGY FOCUS ON LEADING THE CATEGORY AND UNLOCKING ITS UNTAPPED POTENTIAL THROUGH SIX STRATEGIC PRIORITIES Growth through Category Leadership Differentiate Elevate strategic Build on and Optimise and Explore growth with consumer customer leverage our future proof our options insight
Slide 27: Summary
SUMMARY CONDITIONS STARTING TO IMPROVE AND SECTOR FUNDAMENTALS REMAIN INTACT § Poultry is an attractive and growing sector with a significant price advantage over red meat alternatives § Looking through the COVID-related disruptions, Inghams has a track record of strong cash generation and investmen
Slide 28: Appendix
APPENDIX
Slide 29: AASB 16 Lease Impact
AASB 16 LEASE IMPACT Balance Sheet $M FY22 AU NZ FY21 Land & Buildings 835.5 724.1 111.4 852.0 Growers 461.9 384.7 77.2 515.6 Balance Sheet: Equipment 22.0 20.5 1.5 7.3 § Land and Buildings: Ingham’s has a large leased property Right-of-use Assets 1,319.4 1,129.3 190.1 1,374.9 portfolio. Average ter
Slide 30: Profit & Loss Reconciliation
PROFIT & LOSS RECONCILIATION Excluded FY22 Underlying FY21 Underlying FY22 FY22 AASB 16 Profit & Loss $M from (Pre AASB 16) (Pre AASB 16) Statutory Underlying Leases underlying (Reported) (Reported) Core Poultry volume (kt) 465.5 465.5 465.5 446.9 By-Products volume (kt) 111.0 111.0 111.0 109.2 Tota
Slide 31: EBITDA & NPAT Reconciliation
EBITDA & NPAT RECONCILIATION $M FY22 FY21 Var % Significant Items excluded from underlying results: Statutory EBITDA 370.4 443.9 (73.5) (16.6) § Restructuring: FY22 includes redundancy costs of $3.4M (Profit) / Loss on sale of assets 0.0 0.5 (0.5) (100.0) for closed sites, offset by the reversal of
Slide 32: Segment Reconciliation
SEGMENT RECONCILIATION Group Group Australia Australia NZ NZ $M FY22 FY21 Var FY22 FY21 Var FY22 FY21 Var Statutory EBITDA 370.4 443.9 (73.5) 312.2 371.8 (59.6) 58.2 72.1 (13.9) (Profit) / Loss on sale of assets 0.0 0.5 (0.5) 0.0 0.0 0.0 0.0 0.5 (0.5) Restructuring / Impairments 0.3 4.3 (4.0) 0.3 4.
Slide 33: Return on Invested Capital (ROIC)
RETURN ON INVESTED CAPITAL (ROIC) ACHIEVED ROIC OF 13.5% FOR FY22 § Achieved ROIC of 13.5% for the year, versus 22.4% in PCP $M FY22 FY21 § Measure introduced as part of our Capital Management framework Return On Invested Capital (ROIC) § ROIC defined as: Underlying NPAT pre AASB 16 57.1 101.2 - Und
Slide 34: 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