Scales Corp. Ltd. · NZX:SCL

Scales — H1 2020 Earnings Presentation

28 slides from Scales's earnings presentation, Aug 26, 2020

1. Slide 1: Scales Corporation Limited Half Year Results

   Scales Corporation Limited Growing Your Diversified Agribusiness Half Year Results Half Year Results For the six months ended 30 June 2020 For the Six Months Ended 30 June 2020 26 August 26 August 2020 2020

2. Slide 2: Agenda

   Agenda 1. COVID-19 Update 2. Financial and Operating Summary 3. Sustainability 4. Group Results 5. Divisional Performance 6. FY20 Outlook Appendices: I. NZ IFRS Reconciliation II. Disclaimer Scales Corporation Limited – 2020 Half Year Results 2

3. Slide 3: COVID-19 Update

   COVID-19 Update

4. Slide 4: Built to Weather a Pandemic Storm

   Built to Weather a Pandemic Storm Strong business foundations served us well Courageous, hard-working and inspirational team  Diversified geographical and operational businesses  Essential businesses, supplying the world with nutritious food and petfood  Full vertical integration  Strong financi

5. Slide 5: COVID-19 – Focused on Safety

   COVID-19 – Focused on Safety Our people were our first priority • Priority on minimising risk to, and supporting, team members:  Ensured safe working environment.  Staff worked from home where possible.  Full salaries and wages retained, without use of government subsidies.  Financial impact on

6. Slide 6: COVID-19 – Trading Through the Alert Levels

   COVID-19 – Trading Through the Alert Levels Scales’ businesses occupied the privileged position of being ‘essential’ • Business continuity made possible by outstanding leadership effort and teamwork of all staff:  Lockdown occurred during crucial apple harvest period, requiring quick reaction.  Co

7. Slide 7: Proactive Response to COVID-19

   Proactive Response to COVID-19 Operating in a ‘new normal’ • Uncertainty in global markets over the impact and duration of COVID-19. • All businesses continue to maintain elevated hygiene practices. • Pandemic preparedness policies updated to allow a smooth and immediate transition to lockdown, if r

8. Slide 8: Financial and Operating Summary

   Financial and Operating Summary

9. Slide 9: Financial and Operating Summary

   Financial and Operating Summary • Reported NPAT of $27.8m (1H19: $121.8m). • Underlying* NPAT of $29.2m (1H19: $30.1m), down 3.2% on 2019. • Underlying* EBITDA of $44.4m (1H19: $47.3m), a strong result during a global pandemic. • Divisional earnings mix differs from prior years. • Record export volu

10. Slide 10: Sustainability

    Sustainability

11. Slide 11: Sustainability Update

    Sustainability Update Operating in a COVID-19 environment COVID-19 • Continued to run the business effectively across all sites during times of peak harvest and production. • Wages and salaries maintained. • Ongoing supply of fresh apples into national foodbank networks. Our environment • Continued

12. Slide 12: People and Governance

    People and Governance More than ever, it’s all about our people Health and safety • Focus for 2020/2021 on critical risks, with ongoing awareness training and a continual improvement focus throughout all sites. • 3 year health and safety strategy developed for Mr Apple and Scales Logistics:  All on

13. Slide 13: Group Results

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14. Slide 14: Group Financial Performance

    Group Financial Performance Solid Underlying earnings • Solid Underlying NPAT of $29.2m (1H19: $30.1m) and EBITDA of $44.4m (1H19: $47.3m). Income Statement NPAT EBITDA $m 1HY20 1HY19 % chg. 1HY20 1HY19 % chg. Underlying 29.2 30.1 -3.2% 44.4 47.3 -6.3% NZ IFRS & other adjustments: Gain on sale of Po

15. Slide 15: Divisional Overview

    Divisional Overview Divisional earnings impacted by COVID-19 • Horticulture – record export crop, with strong sales into Europe. Sales patterns in Asia and near markets adversely affected by COVID-19 lockdowns.  NZ IAS 41 Agriculture requires unsold agricultural produce to be measured at fair value

16. Slide 16: Balance Sheet

    Balance Sheet Balance Sheet $m Jun-20 Jun-19 Dec-19 Current assets excluding cash Well capitalised financial position Trade & other receivables Inventories 86.6 26.4 94.9 34.0 20.6 26.4 Agricultural produce 75.8 59.1 21.6 Other 9.5 8.3 8.2 • Net Cash of $54.8m at 30 June 2020 vs $59.0m at 30 June Cu

17. Slide 17: Divisional Performance

    Divisional Performance

18. Slide 18: Horticulture – Volumes

    Horticulture – Volumes 2020 volumes ahead of forecast, markets mixed • Record Mr Apple total own grown export volumes of 3.9m TCEs:  Export packout of approximately 76% (2019: 79%). • 6% increase in Premium Variety volumes:  Significant increases in DazzleTM and PosyTM sales. Mr Apple Own Export V

19. Slide 19: Horticulture – Markets

    Horticulture – Markets Benefited from geographical and channel diversification • Sales to date approximately 80% of packed export volume. • European and UK market providing positive returns:  Increased throughput of produce.  Demand strong for some traditional varieties. • Impact on volumes and pr

20. Slide 20: Horticulture – Margin Analysis

    Horticulture – Margin Analysis Analysis undertaken of recent margin trends Traditional planting techniques - greater spacing (~800 trees / ha), ‘3-dimensional’ surface • Comprehensive internal review of profit margins performed:  The Horticulture industry has experienced margin compression in recen

21. Slide 21: Horticulture – Margin Analysis (Continued)

    Horticulture – Margin Analysis (Continued) FY20 margins impacted by short-term industry factors before returning to normal levels • FY20 EBIT margins will below recent years predominantly due to price pressures in Asian markets. • We expect these factors to be temporary and for margins to return to

22. Slide 22: Food Ingredients - Performance

    Food Ingredients - Performance Strong global petfood demand • Excellent first half trading, Underlying EBITDA $11.0m (1H19: $5.1m):  14% increase in volumes sold compared to 1H19.  Change in customer purchasing behaviour due to COVID-19, orders brought forward.  Advantage taken of trading opportu

23. Slide 23: Logistics - Performance

    Logistics - Performance Steady performance by logistics businesses • Freight volumes benefitted from exposure to agribusiness customers: • Air freight capacity and pricing affected by COVID-19:  Valuable support by Government and industry should ensure capacity available for upcoming seasonal shipm

24. Slide 24: FY20 Outlook

    FY20 Outlook

25. Slide 25: Full Year Outlook for 2020

    Full Year Outlook for 2020 Uncertainty remains for full year result • Full year Underlying Net Profit* expected at the bottom end of previously advised guidance of between $30.0m and $36.0m. • Horticulture:  Ongoing disruption in global markets, with approximately 20% remaining to be sold and final

26. Slide 26: Appendices

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27. Slide 27: Appendix I – NZ IFRS Reconciliation

    Appendix I – NZ IFRS Reconciliation Reconciliation of Divisional Underlying Profitability to Reported Profitability Group Horticulture Food Ingredients Logistics Corporate & Eliminations $m 1H20 1H19 1H20 1H19 1H20 1H19 1H20 1H19 1H20 1H19 Underlying / Reported Revenue 253.3 278.0 136.3 159.5 84.1 8

28. Slide 28: Appendix II - Disclaimer

    Appendix II - Disclaimer The information in this presentation has been prepared by Scales Corporation Limited with due care and attention. However, neither Scales Corporation Limited nor any of its directors, employees, shareholders nor any other person shall have any liability whatsoever to any per

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