Farm Pride Foods Limited · ASX:FRM
Farm Pride Foods — Shareholder Meeting (October 2018)
40 slides from Farm Pride Foods's shareholder meeting presentation, Oct 24, 2018
Slide 1: Farm Pride Foods Ltd 2018 AGM
Farm Pride Foods Ltd 2018 AGM 24 October 2018
Slide 2: Farm Pride Board of Directors
FARM PRIDE BOARD OF DIRECTORS Non-executive Chairman Peter Bell Non-executive Director/Audit Chairman Malcolm Ward Executive Director Bruce De Lacy
Slide 3: Farm Pride Management Team
FARM PRIDE MANAGEMENT TEAM COO/CEO Daryl Bird Business Manager Shell Manufacturing Don Woodhouse Business Manager Product Manufacturing Bob Harris National Farms Manager Darrell Boyle National QA Manager Larissa Forest National Maintenance Manager Wade Crawford
Slide 4: State of Play
State of Play
Slide 5: Farm Pride Foods at a Glance
Farm Pride Foods at a Glance • Farm Pride is in the business of producing, FY18 Revenue $86.12m marketing and selling egg and egg products in Market Capitalisation $48m Australia. NTA 81.5 cents • Farm Pride is transitioning to cage free and free Approx. 50% of our total hen flock is range to meet t
Slide 6: Key Messages for 2018
Key Messages for 2018 • Employee safety remains a priority. • EBITDA result in line with trading update. • Egg industry bearing the brunt of the driest January‐September since 1902. • Stage one Pittsworth, Nathalia and pasteuriser complete. • Our last three major capital projects have been free rang
Slide 7: Employee Safety 2018
Employee Safety 2018 Farm Pride Foods LTIFR ‐ Rolling 12 month average Claims Only 29.00 27.00 25.00 23.00 FY18 saw a 15% 21.00 decrease in our LTIFR 19.00 ‐rolling 12 month average from 25.15 17.00 to 21.38 ‐ claims only `` 15.00 Jul‐17 Aug‐17 Sep‐17 Oct‐17 Nov‐17 Dec‐17 Jan‐18 Feb‐18 Mar‐18 Apr‐18
Slide 8: FY18 Performance Snapshot
FY18 Performance Snapshot Revenue $86.116m Underlying EBITDA $5.386m Profit after tax $0.5m Net Assets $47.143m Net Debt $12.023m Earnings per share (cents per share) 0.91 cents Start Something
Slide 9: 2018 Full Year Results
2018 Full Year Results ($'000) 2015 2016 2017 2018 Revenue 91,341 93,765 97,778 86,116 Earnings before Interest & Tax (EBIT) 7,218 11,485 12,232 858 EBIT Depreciation & Amortisation (EBITDA) 12,190 15,988 15,713 5,386 Net Profit before tax (NPBT) 7,218 11,485 12,232 858 Net Profit after tax (NPAT) 5
Slide 10: FY18 Financial Performance
FY18 FINANCIAL PERFORMANCE Westpac Leases Borrowings ‐ Bank + Lease Finance $25.0 $20.0 $15.0 Net Profit/(Loss) After Tax‐ Farm Pride Foods Ltd $'000 Million $ $14.7 $9,000 $9.8 $10.0 $11.5 $8,000 $7,000 $3.0 $11.8 $5.0 $6,000 $6.1 $4.4 $4.1 $4.4 $5,000 $2.6 $0.0 $1.1 $0.3 $4,000 $3,000 $2,000 $1,00
Slide 11: 2018 Full Year Results
2018 Full Year Results Future cash flow growth will be driven by improved earnings, improved working capital management (e.g. lower inventories) and a further investment in cage free Net Cash Flow Provided By Operating Activities $16.0 $14.0 $12.0 $10.0 FY12 Million $ FY13 $8.0 $13.7 FY14 $6.0 $9.2
Slide 12: The Egg Supply Cycle in Australia
The Egg Supply Cycle in Australia The egg industry, like many other industries in agriculture is subject to what is known as the Hog Cycle. Hog cycle ‐ the phenomenon of cyclical fluctuations of supply and prices in the egg market. Whilst there is nothing new about this cycle there is no certainty a
Slide 13: New Victorian Farm
New Victorian Farm Nathalia – Farm is now up and running. The total project will be undertaken in four stages. Each stage consisting of 120,000 free range and cage free hens. This is a 650 acre site, with approval for 480,000 layers along with approval for on-site rearing capability. A flexible farm
Slide 14: Queensland Expansion
Queensland Expansion Pittsworth – entry into Queensland We have commenced a refurbishment program at our Pittsworth farm which is in the Toowoomba region. The farm includes farm land, layer and rearing capacity with a grading operation and feed mill. The operation was originally developed to house 2
Slide 15: Market Update
Market Update
Slide 16: State based banning of cage eggs
State based banning of cage eggs • WA state Agriculture minister has proposed a state based ban on cage egg production if the final copy of the Australian Animal Welfare Standards and Guidelines does not include a phase out timeline for cage egg farming. • Mind the hypocrisy gap. If we care about th
Slide 17: Conversion to a national standard – why?
Conversion to a national standard – why? Australian Animal Welfare Standard for Poultry. • ABC News reported last week that Australians clearly care about animal welfare: their research has found 92 per cent of shoppers in Sydney considered animal welfare to be important. • BUT, Aussie shoppers seem
Slide 18: Legal Requirements
Legal Requirements Free Range Labelling Information Standard. • New legislation in Australian Consumer Law. • It states free range eggs are eggs laid by hens that: • had meaningful and regular access to an outdoor range during daylight hours during the laying cycle; • were able to roam and forage on
Slide 19: Free Range Stocking Densities
Free Range Stocking Densities • Push from Choice, RSPCA and Private Members bill to have stocking densities lowered to 1,500 birds per hectare. • Requires time, significant investment in land and equipment to adjust flock and land ratios. • Consumer education about the space allowance is important.
Slide 20: Australian Eggs
Australian Eggs Industry Standards and Audits. • All of our eggs are sourced from third party accredited farms. ‐ Egg Corp Assured (ending Jan 2019) or the new Egg Standards Australia (for all audits from Jan 2018). • All of our audits conducted this year will be the new ESA and will be for level 3
Slide 21: Climate outlook overview
Climate outlook overview • “I can’t imagine anyone producing food would have it easy right now, but the level of exposure is acute and more long-lasting for egg farmers.” • Egg farmers across Australia are facing skyrocketing costs for feed, with grain prices rising as much as 60 per cent, from $280
Slide 22: Crop outlook overview
Crop outlook overview Australian production of wheat is forecast to fall by around 10%, but crop prospects differ between states. Production in New South Wales and Queensland is forecast to be the lowest in over 10 years, driven by exceptionally warm and dry conditions throughout autumn and winter.
Slide 23: Total Coles and Woolworths Overview
Total Coles and Woolworths Overview AU Grocery scan Total Free Total Total Total Eggs Total Caged Total Barn Range Organic Speciality MAT To 30/09/18 Dozens (000s) 155,690 77,914 57,373 17,249 3,043 111 Dozens (000s) Share of Total Eggs 100.0 50.0 36.9 11.1 2.0 0.1 Dozens (000s) Growth % YA 3.9 11.7
Slide 24: Average Price Per Unit
Average Price Per Unit • Average prices received are lower now due to increased promotional activity. Total Retail IRi MAT to 30/09/18 Start Something
Slide 25: Promotions have increased.
Promotions have increased. No of promotions per year across Coles & Woolworths Top 3 branded lines in market. (Weeks on Promotion >= 5 % 6 wks) 45 40 40 38 35 • Top 3 branded lines have 35 increased promotional 30 29 28 activity by up to 40% on 25 23 previous year. 20 15 10 5 0 MAT To 01/10/17 MAT T
Slide 26: Segment Sales (Coles and Woolworths)
Segment Sales (Coles and Woolworths) Start Something Total Retail IRi MAT to 30/09/18
Slide 27: Total Grocery Overview (Coles and Woolworths)
Total Grocery Overview (Coles and Woolworths) Share Vol MAT Dollars • Barn Egg 11.0% $ 75M • Cage Egg 36.9% $184M • Free Range 50.0% $391M • Other 2.1% $ 28M Total Retail IRi MAT to 30/09/18 Start Something
Slide 28: Growth Opportunities Remain Strong
Growth Opportunities Remain Strong
Slide 29: Shareholder Value Proposition Unchanged in FY18
Shareholder Value Proposition Unchanged in FY18 BUT WITH NEW MANAGEMENT WILL BE SUBJECT TO ONGOING REVIEW NOPAT Targeting shareholder Investment case drivers value creation EBIT Drivers Farm Pride Modest capex ‐ brands Targeting Mid single‐digit Cage egg cage production low single‐ market EPS growth
Slide 30: Strategy Pressure Points or Opportunities
Strategy Pressure Points or Opportunities Retailer competition driving prices lower – new farms mean lower production costs. Domestic AI risk increasing reflecting overseas experience – farm sites spread out across the East coast of Australia means lower biosecurity risk. Activist lobby continually
Slide 31: Strategy Opportunities – More Opportunity
Strategy Opportunities – More Opportunity • Improve operational efficiency across the supply chain recognising the importance of hen welfare, hen welfare management and new manufacturing technology. • Maximise sales growth opportunities using cost effective promotional and marketing whilst continuin
Slide 32: Growth Strategy – More Opportunity
Growth Strategy – More Opportunity Adopt appropriate cost effective smart marketing and promotional campaigns – difficult in the short term where input costs are increasing. Long term view required. Leverage work undertaken by Australian Eggs – ongoing. Seek out further vertical integration opportun
Slide 33: Growth Opportunities Remain
Growth Opportunities Remain • Grow our share of cage free with our core customers. • Continue our investment in our own cage free production. • Coles currently steady. • Lack of consumer loyalty. Only 6-8% of grocery buyers ONLY shop at Coles or Woolworths. • New retail entrants Kaufland, Lidl, Amaz
Slide 34: Farm Pride Uses Science to Prove the True Origin of its Free Range Eggs
Farm Pride Uses Science to Prove the True Origin of its Free Range Eggs • How do we prove where our free range eggs come from? The truth lies within. • FARM PRIDE FOODS IS THE ONLY COMPANY IN AUSTRALIA THAT USES THIS TECHNOLOGY TO AUDIT OUR FREE RANGE EGG SUPPLY CHAIN • “The results of the samples t
Slide 35: Farm Pride Foods - seriously free range
Farm Pride Foods - seriously free range Start Something
Slide 36: Industry Survey
Industry Survey What, exactly, do consumers want? • Australian Eggs has engaged CSIRO to conduct surveys to gauge how people respond to the egg industry and what they see as the industry’s biggest issues. • The CSIRO research will centre around animal welfare, environment, food security and farmers’
Slide 37: Service and experience more important
Service and experience more important • Australian egg farmers produced 6.2 billion eggs in FY18 up 54% on 10 years ago. • Average consumption increased to 245 eggs per person per year or 4.7 eggs per week. • Australians looking for affordable, high quality protein and eggs are the natural choice. •
Slide 38: A Quick Update On Activity On Our Social Media Pages
A Quick Update On Activity On Our Social Media Pages • Instagram, our Farm Pride Eggs page has featured beautiful and colourful breakfasts, we are now heading into Breast Cancer awareness months and our page will be filled with PINK egg packs and dishes. • We have a new Instagram page for the Farm P
Slide 39: Social Media Channels
Social Media Channels Providing topical engaging content and recipe ideas using our eggs. • Foodie focused Farm Pride egg profile. • Filled with egg cooking tips and delicious recipe ideas. • Covering female skewed 25-34 year old market on Instagram, and +30 year old market and Facebook respectively
Slide 40: Questions?
QUESTIONS? Woolworths and Farm Pride Starting Something in 2018
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