Oceana Group Limited · JSE:OCE
Oceana — H1 2019 Earnings Presentation
52 slides from Oceana's earnings presentation, 2019
Slide 1: Investor Presentation for the Six Months Ended 31 March 2019
INVESTOR PRESENTATION FOR THE SIX MONTHS ENDED 31 MARCH 2019 1
Slide 2: Legal Disclaimer and Basis of Preparation
LEGAL DISCLAIMER AND BASIS OF PREPARATION • For the purposes of this notice, the presentation (the “Presentation”) shall mean and include the slides that follow, the oral presentation of the slides by Oceana Group Limited (the “Company”) and/or its advisers, any question- and-answer session that fol
Slide 3: Group Overview
OPERATIONAL STRATEGIC FINANCIAL OVERVIEW & OVERVIEW & GROUP OVERVIEW PERFORMANCE OUTLOOK GUIDANCE 3
Slide 4: Group Overview
GROUP OVERVIEW 55 VESSELS 12 5 255 7 300 000 SPOTTER EMPLOYEES DIVERSIFIED TONS ON AVERAGE PLANES SPECIES/PRODUCTS SOLD ANNUALLY CUSTOMERS INTERNATIONAL IN 46 PROCUREMENT 12 15 LEVEL 1 COUNTRIES FROM STORAGE PRODUCTION BEE 6 COUNTRIES FACILITES FACILITIES CONTRIBUTOR 4
Slide 5: 2019 H1 Performance Overview
2019 H1 PERFORMANCE OVERVIEW CANNED FISH FMO (US) HORSE MACKEREL CCS & HAKE 11% 3% 21% 12% SALES VOLUMES AVERAGE PRICE RECOVERY PLANNED FISHING DAYS OCCUPANCY OPERATING PROFIT PROFIT BEFORE TAX HEPS DPS 16% 28% 20% 10% R554m (H1 2018 : R479m) R423m (H1 2018 : R331m) 249.7c (H1 2018 :
Slide 6: Financial Performance
OPERATIONAL STRATEGIC FINANCIAL OVERVIEW & OVERVIEW & GROUP OVERVIEW PERFORMANCE OUTLOOK GUIDANCE 6
Slide 7: Income Statement
INCOME STATEMENT 2019 2018* R'000 MARCH VAR MARCH Revenue 3 557 416 3% 3 452 824 Gross profit 1 319 207 3% 1 276 540 GP margin 37% 37% Operating expenditure (728 190) -3% (752 711) Operating profit before associate and joint venture loss 591 017 13% 523 829 Associate and joint venture loss (36 726)
Slide 8: Revenue
REVENUE 3 800 3 700 152 176 63 118 3 600 135 3 500 3 400 3 300 3 588 3 557 3 453 3 200 3 100 3 000 March 2018 Exchange rate Comparative Canned fish Export sales Price Angola FMO March 2019 business volumes volume Increase Decrease 8
Slide 9: Operating Profit
OPERATING PROFIT 600 20 6 7 57 500 51 400 300 554 479 200 100 - March 2018 Canned fish and Fishmeal and fish oil Horse mackerel and Lobster and squid Commercial Cold March 2019 fishmeal (Africa) (USA) hake Storage Increase Decrease 9
Slide 10: Financial Position Key Items
FINANCIAL POSITION KEY ITEMS 2019 2018 R'000 MARCH MARCH Property, plant and equipment 1 638 926 1 444 943 Intangible assets 4 691 433 3 901 285 Other assets 441 183 386 688 Current assets 3 081 111 2 464 747 Stock days 148 102 Net cash 193 760 856 737 Total assets 10 046 413 9 054 400 Shareholders
Slide 11: Cash Flow Statement
CASH FLOW STATEMENT 2019 2018 R'000 MARCH MARCH Cash generated from operations 715 086 656 603 Working capital changes (521 165) (245 797) Taxation and dividends paid (536 360) (132 546) Debt serviced (360 754) (356 070) Capital expenditure (145 736) (83 217) Other 27 029 (144 235) Net decrease in c
Slide 12: Working Capital
WORKING CAPITAL 160 140 133 140 130 120 120 100 110 80 103 148 100 60 115 91 102 90 40 69 56 44 80 20 39 38 40 - 70 2017 2018 2019 Inventory Days Debtors Days Creditors Days Cash conversion cycle 12
Slide 13: Dividend per Share
DIVIDEND PER SHARE HEPS AND DPS (CENTS) 350 300 250 200 150 310 250 231 218 100 194 123 106 112 112 50 90 - 2015 2016 2017 2018 2019 HEPS DPS 13
Slide 14: Operational Overview & Outlook
OPERATIONAL STRATEGIC FINANCIAL OVERVIEW & OVERVIEW & GROUP OVERVIEW PERFORMANCE OUTLOOK GUIDANCE 14
Slide 15: Canned Fish
CANNED FISH 15
Slide 16: 2019 H1 Canned Fish
2019 H1 CANNED FISH 2018 2019 KPI’s MEASURE MARCH MARCH Operating profit ZAR 95% 24% Volumes sold cartons 22% 11% Trended net realisation R/ctn 2% 3% Total production cost per carton R/ctn 1% 1% Daily throughput cartons per day cartons 13% 8% Man hours/carton hrs/ctn 5% 15% 1
Slide 17: Sales Volumes
SALES VOLUMES TOTAL SALES (‘000 CTNs) 5 000 147 419 145 6% 4 000 397 12% 131 33% 353 3 000 24% 4 323 2 000 3 854 3 115 1 000 - Mar-17 Mar-18 Mar-19 South Africa ROA International 17
Slide 18: Sales Volumes
SALES VOLUMES SOUTH AFRICA SALES (CTNS’000) 1 200 9 000 ERP IMPLEMENTATION 8 000 BUY-IN 1 000 7 000 800 6 000 5 000 600 4 000 400 3 000 2 000 200 1 000 - - Oct Nov Dec Jan Feb Mar April May June July August September 2018 Monthly 2019 Monthly 2018 Cumulative 2019 Cumulative 18
Slide 19: Total Food Overview
TOTAL FOOD OVERVIEW VOLUME GROWTH VS TOTAL FOOD 15,0% 12,0% 10,0% 7,8% 5,0% 0,4% -0,6% 0,0% 12MM Mar-19 6mm Mar-19 -5,0% Lucky Star Total ask'd basket 19
Slide 20: Promotional and Merchandising Shift
PROMOTIONAL AND MERCHANDISING SHIFT • Introduced DJ Zinhle in our new TV commercials to elevate the status of the brand and the pilchard category • The new campaign highlights the iconic nature of the brand in claiming to be The taste of home 20
Slide 21: Versatility of Product
VERSATILITY OF PRODUCT 21
Slide 22: Canned Fish Supply
CANNED FISH SUPPLY CTNS’000 10 000 12% 4% 9 000 8 000 7 000 10% 40% 48% 6 000 5 000 49% 4 000 3 000 48% 48% 2 000 41% 1 000 - 2017A 2018A 2019F Frozen and canned internationally Frozen and locally canned Fresh and locally canned 22
Slide 23: Canned Fish Supply – Inventory Holdings
CANNED FISH SUPPLY – INVENTORY HOLDINGS CANNED AND FROZEN FISH INVENTORY (R’m) 1 000 900 16% 11% 800 2% 700 40% 600 500 400 89% 98% 300 100% 200 100 - 2017A 2018A 2019F Canned Fish Frozen fish 23
Slide 24: Outlook
OUTLOOK VOLUME DRIVERS • Affordability • Improved supply providing the ability to meet demand without disruption • Marketing and sales: • Consistent messaging to consumers on product attributes: health, convenience (fully cooked) & versatility (recipes) • Brand health and trust strong – increased br
Slide 25: Fishmeal and Fish Oil
; Z x X 4 f ¢ * FISHMEAL AND FISH OIL
Slide 26: 2019 H1 Performance – FMO (Africa)
2019 H1 PERFORMANCE – FMO (AFRICA) 2018 2019 KPI’s MEASURE MARCH MARCH SA operating profit ZAR 191% 16% Volumes sold – SA Tons 21% 2% Volumes sold – Angola Tons 35% 100% SA landings Tons 5% 12% Average fishmeal price vs Peru Index $/mt 11% 1% Average fish oil price vs Peru Index
Slide 27: Outlook – FMO (Africa)
OUTLOOK – FMO (AFRICA) SOUTH AFRICA • Pilchard catches at a cyclical low – fleet focused on industrial fish • Catches to end April marginally above the last 2 years • Biomass healthy – indications are supportive of good catch for the season ANGOLA • Operations mothballed due to resource scarcity • C
Slide 28: 2019 H1 Performance – FMO (US)
2019 H1 PERFORMANCE – FMO (US) 2018 2019 KPI’s MEASURE MARCH MARCH US operating profit* US$ 53% 10% Volumes sold – fishmeal Tons 9% 1% Volumes sold – fish oil Tons 19% 28% Price – fishmeal $/mt 3% 1% Price – fish oil $/mt 20% 10% * Excluding FV adjustment 28
Slide 29: Outlook – FMO (US)
OUTLOOK – FMO (US) BIOMASS/LANDINGS • Latest assessment of biomass indicates a healthy resource • Early landings slower than expected due to weather conditions • Sightings good at lower depths and targeting similar landings to 2018 • High river (and increased nutrients) should theoretically contribu
Slide 30: Global Outlook – FMO Supply
GLOBAL OUTLOOK – FMO SUPPLY WORLD FISHMEAL PRODUCTION X 1000 TONS 6 000 5 000 4 000 3 000 2 000 1 000 - 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E Other China,PR Peru WORLD FISH OIL PRODUCTION X 1000 TONS 1 400 1 200 1 000 800 600 400 200 - 2008 2009 2010 2011 2012 2013 2014 2015 2
Slide 31: Global Outlook – FMO Supply
GLOBAL OUTLOOK – FMO SUPPLY PERU • Delayed spawning due to warm temperatures resulted in later start to season • Official start of season commenced 4th May with quota announced at 2.1 million MT • Fishmeal price increased 10% due to quota cut EU • Expectations of 20-25% lower fishmeal output AFRICA
Slide 32: Global Outlook – FMO Demand
GLOBAL OUTLOOK – FMO DEMAND CHINA • African Swine Fever (ASF) impact reported to be larger and more wide spread than expected FAR EAST • Continued demand for aquaculture feed, aggressive buying from cheaper origins EU • Anticipated increase in demand as a result of lower supply in Scandinavia, Germa
Slide 33: Blue Continent Products
BLUE CONTINENT PRODUCTS 33
Slide 34: 2019 H1 Performance – Horse Mackerel
2019 H1 PERFORMANCE – HORSE MACKEREL 2018 2019 KPI’s MEASURE MARCH MARCH Operating profit ZAR 68% 8% Volumes sold Tons 34% 14% Average sales price Price/kg 4% 6% Fishing days Days 39% 28% Catch per sea day Tons 23% 8% 34
Slide 35: Horse Mackerel – South Africa
Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 HORSE MACKEREL – SOUTH AFRICA Apr-18 DESERT DIAMOND MONTHLY CATCHES May-18 SCHEDULED Jun-18 MAINTENANCE Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 & REFIT Feb-19 DRY DO
Slide 36: Horse Mackerel – Namibia
Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 SCHEDULED MAINTENANCE Oct-17 Nov-17 HORSE MACKEREL – NAMIBIA Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 NAMIBIAN HORSE MACKEREL AVERAGE CATCH PER FISHING DAY Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb
Slide 37: Outlook – Horse Mackerel
OUTLOOK – HORSE MACKEREL SOUTH AFRICA • Landings encouraging and expecting consistent catch rate on prior year • Quota appeal process remains pending • Strong demand NAMIBIA • 2018 rights renewal unlikely to be finalised in 2019 • Allocation and quota availability challenging – timing of second allo
Slide 38: 2019 H1 Performance – Hake
2019 H1 PERFORMANCE – HAKE 2018 2019 KPI’s MEASURE MARCH MARCH Operating profit ZAR 94% 18% Volumes sold Tons 23% 14% Sales price Euro/kg 1% 11% Sea days Days 8% 8% Catch rate Catch/day 2% 4% 38
Slide 39: Hake Rand and Euro Pricing per kg
R10,00 R15,00 R20,00 R25,00 R30,00 R35,00 HAKE Oct-16 Nov-16 Rand Dec-16 Jan-17 Euro Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 RAND AND EURO PRICING PER KG May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 € 2,
Slide 40: Outlook – Hake
OUTLOOK – HAKE • 10% increase in TAC • Continued positive landings – improvement in catch rate on prior year expected • Consistent European and local demand for MSC hake • Hake rights renewal process scheduled for 2020 40
Slide 41: Lobster and Squid
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Slide 42: Overview and Outlook – Lobster and Squid
OVERVIEW AND OUTLOOK – LOBSTER AND SQUID LOBSTER • H1 Performance • Reduced TAC and quota • Favourable live pricing achieved driven by reduced supply and higher mix of live product • Outlook • Positive pricing due to reduced supply • Rationalisation plan and alternatives being considered SQUID • H1
Slide 43: Commercial Cold Storage
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Slide 44: 2019 H1 Performance – CCS
2019 H1 PERFORMANCE – CCS 2018 2019 KPI’s MEASURE MARCH MARCH Operating profit ZAR 13% 18% Revenue occupancy % 7% 12% Revenue /pallet R/pallet 2% 4% Non-recurring once-off costs R’m - R7m 44
Slide 45: Operating Profit – CCS
OPERATING PROFIT – CCS 50 45 6 9 40 3 7 35 30 25 20 41 34 15 10 5 - March 2018 SA Coastal Namibia and Angola Inland Non-recurring cost March 2019 Increase Decrease 45
Slide 46: Outlook – CCS
OUTLOOK – CCS GAUTENG • Midrand partial exit finalised • Improved occupancy at City Deep will continue in H2 COASTAL • Strong performance expected • Frozen fish strategy driving efficiencies ANGOLA/NAMIBIA • Higher occupancy levels expected at Walvis Bay due to improved fishing conditions • Angola l
Slide 47: Strategic Overview and Guidance
STRATEGIC OVERVIEW AND GUIDANCE 47
Slide 48: Fishing Rights Allocation Process 2020
FISHING RIGHTS ALLOCATION PROCESS 2020 • Current fishing rights in the HDST (hake deep ANTICIPATED TIMELINES sea trawl) and SMP (small pelagic) South Coast Rock Lobster (SCRL) and Squid sectors DATE EVENT expire on 31 December 2020 APR 2019 Release of draft policy MAY/JUL 2019 Gazetting of Draft Pol
Slide 49: FRAP 2020 – Oceana Approach
FRAP 2020 – OCEANA APPROACH • Oceana level 1 BEE black ownership over 68% OCEANA SUPPLY 2019 14% • Under 15% of supply impacted by FRAP 2020 • FRAP 2020 risk mitigated through 16% 44% diversification strategy • International pilchard supply chain further reduces risk 26% • Intending to play a proact
Slide 50: Guidance
GUIDANCE OPERATING PERFORMANCE • Steady canned fish growth • Good demand for fishmeal and oil • Positive SA fishmeal landings • Firm pricing on export products • Improved vessel utilisation for both horse mackerel and hake • Uncertainty regarding 2nd timing of HM Namibia allocation for 2019 • CCS no
Slide 51: Thank You
THANK YOU 51
Slide 52: Annexure
ANNEXURE 2018 2019 FINANCIAL OVERVIEW (R'000) MARCH MARCH VAR CANNED FISH AND FISHMEAL Revenue 1 848 092 1 965 700 6% Operating profit 171 015 221 753 30% Operating profit margin 9% 11% FISHMEAL AND FISH OIL (US) Revenue 614 361 654 487 7% Operating profit 60 725 118 172 95% Operating profit margin