Astral Foods Limited · JSE:ARL
Astral Foods — FY2019 Earnings Presentation
63 slides from Astral Foods's earnings presentation, November 2019
Slide 1: Annual Results Presentation
Annual Results Presentation for the 12 months ended 30 September 2019
Slide 2: Agenda
AGENDA Business Overview Page 3 / Slide 3 Operational Overview Page 5 / Slide 8 Industry Matters Page 14 / Slide 26 Financial Overview Page 16 / Slide 29 Outlook Page 22 / Slide 41 Additional Information Page 24 / Slide 45 2 2
Slide 3: Business Overview
BUSINESS OVERVIEW Chris Schutte
Slide 4: Salient Points
Business Operational Financial Industry Matters Outlook Overview Overview Overview SALIENT POINTS Feed input costs increased markedly on higher maize prices, due to a smaller maize crop following poor crop yields for 2019 Poultry production efficiencies were maintained in line with projections
Slide 5: Key Financial Indicators
Business Operational Financial Industry Matters Outlook Overview Overview Overview KEY FINANCIAL INDICATORS Revenue 4% Profit before interest and tax 55% 55% Earnings per share @ 1 659 cps Headline earnings per share @ 1 674 cps 55% 56% Total dividend for the year @ 900 cps 5
Slide 6: Divisional Overview
Business Operational Financial Industry Matters Outlook Overview Overview Overview DIVISIONAL OVERVIEW Poultry Feed Feeding cost increased Raw material costs up Bird performance improvement Less internal feed required Broiler sales volumes up External sales volumes down Broiler sales r
Slide 7: The Year in Perspective
Business Operational Financial Industry Matters Outlook Overview Overview Overview THE YEAR IN PERSPECTIVE (R million) 2 500 2 000 569 1 500 258 203 26 223 1 000 349 1 942 500 882 R1 060 million 0 PBIT F2018 PBIT F2019 Other Broiler sales Broiler selling Extraordinary Raw material conversion efficie
Slide 8: Andy Crocker
¢9Astral Andy Crocker
Slide 9: Feed Division
Business Operational Financial Industry Matters Outlook Overview Overview Overview FEED DIVISION Revenue - R million Operating profit - R million 7 000 500 450 489 6 574 457 6 000 6 198 400 5 000 350 300 4 000 250 3 000 200 2 000 150 100 1 000 50 - - F2018 F2019 F2018 F2019 Revenue up 6.1% Opera
Slide 10: Feed Division
Business Operational Financial Industry Matters Outlook Overview Overview Overview FEED DIVISION SAFEX yellow maize prices increased markedly for the period under review F2019 avg. R2 638 per ton (F2018: R2 098) up R540 per ton y-o-y Internal feed sales decreased by 3.0% due to improved broiler
Slide 11: Feed Division – Sales Mix
Business Operational Financial Industry Matters Outlook Overview Overview Overview FEED DIVISION – SALES MIX 12% 14% 22% F2018 F2019 1 410 283 Tons 21% 1 364 233 Tons Volume decrease ≈ 3.3% 60% 60% 6% 5% 11
Slide 12: SAFEX Yellow Maize Price
Business Operational Financial Industry Matters Outlook Overview Overview Overview SAFEX YELLOW MAIZE PRICE Source: CJA Strategic Risk Brokers 12
Slide 13: Durban Soya Meal Price
Business Operational Financial Industry Matters Outlook Overview Overview Overview DURBAN SOYA MEAL PRICE Source: CJA Strategic Risk Brokers 13
Slide 14: Commercial
¢9Astral = Commercial
Slide 15: Poultry Division - Consolidated
Business Operational Financial Industry Matters Outlook Overview Overview Overview POULTRY DIVISION - CONSOLIDATED Revenue - R million Operating profit - R million 11 000 1 500 10 000 10 604 10 877 1 400 1 453 1 300 9 000 1 200 8 000 1 100 1 000 7 000 900 6 000 800 5 000 700 600 4 000 500 3 000 400
Slide 16: Poultry Division - Commercial
Business Operational Financial Industry Matters Outlook Overview Overview Overview POULTRY DIVISION - COMMERCIAL Profits for the period under review declined significantly on the comparable year Broiler selling prices decreased on subdued consumer demand and deeper promotional activity in the ma
Slide 17: Poultry Division – Product Mix
Business Operational Financial Industry Matters Outlook Overview Overview Overview POULTRY DIVISION – PRODUCT MIX 23% 22% F2018 49% F2019 7% 437 506 Tons 7% 448 944 Tons 51% Volume increase ≈ 2.6% 14% 12% 4% 5% 3% 3% 17
Slide 18: Broiler Selling Price
Business Operational Financial Industry Matters Outlook Overview Overview Overview BROILER SELLING PRICE 150% 140% Lower brine effect 130% 120% Bird flu impact 110% 100% 90% 80% Oct-14 Oct-17 Oct-18 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Feb-18 Jun-18 Feb-19 Jun-19 Apr-15 Apr-16 Apr
Slide 19: Change in Broiler Selling Price vs. Feed Price
Business Operational Financial Industry Matters Outlook Overview Overview Overview CHANGE IN BROILER SELLING PRICE vs. FEED PRICE 40% 30% 20% 10% 0% Feb-15 Jun-15 Feb-16 Jun-16 Feb-17 Jun-17 Feb-18 Jun-18 Feb-19 Jun-19 Dec-14 Aug-15 Dec-15 Aug-16 Dec-16 Aug-17 Dec-17 Aug-18 Dec-18 Aug-19 Apr-17 Oct-
Slide 20: Poultry Division Agriculture
¢9Astral POULTRY raw DIVISION S Agriculture Gary Arnold
Slide 21: Poultry Division - Agriculture
Business Operational Financial Industry Matters Outlook Overview Overview Overview POULTRY DIVISION - AGRICULTURE Sales increased on higher demand for parent stock, hatching eggs and broiler day-old chicks Feed input costs increased due to higher raw material costs adversely affecting the live b
Slide 22: Broiler Production Performance
Business Operational Financial Industry Matters Outlook Overview Overview Overview BROILER PRODUCTION PERFORMANCE 108% 106% 104% 102% 100% 98% 96% Key indicators base-lined to 100% in F2015 94% F2015 F2016 F2017 F2018 F2019 Slaughter age Live weight Average daily gain 22
Slide 23: Broiler Production Performance
Business Operational Financial Industry Matters Outlook Overview Overview Overview BROILER PRODUCTION PERFORMANCE 125% 120% 115% 110% 105% 100% 95% 90% 85% Key indicators base-lined to 100% in F2015 80% F2015 F2016 F2017 F2018 F2019 Mortality Feed consumption Performance efficiency factor 23
Slide 24: Other Africa Division
¢9Astral OTHER sees AFRICA DIVISION
Slide 25: Other Africa Division (Zambia, Mozambique & Swaziland)
Business Operational Financial Industry Matters Outlook Overview Overview Overview OTHER AFRICA DIVISION (Zambia, Mozambique & Swaziland) Revenue - R million Operating profit - R million 500 35 450 480 30 32 400 411 350 25 300 20 22 250 15 200 150 10 100 5 50 - - F2018 F2019 F2018 F2019 Revenue up
Slide 26: Industry Matters
é7Astral INDUSTRY MATTERS
Slide 27: Poultry Imports per Month
Business Operational Financial Industry Matters Outlook Overview Overview Overview POULTRY IMPORTS PER MONTH Tons 70000 65000 60000 55000 50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Oct
Slide 28: Industry Overview
Business Operational Financial Industry Matters Outlook Overview Overview Overview INDUSTRY OVERVIEW SAPA was restructured last year and is working effectively, and membership of the broiler organisation is approximately 73% (of local weekly broiler production numbers) Based on industry statisti
Slide 29: Financial Overview
FINANCIAL OVERVIEW Daan Ferreira
Slide 30: Income Statement
Business Operational Financial Industry Matters Outlook Overview Overview Overview INCOME STATEMENT 2019 2018 Year ended 30 September R million R million % change Revenue 13 485 12 979 4% Operating profit 882 1 942 55% Operating profit margin 6.5% 15.0% Net finance income 30 52 Profit before tax 913
Slide 31: Group Annual Revenue
Business Operational Financial Industry Matters Outlook Overview Overview Overview GROUP ANNUAL REVENUE (R billion) 13,5 13,0 12,4 12,0 11,3 6,2 6,6 9,6 6,6 7,2 8,5 6,2 8,2 7,4 7,2 6,9 7,0 5,5 6,3 4,3 4,9 5,2 4,0 3,5 4,8 3,6 10,9 3,5 5,1 10,6 3,9 4,1 9,9 3,7 2,7 8,7 9,1 2,5 2,8 7,0 2,7 2,7 5,8 6,0 2
Slide 32: Group Annual Operating Profit
Business Operational Financial Industry Matters Outlook Overview Overview Overview GROUP ANNUAL OPERATING PROFIT 1942 14,8% (R million) 15,0% 12,8% 12,3% 457 9,8% 9,6% 9,3% 1101 1086 8,4% 8,7% 8,3% 6,5% 6,7% 882 7,3% 766 809 6,6% 4,6% 674 597 5,8% 423 391 581 585 5,1% 548 549 272 477 493 5,9% 333 38
Slide 33: Group Six Monthly Operating Profit
Business Operational Financial Industry Matters Outlook Overview Overview Overview GROUP SIX MONTHLY OPERATING PROFIT (R million) 1044 875 898 191 207 266 550 551 503 429 379 324 186 280 237 203 213 212 239 153 233 154 120 59 250 157 197 140 135 156 173 45 59 351 310 194 252 184 616 836 617 258 113
Slide 34: Balance Sheet
Business Operational Financial Industry Matters Outlook Overview Overview Overview BALANCE SHEET September 2019 September 2018 R million R million % change Non-current assets 2 658 2 409 10% Net working capital 1 288 1 189 8% Current assets (excl. cash) 2 982 2 943 1% Current liabilities (excl. borr
Slide 35: Capital Expenditure
Business Operational Financial Industry Matters Outlook Overview Overview Overview CAPITAL EXPENDITURE 2019 2018 Year ended 30 September R million R million Depreciation and amortization 176 152 Total capex spend and capitalised 432 356 Festive expansion 185 Standerton silo complex 41 Other capex 20
Slide 36: Capital Expenditure - F2019
Business Operational Financial Industry Matters Outlook Overview Overview Overview CAPITAL EXPENDITURE - F2019 R million Festive expansion (including advance payments) 440 Meadow Standerton silo upgrade 41 Processing plant equipment upgrades 36 Broiler farm refurbishments 50 HPAI mitigation 8 Lister
Slide 37: Working Capital
Business Operational Financial Industry Matters Outlook Overview Overview Overview WORKING CAPITAL September 2019 September 2018 Variance R million R million R million Current assets 2 982 2 943 39 Biological assets 759 770 (11) Inventory - Poultry 337 532 (195) - Feed 291 255 36 - Other Africa 63 5
Slide 38: Statement of Cash Flows
Business Operational Financial Industry Matters Outlook Overview Overview Overview STATEMENT OF CASH FLOWS 2019 2018 For the twelve months ended 30 September R million R million Cash operating profit 936 2 156 Working capital movement 257 (425) 1 193 1 731 Tax paid (214) (516) Net interest received
Slide 39: Headline Earnings & Dividend per Share
Business Operational Financial Industry Matters Outlook Overview Overview Overview HEADLINE EARNINGS & DIVIDEND PER SHARE 3 712 2 016 1 914 1 674 1 381 1 286 1 148 958 890 960 965 840 787 864 631 487 434 272 326 90 108 168 230 380 585 700 700 700 760 810 656 222 440 1 150 490 1 055 2 050 900 F2001 F
Slide 40: In Summary
Business Operational Financial Industry Matters Outlook Overview Overview Overview IN SUMMARY Group profits down (-55%) Net cash outflow (R232 million) High final F2018 dividend paid F2018 incentives paid Increased capital expenditure Surplus cash at F2019 year end (R555 million) Still
Slide 41: Outlook
é7Astral OUTLOOK Chris Schutte
Slide 42: Potential Negative Influences
Business Operational Financial Industry Matters Outlook Overview Overview Overview POTENTIAL NEGATIVE INFLUENCES Raw material prices will remain high, and continue to impact Astral’s largest input cost into 1H2020, namely feed making up 66% of broiler live cost Continued record level of unemploy
Slide 43: Potential Positive Influences
Business Operational Financial Industry Matters Outlook Overview Overview Overview POTENTIAL POSITIVE INFLUENCES Higher planting intentions for maize acreage, together with improved prospects for seasonal rainfall could see an above average crop for the 2020 harvest season Proactive engagement f
Slide 44: Astral's Strategy
“ Astral’s strategy is to be the best cost integrated poultry producer in selected African countries ” Confirmed August 2019 é7Astral
Slide 45: Additional Information
é7Astral ADDITIONAL INFORMATION
Slide 46: Key Financial Ratios
KEY FINANCIAL RATIOS 70 30 65 61 60 55 25 51 48 48 49 50 46 45 20 41 42 39 39 16,5 40 37 16,1 36 36 36 14,5 34 33 13,9 15 31 31 31 30 14,8 29 15,0 30 28 11,4 26 26 11,0 11,1 25 23 24 10,0 12,3 12,8 9,9 19 9,9 9,3 9,3 21 20 8,9 13 10 19 16 7,8 20 7,5 9,6 9,3 7,4 12 9,8 8,7 17 8,3 8,4 4,5 6,5 5,8 5,9
Slide 47: Key Financial Indicators
KEY FINANCIAL INDICATORS 100 97,45 90 96,06 80 78,00 70 60 61,07 61,05 50 49,95 40 44,16 41,36 41,65 34 34 29 37,43 30 26 35,38 27 33,47 34,24 24 24 22 17 21 21 28,28 21 19 18 20 23 23,83 15 16 20 14 11 10 17,36 9 10 14,34 14 15 12 12 10,79 2 10 8,53 9 9 7 0 3 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-
Slide 48: SAFEX Yellow Maize Price vs. CBOT in Rand Terms
SAFEX YELLOW MAIZE PRICE vs. CBOT IN RAND TERMS Source: CJA Strategic Risk Brokers 48
Slide 49: World Corn Ending Stocks
WORLD CORN ENDING STOCKS Million Tons 375 30% 27,79% 350 27,80% 26,22% 325 300 25,00% 23,52% 25% 275 23,38% 23,00% 250 225 19,82% 200 20% 175 150 125 100 15% 75 50 25 0 10% 2014 2015 2016 2017 2018 2019 2020E 2021F End Stock Maize stock to use ratio Source: CJA Strategic Risk Brokers 49
Slide 50: South Africa – Total Maize Supply & Demand
SOUTH AFRICA – TOTAL MAIZE SUPPLY & DEMAND Marketing year (May to April) 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20E 2020/21F '000 tons Actual Actual Actual Actual Actual Estimate Forecast Carry In (1 May) 589 2 074 2 471 1 093 3 689 2 662 1 744 Crop Estimate 14 250 9 955 7 779 16 820 12 510 11
Slide 51: South Africa – Total Maize Supply & Demand
SOUTH AFRICA – TOTAL MAIZE SUPPLY & DEMAND ‘000 Tons 4 000 28,31% 30% 3 500 25% 3 000 21,75% 20,19% 20% 2 500 16,62% 14,69% 14,73% 2 000 15% 9,87% 3 689 1 500 2 662 10% 2 471 1 000 2 062 1 912 1 744 5% 500 1 093 0 0% 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20E 2020/21F Carry out Maize stock to
Slide 52: El Niño Southern Oscillation - Forecast
EL NIÑO SOUTHERN OSCILLATION - FORECAST Source: International Research Institute for Climate and Society (IRI) – Columbia University 52
Slide 53: Southern Africa - Vegetative Health Index
SOUTHERN AFRICA - VEGETATIVE HEALTH INDEX VHI of previous year VHI of current year Source: NOAA - National Environmental Satellite, Data, and Information Service (VHI) 53
Slide 54: Broiler Feed – Ingredient Inclusion & Cost Contribution
BROILER FEED – INGREDIENT INCLUSION & COST CONTRIBUTION 0,3 0,3 0,4 0,5 0,5 0,4 0,4 0,3 100% 3,0 4,7 5,0 4,7 5,4 6,0 5,4 5,3 7,5 7,3 6,6 9,9 0,2 0,4 0,5 9,1 14,6 16,6 16,6 90% 10,3 10,3 18,2 6,4 7,3 0,4 13,8 6,7 1,7 0,9 1,2 7,8 0,5 19,8 23,4 21,2 0,7 22,2 80% 9,1 6,4 6,9 1,5 0,7 8,6 0,7 6,2 9,1 8,2
Slide 55: Broiler Price vs. Food Price Inflation
BROILER PRICE vs. FOOD PRICE INFLATION 150% 150% 140% 140% 130% 130% 120% 120% 110% 110% 100% 100% 90% 90% Apr-19 Apr-15 Apr-16 Apr-17 Apr-18 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Oct-17 Feb-18 Jun-18 Oct-18 Feb-19 Jun-19 Aug-15 Aug-16 Aug-17 Aug-18 Aug-19 Dec-14 Dec-15 Dec-
Slide 56: South African Protein Price Comparison
SOUTH AFRICAN PROTEIN PRICE COMPARISON cents / kg 9000 8000 7000 6000 5000 4000 3000 2000 1000 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 May-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 May-14 Sep-14 May-15 Sep-15 Sep-16 Ma
Slide 57: Local Broiler Production & Market Share
LOCAL BROILER PRODUCTION & MARKET SHARE 21% 26% 5% 5% 8% 20% 7% 8% Astral RCL Country Bird Daybreak Sovereign Grainfields Chubby Chick Other Local broiler production ≈ 19.3 million birds per week Source: Own Estimates 57
Slide 58: Local Broiler Production & Market Share
LOCAL BROILER PRODUCTION & MARKET SHARE 18% 29% 14% 6% 15% 5% 3% 4% 6% Astral RCL Country Bird Daybreak Sovereign Grainfields Chubby Chick Other Imports Avg. poultry imports ≈ 8 million birds per week (12 months ending September 2019) Source: Own Estimates 58
Slide 59: Total Poultry Imports (Chicken, MDM, Turkey)
TOTAL POULTRY IMPORTS (CHICKEN, MDM, TURKEY) Tons 600 000 500 000 400 000 300 000 200 000 F2016 F2017 F2018 F2019 100 000 0 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep F2016 37 789 83 258 126 866 165 602 200 461 258 134 306 385 360 899 414 947 460 098 502 138 551 209 F2017 50 324 101 279 135 812
Slide 60: Total Poultry Imports – Country of Origin
TOTAL POULTRY IMPORTS – COUNTRY OF ORIGIN Country of origin for poultry Country of origin for poultry imports - 2018 imports - 2019 YTD (Sept) Argentina Thailand Other 3,9% Other 1,9% 6,5% 1,9% US 16,1% US 16,4% Argentina 5,9% Brazil 50,0% Brazil 61,5% EU 12,6% EU 23,3% 566 210 tons 411 235 tons Sou
Slide 61: Total Poultry Imports – Country of Origin
TOTAL POULTRY IMPORTS – COUNTRY OF ORIGIN Country Imports (tons) 2017 2018 2019 YTD Brazil 337 476 348 155 205 820 United States 87 059 91 374 67 388 Poland 72 13 463 39 241 Argentina 32 816 33 278 26 833 Ireland 24 746 26 328 23 146 Denmark 16 884 25 672 19 591 Spain 11 138 4 932 13 228 Thailand 4
Slide 62: Poultry Sector Master Plan
POULTRY SECTOR MASTER PLAN The master plan sets a number of targets to be met by 2023 and was signed by all relevant stakeholders on 6 November 2019 Investment pledges (future and underway) topping R1.5 billion in expanding processing capacity, with a further R1.7 billion in expanding broiler pr
Slide 63: www.astralfoods.com
Chris Schutte Chief Executive Officer Tel : +27 (0) 12 667 5468 Fax : +27 (0) 86 504 2002 email: Chris.Schutte@astralfoods.com www.astralfoods.com Daan Ferreira Chief Financial Officer Tel : +27 (0) 12 667 5468 Fax : +27 (0) 86 504 1602 email: Daan.Ferreira@astralfoods.com