Synlait Milk Ltd. · NZX:SML
Synlait Milk — Shareholder Meeting (December 2015)
47 slides from Synlait Milk's shareholder meeting presentation, Dec 8, 2015
Slide 1: Annual Meeting of Shareholders 2015
ANNUAL MEETING OF SHAREHOLDERS 2015 8 DECEMBER 2015
Slide 2: Agenda
AGENDA - Welcome and introductions - Change in Board Director - Chairman's update - Chief Executive Officer’s update - Chief Financial Officer’s update - Outlook - Questions - Formal Resolutions - Any other business - Annual Meeting concludes [approx. 3pm] - Site tour [optional, starting approx. 3.1
Slide 3: Board of Directors
BOARD OF DIRECTORS © SYNLAIT 2015
Slide 4: Change in Board Director
CHANGE IN BOARD DIRECTOR BRIGHT DAIRY LIMITED REPRESENTATION TO CHANGE. Bright Dairy Limited have appointed Mr Qikai Lu to represent Bright on the Synlait Milk Limited Board. Mr Lu takes over from Mr Zongbo Dong, Bright Dairy Limited’s Chief Financial Officer, who has voluntarily resigned in order t
Slide 5: Chairman's Update
CHAIRMAN’S UPDATE Graeme Milne CHAIRMAN © SYNLAIT 2015
Slide 6: FY15 an extremely busy year
FY15 AN EXTREMELY BUSY YEAR - Our vision is to become the world’s most - These were our quality testing laboratory and innovative and trusted dairy company. administration building and dryer three – a 10.5 metric tonne (MT) per hour infant formula and - We took major steps in that direction in our l
Slide 7: Poised for growth in earnings
POISED FOR GROWTH IN EARNINGS - Total FY15 sales were $448.1 million, a long way - Built strong supplier and customer relationships in back from $600.5 million last year. FY15 to deliver future earnings growth. - Revenue decrease due to fall in global commodity - Next two years focused on improving
Slide 8: International dairy market
INTERNATIONAL DAIRY MARKET WEIGHTED AVERAGE AUCTION COMMODITY PRICE - FY15 saw a relentless decrease in dairy market pricing throughout the year. FY14 FY15 - Pricing has decreased from approximately: - Feb 2014: US$5,000 / MT - July 2014: US$3,000 / MT Av GDT US$4,532 Av GDT US$2,593 - July 2015: US
Slide 9: Dairy prices not linked to our profit
DAIRY PRICES NOT LINKED TO OUR PROFIT - International dairy prices do not have a direct impact on our profitability. - Milk price is the largest cost of production and is directly linked to international dairy prices. - When the milk price is high, revenue is higher ($) however our gross margin is u
Slide 10: Future focus
FUTURE FOCUS - The focus for FY16 is developing our nutritional and infant formula products with key customers, following the successful commissioning of dryer three in September 2015. - We will continue to focus on our B2B partnerships with leaders in the infant formula industry, differentiating ou
Slide 11: Future focus
FUTURE FOCUS - Some of these products rely on differentiated farm practices to ensure Special Milk is produced on farm and directed to specific production. - Examples of this differentiation include a2 and Grass Fed. - At the time of our FY15 Annual Result announcement, I said based on increased vol
Slide 12: Chief Executive Officer's Update
CHIEF EXECUTIVE OFFICER’S UPDATE John Penno MANAGING DIRECTOR & CHIEF EXECUTIVE OFFICER © SYNLAIT 2015
Slide 13: Increasing our focus
INCREASING OUR FOCUS - Remain completely focused on making more from - FY15 has seen us substantially complete our milk and by doing so we believe that we will build the growth initiative programme as outlined in our world’s most innovative and trusted dairy company. 2013 IPO prospectus. - Our strat
Slide 14: Delivering on our strategy
DELIVERING ON OUR STRATEGY - Sales volumes to multinationals have grown by 59% SALES VOLUME BY PRODUCT CATEGORY in the last year to 41,979 MT and now represent 43% 120,000 of our total powder sales volumes. 97,803 100,000 93,644 - Sales of infant grade milk powders, nutritional base 5,592 8,800 powd
Slide 15: Delivering on our strategy
DELIVERING ON OUR STRATEGY SALES REVENUE BY GEOGRAPHIC REGION 10% 6% 3% 8% 30% 17% 30% 39% 26% 31% FY2014 FY2015 CHINA REST OF ASIA MIDDLE EAST AND AFRICA NEW ZEALAND REST OF WORLD © SYNLAIT 2015 15
Slide 16: Our products
OUR PRODUCTS NUTRACEUTICAL PRODUCTS Highly specialised and similar to pharmaceutical-grade solutions, these products are created through technical innovation and excellence. Synlait Lactoferrin and night milk ingredient (iNdream3) are both Synlait creations. NUTRITIONAL PRODUCTS Designed to enhance
Slide 17: Investment in capability
INVESTMENT IN CAPABILITY - Commissioned Synlait Lactoferrin plant in April 2014. Following some initial challenges, we secured a cornerstone customer. - Commissioned 22,500m2 drystore in April 2014 that enables full containerisation of finished products for export onsite. - Commissioned blending and
Slide 18: Investment in capability
INVESTMENT IN CAPABILITY - New administration office building commissioned in July 2015. - Quality testing laboratory and new product development centre completed in October 2015. - With these developments we will have established one of the largest and highest specification infant formula productio
Slide 19: Milk supply
MILK SUPPLY A 6.6% YEAR ON YEAR INCREASE IN millions kgMS MILK VOLUMES CONTRACTED SUPPLY VOLUMES. 60 53.6 2.5 - Overall milk supply up 7.4% on previous year to 50 46.8 49.9 2.0 53.6 million kgMS. 44.0 4.7 40 6.5 - Increased contracted milk supply by 6.6%, year on year, to 51.0 million kgMS: 29.5 30
Slide 20: Sophisticated milk supply
SOPHISTICATED MILK SUPPLY - Secured 173 contracted milk suppliers for FY16, delivering a forecast 57.1m kgMS. Up 6.1m kgMS on FY15. - Partnership with The a2 Milk Company™ continues to develop: - Exclusive manufacturer of a2 Platinum® infant formula and instant whole milk powder - Sourced from herds
Slide 21: Sophisticated milk supply
SOPHISTICATED MILK SUPPLY - Lead With Pride™ building momentum: - 20 farms are certified - A further 10 farms (at least) expected to certify by year end - In FY16 more than 50% of our milk supply will attract a premium over base milk price. © SYNLAIT 2015 21
Slide 22: Value inside the farm gate
VALUE INSIDE THE FARM GATE $'000's MILK PREMIUMS PAID DIVERSITY OF PREMIUMS1 CREATES 3,500 VALUE FOR MILK SUPPLIERS. 3,078 3,000 2,672 - Milk premiums offered to our suppliers link back to 695 2,392 customer opportunities. 2,500 2,271 276 275 2,026 405 - Year on year growth in certified Lead with Pr
Slide 23: The best place to work
THE BEST PLACE TO WORK - Our staff, who have been on the journey for some time, remain committed to what we are working to achieve. - We are passionate about making Synlait the best place to work and towards the end of FY15 we enjoyed a steep change in productivity as our office-based team moved to
Slide 24: Simplifying and improving our business
SIMPLIFYING AND IMPROVING OUR BUSINESS - The last two years focused on building our customer base, manufacturing capacity and the capability of our team. - The next two years will be focused on achieving operational excellence and building infant formula volumes with our key customers. - Plant confi
Slide 25: Chief Financial Officer's Update
CHIEF FINANCIAL OFFICER’S UPDATE Nigel Greenwood CHIEF FINANCIAL OFFICER © SYNLAIT 2015
Slide 26: Overview
OVERVIEW NET PROFIT / (LOSS) AFTER TAXATION $ millions - Underlying earnings1 after taxation $12.2 million, down 38%. 25 - Favourable one off product mix benefit in FY14 of 20 19.6 $24.1 million. 15 - Improved gross profit contribution for both ingredient 12.2 11.5 (up $9.8 million) and nutritional
Slide 27: Profitability
PROFITABILITY UNDERLYING NET PROFIT AFTER TAX (NPAT) $ millions 25 20 15 0.3 (0.4) 2.3 (6.1) 10 19.6 (3.5) 12.2 5 0 FY14 Gross profit Net overheads Share of associates Interest expense Tax FY15 underlying underlying NPAT NPAT © SYNLAIT 2015 27
Slide 28: Gross profit
GROSS PROFIT GROSS PROFIT STRONG PERFORMANCE IN NUTRITIONALS. - Ingredients gross profit up on sales volumes (951 MT), price premiums ($60 / MT) and estimated favourable performance against notional producer metrics. Offset by marginally higher manufacturing costs. - Nutritionals gross margin up on
Slide 29: Net operating assets
NET OPERATING ASSETS CHANGE IN NET OPERATING ASSETS GROWTH PRIMARILY DUE TO DRYER THREE BUILD PROGRAMME. - Increase in net operating assets driven by capital spend and asset revaluation. - Other movements largely related to CAPEX accrual (primarily retentions on build of dryer three, quality testing
Slide 30: Net debt
NET DEBT NET DEBT $ million INCREASING DEBT TO FUND EXPANSION 300 CAPITAL EXPENDITURE. (14.0) (2.1) (101.7) (8.4) 250 - Cashflow from operating activities strained due to higher than usual advance payments to farmers. 200 - Investment in dryer three, quality testing laboratory and administration bui
Slide 31: Equity
EQUITY EQUITY BRIDGE $ million MARK TO MARKET REVALUATION OF 300 DERIVATIVES IMPACTS $34.1 MILLION. - Retained earnings movement from FY15. 250 - Asset revaluation of $16.8 million results in after tax 12.3 equity impact of $12.3 million. 200 10.6 - Of the derivative $34.1 million impacts: (34.1) -
Slide 32: Bank facility update
BANK FACILITY UPDATE MATURITY PROFILE SIGNIFICANTLY IMPROVED. $ million DEBT MATURITY EXTENSION - Completed renegotiation of Bank Facilities Agreement with 300 syndicate which resulted in the following outcomes: 250 - Decrease in Working Capital facility requirements - set at $35 million for FY16. L
Slide 33: Bank facility update
BANK FACILITY UPDATE - Net debt/EBITDA (leverage) ratio covenant introduced. $ million DEBT MATURITY EXTENSION 300 - Debt maturing in FY17 primarily relates to the Mitsui & Co (NZ) Ltd. trade and inventory financing facilities. These will 250 either be renewed and extended for a further two years or
Slide 34: Outlook
OUTLOOK John Penno MANAGING DIRECTOR & CHIEF EXECUTIVE OFFICER © SYNLAIT 2015
Slide 35: Accelerating our financial performance
ACCELERATING OUR FINANCIAL PERFORMANCE - Business now geared up to achieve our strategy. - Total sales volumes set to grow from 97,800 MT in FY15 to an estimated 122,500 MT in FY16. - Expect Synalit Lactoferrin sales to almost double, however at significantly lower market pricing. - Overhead costs e
Slide 36: FY16 profit growth linked to strategy
FY16 PROFIT GROWTH LINKED TO STRATEGY - Improving financial performance driven through growth in nutritional volumes. - Seeing margin improvement across the board due to scale efficiencies and growth in consumed packaged infant formula. - Continued volume growth for The a2 Milk Company™. - FY16 laun
Slide 37: Earnings forecast reflects growth in nutritional sales
EARNINGS FORECAST REFLECTS GROWTH IN NUTRITIONAL SALES - Underlying NPAT growth related to sales volumes RELATIONSHIP BETWEEN SALES VOLUMES growth. AND UNDERLYING EARNINGS - Acceleration of financial performance will be primarily driven by growth in nutritional product sales. - FY16 NPAT forecast on
Slide 38: Expect growth in nutritional sales to exceed initial guidance
EXPECT GROWTH IN NUTRITIONAL SALES TO EXCEED INITIAL GUIDANCE - Prior in market guidance suggested a threefold year on year increase of manufactured finished consumer GROWTH IN NUTRITIONAL PRODUCT SALES (MT) packaged infant formula. Forecast Revision - This increase included expected toll manufactur
Slide 39: Half year result expectation
HALF YEAR RESULT EXPECTATION EXPECTING SIGNIFICANTLY HIGHER EARNINGS YEAR ON YEAR. - Interim result will be significantly above FY15’s underlying NPAT of $419,000. - FY15 interim result had low volumes of nutritional sales and at very low margins (incl. selling down provisioned inventories). - We ar
Slide 40: Questions
QUESTIONS Graeme Milne CHAIRMAN © SYNLAIT 2015
Slide 41: Formal Resolutions
FORMAL RESOLUTIONS Bill Roest DIRECTOR © SYNLAIT 2015
Slide 42: Resolution 1: Auditor's remuneration
FORMAL RESOLUTIONS RESOLUTION 1: AUDITOR’S REMUNERATION. - To consider and, if thought fit, pass the following as an ordinary resolution: “That the Board be authorised to determine the auditor’s fees and expenses for the 2016 financial year.” © SYNLAIT 2015
Slide 43: Resolution 2: Election of director
FORMAL RESOLUTIONS RESOLUTION 2: ELECTION OF DIRECTOR. - To consider and, if thought fit, pass the following as an ordinary resolution: “That Graeme Milne be re-elected as a Director.” © SYNLAIT 2015
Slide 44: Resolution 3: Director's remuneration
FORMAL RESOLUTIONS RESOLUTION 3: DIRECTOR’S REMUNERATION. - To consider and, if thought fit, pass the following as an ordinary resolution: “That there be no change to Director’s fees from 1 April 2016.” © SYNLAIT 2015
Slide 45: Any Other Business
ANY OTHER BUSINESS Graeme Milne CHAIRMAN © SYNLAIT 2015
Slide 46: Site Tour
SITE TOUR © SYNLAIT 2015
Slide 47: Thank You
THANK YOU Visit our Investor Centre at www.synlait.com for more information. Media or investor queries can be directed to: Dan Walraven Communications Advisor Synlait Milk Limited P: +64 3 373 3069 E: daniel.walraven@synlait.com © SYNLAIT 2015