Aeci Ltd · JSE:AFE
Aeci — Investor Day (October 2015)
55 slides from Aeci's investor day presentation, Oct 27, 2015
Slide 1: Investor Day: Food Additives and Ingredients growth pillar
INVESTOR Food Additives and Ingredients DAY growth pillar 27 October 2015
Slide 2: Agenda
AGENDA 1 1. Welcome and introductions 2. AECI » Overview » Business environment » Focus to year-end » Strategic growth pillars 3. Presentation: Food Additives and Ingredients 4. Site visits to Afoodable and SCP (2 groups) 5. Close
Slide 3: AECI Overview and Focus
AEC! OVERVIEW 5 , AND FOCUS — OASCI good chemistr:
Slide 4: Overview: safety TRIR
OVERVIEW 3 Sep ’15 12-month rolling TRIR = 0,37 All workers TRIR 1,0 Maximum 0,8 tolerable level 0,6 0,4 0,2 0,0 10 11 12 13 14 15
Slide 5: Overview: Post-July '15
OVERVIEW: POST-JULY ’15 4 › Benefits of acquisitions and strategic portfolio management continue to be realised » Pleasing progress on integration of ~ Farmers Organisation Limited (Nulandis) – effective 1 June ~ SCP – effective 1 August › Realisation of property assets at Somerset West » Bulk sale
Slide 6: Share Repurchase
SHARE REPURCHASE 5 › Embarked on a general repurchase on 12 August ’15 » In terms of AGM authority › Share price had declined significantly to R100,00 » Value in buying back shares › Funded from cash generated by operations › As at 22 October ’15 » 4,4 million shares repurchased » Average price = R9
Slide 7: Business Environment
BUSINESS ENVIRONMENT a OASCI good chemistr:
Slide 8: Business Environment: SA mining volumes
BUSINESS ENVIRONMENT 7 SA mining volumes Jan ’10 – Aug ’15 Source: Stats SA
Slide 9: Business Environment: gold and platinum prices
BUSINESS ENVIRONMENT 8 Historical price performance – gold and platinum (US$/oz) Source: SNL
Slide 10: Business Environment: coal and iron ore prices
BUSINESS ENVIRONMENT 9 Historical price performance – coal and iron ore (US$/tonne) Source: SNL
Slide 11: Mining: Business Environment Effects
MINING: BUSINESS ENVIRONMENT EFFECTS 10 SA » Mine and shaft closures » Platinum mining sector has recovered – but not to ’13 levels » Blue chip customers exposed ~ Business rescue processes underway » Major tenders retained, some margin sacrifice Central Africa » Good volume growth to end-September,
Slide 12: Business Environment: SA manufacturing volumes
BUSINESS ENVIRONMENT 11 SA manufacturing volumes Jan ’08 – Aug ’15 Source: Stats SA
Slide 13: Business Environment: ZAR/US$ exchange rate
BUSINESS ENVIRONMENT 12 ZAR/US$ exchange rate Jan ’14 – end Sep ’15 Source: INET Bridge
Slide 14: Business Environment: Brent crude oil
BUSINESS ENVIRONMENT 13 Brent crude oil (US$/bbl) Source: INET Bridge
Slide 15: SA manufacturing and agriculture
BUSINESS ENVIRONMENT 14 SA manufacturing and agriculture › Uninspiring overall » Electricity supply more stable of late but remains a concern ~ Effects on customers, particularly SMEs » Sector growth not tracking GDP growth ~ GDP targets revised down » Weak demand impacts margin and volume growth »
Slide 16: SA Manufacturing and Agriculture: Business Environment Effects
SA MANUFACTURING AND AGRICULTURE: BUSINESS ENVIRONMENT EFFECTS 15 Notwithstanding the difficult environment › Specialty chemicals segment pleasingly robust » Good overall performance from the portfolio ~ Strategic portfolio management ~ Benefits of acquisitions › Strategic growth pillars validated
Slide 17: Focus to Year-End
FOCUS TO YEAR-END 16 › Continue to drive cost control and working capital management » Group procurement initiatives » Reshaping the business for prevailing market conditions » Regional Financial Shared Services Centre » S189 issued in some businesses » Moratorium on employment in certain areas › Ge
Slide 18: Strategic Growth Pillars
STRATEGIC GROWTH PILLARS [L OASCI good chemistr:
Slide 19: Strategy Summarised
AECI ImproChem OA=Cr good chemistry
Slide 20: Strategy Summarised
| 19 | [ STRATEGY SUMMARISED AECI Zlakefoods We live fod inmotion “sep Food AppITIVES AND INGREDIENTS ineneD-— OA=Cr good chemistry
Slide 21: 1H15 Revenue Split (%)
1H15 REVENUE SPLIT (%) 20 Mining solutions = 59% of revenue
Slide 22: Specialty Chemicals
SPECIALTY CHEMICALS 21 1H15 revenue by market sector (%) – water solutions = 16%
Slide 23: SA Food and Beverage Consumption
SA FOOD AND BEVERAGE CONSUMPTION 22 › ’15 per capita food consumption (ZAR) = +6,7% y-o-y » 5-year forecast CAGR to ’19 = +7,0%. › ’15 soft drinks volume sales = +4,2% y-o-y » Forecast compound annual growth to ’19 = +4,0%. › ’15 mass grocery retail sales (ZAR) = +7,8% y-o-y » Forecast compound annu
Slide 24: Food Additives and Ingredients
FOOD ADDITIVES AND INGREDIENTS
Slide 25: Food Additives and Ingredients: Vision and Strategy
FOOD ADDITIVES AND INGREDIENTS: VISION AND STRATEGY 24 Vision › To become a major supplier of food ingredients and additives to customers in SA’s food manufacturing and retail sectors › Thereafter, to expand exports (Africa, Middle East) Strategy › To focus on expanding the product offering of the e
Slide 26: Food Additives and Ingredients Pillar: Businesses
FOOD ADDITIVES AND INGREDIENTS PILLAR: BUSINESSES 25 › Exclusive representative for leading › Manufactures and distributes a international manufacturers and broad range of juice-based products suppliers of specialty ingredients › Includes formulated compounds, fruit and commodities concentrate blend
Slide 27: SA Food and Beverage Market Overview (%)
SA FOOD AND BEVERAGE MARKET OVERVIEW (%) 26 R285bn in ’14 (6% of GDP) 7 ▃▃▃ Beverages 15 ▃▃▃ Bakery and confectionery 38 ▃▃▃ Cereals and grains ▃▃▃ Dairy and ice cream 8 ▃▃▃ Spices, soups, sauces, dressings ▃▃▃ Meat and meat processing ▃▃▃ Snack foods 13 4 15 Source: Frost & Sullivan
Slide 28: AECI '14 Revenue from Food Industry by Market Sector
AECI ’14 REVENUE FROM FOOD INDUSTRY BY MARKET SECTOR (%) 27 5 5 ▃▃▃ Meat 7 23 ▃▃▃ Dairy 7 ▃▃▃ Poultry ▃▃▃ Health ▃▃▃ Bakery 10 ▃▃▃ Beverage ▃▃▃ Glucose 23 ▃▃▃ Edible oil 21
Slide 29: SA Food and Beverage Market Overview: market access
SA FOOD AND BEVERAGE MARKET OVERVIEW (%) 28 Market access 38% 62% Source: Frost & Sullivan
Slide 30: SA Food and Beverage Market Overview
SA FOOD AND BEVERAGE MARKET OVERVIEW 29 Source: Lake Foods
Slide 31: AECI Food Additives and Ingredients: Growth History
AECI FOOD ADDITIVES AND INGREDIENTS: GROWTH HISTORY 30
Slide 32: Lake Foods: Three Divisions
LAKE FOODS: THREE DIVISIONS 31 › Food Solutions » Represents international manufacturers and suppliers of specialty ingredients and commodities for the dairy, beverage, wine, meat, poultry, bakery, health, nutrition industries › Infigro » Perlite and related products as a filter aid › Afoodable » Li
Slide 33: Lake Foods: Value Proposition
LAKE FOODS: VALUE PROPOSITION 32 › Qualified and highly skilled sales and marketing staff » Application laboratory and technical specialists – formulation development and pilot plant application trials » Technical expertise for implementation at customer’s manufacturing facility » Development of cus
Slide 34: Lake Foods: Food Safety
LAKE FOODS: FOOD SAFETY 33 › Responsibility for food safety and quality is integral › Controlled by an internal lab with qualified food technologists › SABS audited HACCP system implemented from ’06 › Continued focus – FSSC 22000 implemented by June ’16 › Food Solutions and Infigro also ISO9001 accr
Slide 35: Lake Food Solutions
( LAKE FOOD SOLUTIONS [34 | FOCUS MARKETS Beverages Confectionery OA=CI good chemistry
Slide 36: Some Key Principals
[ SOME KEY PRINCIPALS |35 | © ©: Rousselot & BUDENHEIM f- GELYMAR a VION company EM VIIBEN sTOoL® BENTONITE Genulite = BASF Nicalire The Chemical Company OA=CI good chemistry
Slide 37: Infigro
[ INFIGRO |36 | Filteraid products for the wineries; breweries; ‘Filtration non-alcoholic beverage industry; edible oils; the sugar and glucose manufacturers OA=CI good chemistry
Slide 38: Afoodable product lines
AFOODABLE 37 290 product lines
Slide 39: Afoodable
AFOODABLE 38 › Established in ’90 › Privately-owned › Producing liquid marinades and sauces for the local market › Acquired by AECI in ’12 » In line with strategy to grow Food Additives and Ingredients pillar for critical mass » Divisionalised into Lake Foods › Facility in Montague Gardens, Cape Tow
Slide 40: Afoodable: Investment Rationale
AFOODABLE: INVESTMENT RATIONALE 39 › Food health and safety › Planned FSSC implementation » Risk management › Process flow, QC improvements › Increased capacity › Improved efficiencies › Increased flexibility and diversity of product range
Slide 41: Afoodable: Value Proposition
AFOODABLE: VALUE PROPOSITION 40 › Products prepared to set recipes or formulations » Formulated by product development team or specified by customers › Several manufacturing processes › Sensory profiling » In-house capability » Scientific characterisation/description of food product/raw material as
Slide 42: SA Specialty Sauces Market
SA SPECIALTY SAUCES MARKET: 41 626KL 41 Afoodable = 6 000k /year 32% ▃▃▃ Food services ▃▃▃ Export ▃▃▃ Wholesale 50% ▃▃▃ Industrial ▃▃▃ Retail 5% 5% 5% Source: BMI
Slide 43: Afoodable: Growth Strategy
AFOODABLE: GROWTH STRATEGY 42 Increase volumes to 8 000k in ’16 › Predominantly in food services » Large sector » Key distributors/customers › IP-driven › Expansion of product range » Strong R&D » Pizza toppings, pasta and white sauces › Pursue exports
Slide 44: Lake Foods: Growth Strategy
LAKE FOODS: GROWTH STRATEGY 43 › Focus on enhancing the offering to food additives sector of the market » Includes the commodity products portfolio » Existing and new principals, innovations » Aligned with global trends » Stronger partnerships with customers › Growing IP in the business » Dairy stab
Slide 45: Southern Canned Products (SCP)
SOUTHERN CANNED PRODUCTS (“SCP”) 44 › Manufacturer and distributor of ingredients for juice-based drinks and products, in Cape Town › Strengthens Food Additives and Ingredients pillar › Purchase price = R235m » 6 – 7x EBITDA › Effective 1 August ’15 › Standalone business in AECI Group
Slide 46: SCP
SCP 45 › Established in ’60s; canned fruit production, trading other products (US, Europe, Japan) › ’05: management acquired 50% shareholding from Gerber Goldschmidt » Began importing and supplying fruit concentrates and purees to local (e.g. Distell, Appletizer, Ceres) and European formulated juice
Slide 47: Fruit Processing Flow
( FRUIT PROCESSING FLOW [46 | Fruit growers Fresh fruit Fruit processors (Primary) Fruit juices Fruit processors (Intermediate) Formulated products Beverage producers Ready-to-drink juices, ciders etc. OA=CI good chemistry
Slide 48: SCP Businesses
SCP BUSINESSES 47 › Traded › Branded » Global sourcing » Oil imported » Volumes = purchasing power » Bottle and blend » Value-added component
Slide 49: SCP Business Split
SCP BUSINESS SPLIT 48 Business split ’14 (%) Targeted business split ’18 (%) 23 ▃▃▃ Traded 40 ▃▃▃ Traded 47 ▃▃▃ Branded ▃▃▃ Branded 17 60 ▃▃▃ Formulated ▃▃▃ Formulated 13
Slide 50: SCP: Formulated Products
SCP: FORMULATED PRODUCTS 49 › Compounds » Tailored for customers’ requirements » Allows beverage manufacturers to produce/reproduce end product consistent in taste, appearance and flavour › Fruit concentrates » Blends of standardised juices developed and manufactured specifically for the profile of
Slide 51: SCP: Capacity and Capability
SCP: CAPACITY AND CAPABILITY 50 › 50 000tpa of liquid products » 30 000tpa bulk juices, 20 000tpa formulated blends › Also blend and bottle olive and seeded oils under the Olive Pride brand » 30 000ℓ/month › Packaging to customer requirements » Road bulk tankers, ISO bulk container systems, flexi-ta
Slide 52: SCP Growth Strategy
SCP GROWTH STRATEGY 51 › Focus on growth in formulated juices and compounds/emulsions » IP and technical expertise for emulsions/flavours and syrups (carbonated beverages) › Build on current SA customer base › Maintain strategic relationships with multinationals › Increase exports of formulated prod
Slide 53: Food Additives and Ingredients: Conclusion
FOOD ADDITIVES AND INGREDIENTS: CONCLUSION 52 › Food and beverages remains a fast-growing sector › Fragmented and diversified » Opportunities for growth through acquisitions and consolidation ~ Enhance the product and services offering › Further acquisitions will be pursued to build this growth pill
Slide 54: AECI Food Additives and Ingredients: Revenue Targets
AECI FOOD ADDITIVES AND INGREDIENTS: REVENUE TARGETS (RM) 53 1 600 1 400 1 200 SCP (5 months) 1 000 800 600 Afoodable 400 200 0 10 11 12 13 14 15 16 17 18
Slide 55: Thank You
THANK YOU OASCI good chemistr: