Sanford Limited · NZX:SAN
Sanford — H1 FY23 Earnings Presentation
43 slides from Sanford's earnings presentation, May 22, 2023
Slide 1: Results Briefing for the Six Months Ended 31 March 2023
RESULTS BRIEFING FOR THE SIX MONTHS ENDED 31 MARCH 2023 22.05.23
Slide 2: Disclaimer
DISCLAIMER Important Notice This presentation contains not only a review of operations and information about Sanford Limited (the Company), but also contains some forward-looking statements about the Company and the environment in which it operates. This disclaimer applies to this presentation and a
Slide 3: Half Year (H1 FY23) Results Summary
HALF YEAR (H1 FY23) RESULTS SUMMARY
Slide 4: H1 FY23 Summary
H1 FY23 SUMMARY Market Conditions remain positive • In-market prices and demand remain strong across most products and geographic locations. • Revenue up 3% to $277m from $271m last half year. • NPAT of $11.1m, a 82% increase on the same period last year of $6.1 million. • Adjusted EBIT of $26.6m vs
Slide 5: H1 FY23 Results Snapshot
H1 FY23 RESULTS SNAPSHOT Growth on prior half year performance Catch/Harvest Volume Sales Volume Revenue Adjusted EBIT1 56.1k GWT 45.8k GWT $277.6M $26.6M 8.7% -6% 3% 39% NPAT Adjusted EBITDA1 Adjusted EBIT / GW kg EPS Interim Dividend $11.1M $42.1M 58₵/kg 12CPS 6 Cents +82%2 30% 19₵/kg +5₵2 +6₵ Not
Slide 6: Improved Profitability Driven by Salmon
IMPROVED PROFITABILITY DRIVEN BY SALMON Key drivers of Adjusted EBIT change vs H1 FY22 NZD $M 6
Slide 7: Improved Profitability Driven by Salmon
IMPROVED PROFITABILITY DRIVEN BY SALMON Key drivers of Adjusted EBIT change vs H1 FY22 NZD $M Group Australia Costs Wildcatch drivers +$0.6m Salmon drivers +$5.5m Mussel drivers +$1.3m ($0.6m) $0.7m 7
Slide 8: Gross Margin Improving
GROSS MARGIN IMPROVING • Gross margin is above pre-Covid levels. • Rising global seafood prices key driver of increase • Margin increase is tempered by higher costs, principally for fuel, labour and feed for salmon 8
Slide 9: Historical Adjusted EBIT Comparison
HISTORICAL ADJUSTED EBIT COMPARISON Half year adjusted EBIT $m 40 35.4 35 32.6 31.0 30 26.8 26.6 24.9 25 23.2 19.6 19.2 20 15 10.7 10 5 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 • Objective is to increase performance to historical EBIT highs which peaked for the three years 2017-2019 and f
Slide 10: Geographic Diversity of Sales by Revenue
GEOGRAPHIC DIVERSITY OF SALES BY REVENUE ($) • Diverse footprint • Sales to NZ and North America increased • Good geographic spread 10 1 Revenue information above is based on the delivery destination of sales.
Slide 11: HY23 Balance Sheet and Cash Flow
HY23 BALANCE SHEET AND CASH FLOW Balance Sheet remains strong, debt levels have risen with increased costs Gearing1 Net Debt Net Debt / Adjusted EBITDA $183.6M 2.36X 21.9% +4.6 % vs Mar 22 Mar 22 | 3.0x Mar 22 | 21.9% Total Equity Return on Average Total Equity $692.4M 10% +49% vs Mar 22 Mar 22 | 1.
Slide 12: Seafood Inventory Normalised
SEAFOOD INVENTORY NORMALISED Inventory Volume (PWT) Inventory Value ($m)** H1 FY23 vs H1 FY22 increase +2.4% H1 FY23 vs H1 FY22 YOY increase +14% $74.8 $72.2 $58.9 $57.1 $50.1 $48.1 * * * Wildcatch Inventory includes stock on board vessels 12 ** Inventory value differs to financial statements as abo
Slide 13: Capital Expenditure in H1 FY23 vs H1 FY22
CAPITAL EXPENDITURE IN H1 FY23 VS H1 FY22 H1 FY23 H1 FY22 Integrity $15m $16m Vessel surveys (incl. San Discovery) $7m Vessel surveys (incl. San Discovery) $11m Processing equipment $1m Processing equipment $2m IT system “SanCore” $2m IT system “SanCore” $3m IT systems - Business $1m Aquaculture $4m
Slide 14: Environmental, Social, Governance (ESG) – H1 FY23 Summary
ENVIRONMENTAL, SOCIAL, GOVERNANCE (ESG) – H1 FY23 SUMMARY Climate People and Community • Sanford climate workshops held; future climate scenarios • 116,000 seafood meal equivalents donated to those assessed. affected and displaced by Jan/Feb flooding and cyclone • Commenced: Implementation phase for
Slide 15: Divisional Performance and H2 Priorities
DIVISIONAL PERFORMANCE AND H2 PRIORITIES
Slide 16: Salmon
I SANFORD
Slide 17: Salmon H1 FY23
SALMON H1 FY23 Sales and pricing continue to perform strongly. Mortality mitigations in place. 17 * Profit contribution is Adjusted EBIT before head office overheads
Slide 18: Salmon H1 FY23
SALMON H1 FY23 Pricing uplift driven by favourable mix/BGB growth. Inventory levels well managed. 18
Slide 19: Salmon H1 FY23 Achievements and H2 Priorities
SALMON H1 FY23 H1 Achievements: H2 Priorities • Positive first half performance with Adjusted • Balancing strong market demand with supply. EBIT 45% up on last year. • Mitigating increased costs – in particularly feed and • Prices and demand are strong and harvest fuel. volumes stable. • Investigati
Slide 20: Wildcatch
WILDCATCH
Slide 21: Wildcatch H1 FY23
WILDCATCH H1 FY23 Flat volume and improved pricing on H1 FY22. 21 * Profit contribution is Adjusted EBIT before head office overheads
Slide 22: Wildcatch H1 FY23
WILDCATCH H1 FY23 Pricing significantly improving across key species. Inventory normalised. 22
Slide 23: Wildcatch H1 FY23 Achievements and H2 Priorities
WILDCATCH H1 FY23 H1 Achievements: H2 Priorities: • Adjusted EBIT consistent and in line with H1 FY22. • Adapt operations to compensate for reduced squid • Prices and demand remain strong (particularly scampi and catch and availability. hoki). • Vessel reliability – maintaining fleet and managing •
Slide 24: Inshore Update
INSHORE UPDATE
Slide 25: Inshore Optimisation (Agreement with Moana New Zealand)
INSHORE OPTIMISATION - (AGREEMENT WITH MOANA NEW ZEALAND) • Inshore business has been delivering a negative contribution. • Increased costs, Covid impacts, lack of labour and a factory located in what is now a high density residential area, all contributing factors to a poor performance and challeng
Slide 26: Inshore Optimisation – Next Steps
INSHORE OPTIMISATION – NEXT STEPS • Commerce Commission approval required for the transaction to complete. • Application to Com Com end of May. Process to take approximately 4 months (that could vary). • Intention is to facilitate employment at Moana for Sanford staff affected by these changes. • Su
Slide 27: Mussels
MUSSELS
Slide 28: Greenshell Mussels H1 FY23
GREENSHELL MUSSELS H1 FY23 Pricing improved as global food service channel recovering. Volume uplift partly restrained by processing capacity constraints. 28 * Profit contribution is Adjusted EBIT before head office overheads
Slide 29: Mussels H1 FY23
MUSSELS H1 FY23 Pricing uplift relative to Covid impacted lows. Inventory levels normalised. 29
Slide 30: Mussels H1 FY23 Achievements and H2 Priorities
MUSSELS H1 FY23 H1 Achievements: H2 priorities: • Adjusted EBIT up 160% on last year (off a low base • Staff shortages remain the biggest challenge for the and behind expectations) but sales volumes down business and a priority - this is impacting our ability to meet 13% (partly mix related). demand
Slide 31: Looking Forward
LOOKING FORWARD i )
Slide 32: Strategic Initiatives
STRATEGIC INITIATIVES gIRATEGIC INITIATIVEg Improve value utilisation of entire Ensure the welfare, growth fish and eliminate waste & fulfilment of our people - economic, physical, emotional 6, Highly Valued O20 @eo0 eo Community (4)) Partner Enabling \ Healthy Oceans and Ecosystems Differentiate th
Slide 33: Build and Sustain Partnerships with Customers Aligned to Our Purpose
BUILD AND SUSTAIN PARTNERSHIPS WITH CUSTOMERS ALIGNED TO OUR PURPOSE • Launch of Big Glory Bay fresh tray packed product with Foodstuffs. • Continued diversification of our global customer base, bringing on eight new retail partners within the last six months. • Further extension of our portfolio wi
Slide 34: Develop Expertise, Knowledge and Insight to Drive Asset Optimisation
DEVELOP EXPERTISE, KNOWLEDGE AND INSIGHT TO DRIVE ASSET OPTIMISATION, PROFIT, VALUE, QUALITY AND SUSTAINABILITY • Appointment of Group Enterprise Risk Manager. • Results from first of three mussel powder studies showing positive outcomes in alleviating knee pain. • Climate futures workshopped with o
Slide 35: Differentiate Through Innovation, Quality, Provenance, Sustainability
DIFFERENTIATE THROUGH INNOVATION, QUALITY, PROVENANCE, SUSTAINABILITY, OPERATIONAL EXCELLENCE AND APPLICATION OF SCIENCE • Adoption of super baffler bird mitigation on fishing vessels. • Ongoing work on Big Glory Bay brand including winning NZ Outstanding Food Producer Awards for our portions produc
Slide 36: Improve Value Utilisation of Entire Fish and Eliminate Waste
IMPROVE VALUE UTILISATION OF ENTIRE FISH AND ELIMINATE WASTE • Opening of Sanford Bioactives in Blenheim and ongoing work on delivery of mussel oil and powder processing. • Changed cascade of frozen at sea ling catch to improve quality of value adding products and utilisation of whole fish. For exam
Slide 37: Invest in Systems and Processes to Drive a High Achieving Organisation
INVEST IN SYSTEMS AND PROCESSES TO DRIVE A HIGH ACHIEVING ORGANISATION • SanCore programme advances with progress on implementation of our D365 system to manage core finance and supply chain processes. • Adoption of Marel Innova product tracking system at Sanford Bioactives plant and on vessels in o
Slide 38: Ensure the Welfare, Growth and Fulfilment of Our People
ENSURE THE WELFARE, GROWTH AND FULFILMENT OF OUR PEOPLE – ECONOMIC, PHYSICAL, EMOTIONAL • Move to a divisional structure to take decision making closer to the drivers of P&L performance. • Appointment of new CPO. • Donated 116,000 meal equivalents of seafood to those affected and displaced by Januar
Slide 39: Looking Forward: Questions?
LOOKING FOWARD QUESTIONS?
Slide 40: Conclusion
CONCLUSION • Delivering improved profitability. • Cost and supply challenges remain, however, looking to improve. • Incremental growth to be delivered through further recovery of mussels and delivering Inshore proposal • Team committed to getting to Pre-Covid profitability and beyond. 40
Slide 41: Thank You
LOOKING THANK FOWARD YOU CLOSE
Slide 42: Appendix: USD FX Hedging Pattern for the Year
APPENDIX 1 : USD FX HEDGING PATTERN FOR THE YEAR USD EXCHANGE RATE 2023 HALF YEAR Actual Achieved 2022/2023 2022/2023 Spot Rates Ave Effective 2022/2023 0.6600 0.6400 0.6200 0.6000 0.5800 0.5600 0.5400 Oct Nov Dec Jan Feb Mar 42
Slide 43: HY23 Financial Results - GAAP to Non GAAP
HY23 FINANCIAL RESULTS - GAAP TO NON GAAP Non-GAAP Profit measures Unaudited Unaudited Audited GAAP to Non-GAAP Reconciliation 6 months ended 31 6 months ended 31 12 months ended 30 Sanford’s standard profit measure prepared under New Zealand GAAP is net profit. March 23 per consol March 22 Septembe