Graincorp Limited Class A · ASX:GNC
Graincorp Limited Class A — FY2012 Earnings Presentation
52 slides from Graincorp Limited Class A's earnings presentation, Nov 15, 2012
Slide 1: 2012 Results Release and Strategy Update
2012 Results Release and Strategy Update Investor Presentation – 15 November 2012
Slide 2: 2012 Results Release and Strategy Update
2012 Results Release and Strategy Update 2012 Results Strategy Update • Financial Highlights • Integrated Business Model • Segment Performance • Attractive industry fundamentals • Balance Sheet and Capex • Earnings growth initiatives • 2013 Outlook -2-
Slide 3: GrainCorp is Australia's leading agribusiness
GrainCorp is Australia’s leading agribusiness Integrated Business Model with an international “end-to-end” grain supply chain connecting consumers to growers Unique portfolio of local storage and logistics assets and local and international downstream processing assets linked by a global Mar
Slide 4: Delivering our corporate objectives: Improving shareholder returns
Delivering our corporate objectives 1 Improving shareholder returns • Effective strategy driving higher underlying profitability and improving ROE(1) • TSR(2) materially outperformed the market over last 2 years through strong share price performance and consistent dividends: – 36% TSR in year to 30
Slide 5: Delivering our corporate objectives: Managing variability
Delivering our corporate objectives 2 Managing variability • Continued diversification reducing earnings and cash flow volatility: – Processing EBITDA contribution higher from 13%(1) in FY09 to current ~50%(2) through additions of Malt (in FY10) and Oils (in FY13) – Reduced volatility supports platf
Slide 6: Delivering our corporate objectives: Delivering growth
Delivering our corporate objectives 3 Delivering growth • Grown over 20 years from a $100M company into an ASX100 >$2.0B company • Growth across all segments both organically (e.g. margin improvements and volumes post single wheat desk removal) and acquisitively (e.g. Malt and Oils) • Balance sheet
Slide 7: FY12 Results Release: Financial Highlights
FY12 Results Release Financial Highlights
Slide 8: Higher earnings due to effective strategy and strong volumes
Higher earnings due to effective strategy and strong volumes • Earnings higher to $414M EBITDA(1) (up 18%) and $205M NPAT(1) (up 19%) due to: – Effective strategy → capturing value from our integrated grain supply chain – Strong volumes → handling, marketing and processing • Storage & Logistics(2) e
Slide 9: Business transformation delivers continued earnings growth
Business transformation delivers continued earnings growth EBITDA(1) NPAT and Return on Equity 500 20 250 20% Grains and Corporate $M (LHS) NPAT $M (LHS) Processing $M (LHS) Annual ROE % (RHS) 200 15% 400 Receivals mmt (RHS) 16 Rolling 3 yr avg ROE % (RHS) 150 10% 300 12 100 5% 200 8 50 0% 100 4 $M
Slide 10: Diversified business supporting more consistent earnings and dividends
Diversified business supporting more consistent earnings and dividends Dividends and Earnings Per Share(1) • FY12 fully franked final dividend consisting of $0.20 Ordinary and $0.15 120 Ordinary DPS Special 100 Special DPS • FY12 final dividend dates: EPS 80 – Ex-dividend date: 27 Nov 2012 cents per
Slide 11: FY12 Results Release: Segment Performance
FY12 Results Release Segment Performance
Slide 12: Safety and Corporate Social Responsibility
Safety and Corporate Social Responsibility Safety Environment People Priority to build a culture of Committed to sound environmental Focus on engagement, “Zero Harm - Safe for Life” management practices and performance and • Committed to achieving sustainable operations development best-practice saf
Slide 13: Strong performance across the business
Strong performance across the business FY11 to FY12 Earnings Bridge(1) - $M 1 3 18 13 5 7 13 55 Strong volumes and procurement gains Addition of Pinkenba and High volumes but Schill Malz malting facilities 205 Effective return to long-term plus growth capex in strategy and average margins Storage &
Slide 14: Portfolio of grain businesses capture value across the grain chain
Portfolio of grain businesses capture value across the grain chain Revenue EBITDA(1) FY12 EBITDA(4) % contribution $M FY12 FY11 FY12 FY11 Allied Mills Storage & Logistics 805 743 250 195 5% Malt Marketing(2) 1,891 1,406 63 70 26% Storage & Logistics Malt 945 868 117 99 55% Allied Mills(3) - - 10 9 M
Slide 15: Storage & Logistics – higher earnings due to firm volumes and strategy execution
Storage & Logistics – higher earnings due to firm volumes and strategy execution EBITDA 28% higher to $250M due to: $M FY12 FY11 • Strong grain volumes and market share Revenue 805 743 – Throughput 18% higher to 28.5mmt(1) EBITDA 250 195 – 59% share of production(3) received at EBIT 197 151 country
Slide 16: Marketing – consistent earnings and growing global reach
Marketing – consistent earnings and growing global reach Consistent earnings due to: $M FY12 FY11 • Higher international sales Revenue 1,891 1,406 – 4.4mmt FY12 sales to customers across EBITDA 63 70 more than 25 countries Interest expense(1) (22) (25) – Strong portfolio of customers → particularly
Slide 17: Malt – higher volumes and effective margin management
Malt – higher volumes and effective margin management Earnings 18% higher to $117M despite $M FY12 FY11 high Australian and Canadian dollars due to: Revenue 945 868 • 251kmt annual production capacity added EBITDA(1) 117 99 → global portfolio and customer proposition EBIT 81 68 • Sales growth to 1.3
Slide 18: Allied Mills – higher earnings and capacity replacement announced
Allied Mills – higher earnings and capacity replacement announced • Continued earnings growth from value add $M (60% JV share) FY12 FY11 product initiatives (e.g. par baked EBITDA 25 22 products) Equity Profit(1) 10 9 • Replacement of Toowoomba milling capacity (closed due to flooding) with Sharehol
Slide 19: FY12 Results Release: Balance Sheet and Capex
FY12 Results Release Balance Sheet and Capex
Slide 20: Strong and flexible balance sheet
Strong and flexible balance sheet Core Debt(1) - $M • FY12 pro forma Core Debt(1) of $320M – Actual Core Debt of $16M at 30 Schill Malz acquisition Short-term debt completed for $81M 9 less Marketing September 2012 (includes $104M and Oils inventories net proceeds from institutional 43 132 26 tranch
Slide 21: Marketing grain inventory funded with specific commodity inventory facilities
Marketing grain inventory funded with specific commodity inventory facilities Marketing’s funding strategy Marketing Grain Inventory(1) - $M • Marketing’s grain trading activities are 675 Marketing grain inventory Short-term debt predominantly funded with specific short 600 572 term commodity invent
Slide 22: Capex supporting safety, network efficiencies and strategic initiatives
Capex supporting safety, network efficiencies and strategic initiatives Capex(1) - $M Depreciation & Amortisation - $M 140 100 91 Stay-in-business 122 Depreciation 120 112 78 106 80 18 Growth Amortisation 72 100 17 63 16 60 80 53 63 41 60 39 40 73 40 61 31 31 56 53 59 20 37 40 49 20 25 29 $M 0 0 $M
Slide 23: FY12 Results Release: FY13 Outlook
FY12 Results Release FY13 Outlook
Slide 24: Grains outlook – firm carry-in and export volumes
Grains outlook – firm carry-in and export volumes Market fundamentals GrainCorp FY13 outlook • Eastern Australian crop production • 4.3mmt carry-in Storage & Logistics estimate 18.3mmt(1) • Strong market share maintained → • Firm grain prices receivals (country, ports) and exports • Positive harvest
Slide 25: Processing outlook – well placed through strong competitive positions
Processing outlook – well placed through strong competitive positions Market fundamentals GrainCorp FY13 outlook • Global barley crop production • Sales on track with 1.0mmt forward ~131mmt(1) and quality sound sold YTD • Firm barley prices • Strong capacity utilisation driven by Malt • Soft beer de
Slide 26: Strategy Update: Integrated Business Model serving a growing market
Strategy Update Integrated Business Model serving a growing market
Slide 27: Strength of our integrated Business Model
Strength of our integrated Business Model Global grains traded(1) Three core • Wheat, barley, canola → representing Other Wheat grains 35% of global traded grains and oilseeds 8% 30% • Focus on “drier climate” grains where we Corn 23% have a comparative advantage through Barley 3% origination, freig
Slide 28: Integrated Business Model delivering strong financial and strategic performance
Integrated Business Model delivering strong financial and strategic performance • Board and management have a proven track record of strategy execution: – EBITDA improvement → value add initiatives and benefits post single wheat desk removal – EBITDA growth → diversification into grain processing (M
Slide 29: Unique portfolio of valuable grain storage and logistics assets and capabilities
Unique portfolio of valuable grain storage and logistics assets and capabilities Our eastern Australia grain network • The largest country site and port network in eastern Australia, handling ~75%(1) of annual grain production(2) through: – 280+ sites with ~21mmt of storage capacity handling 55-60%
Slide 30: Unique global portfolio of valuable grain processing and complementary facilities
Unique global portfolio of valuable grain processing and complementary facilities • Produce ~35% of Australia’s malt • Produce ~35% of Australia's flour(1) • Produce ~40% of Australia’s canola oil and ~40% of Australasia’s refined edible oil • Import and export ~40% of Australasia’s edible oil throu
Slide 31: Global exposure to attractive grain industry fundamentals
Global exposure to attractive grain industry fundamentals Global grain demand Global malt demand Global canola oil demand • Global grain trade has • Global malt export trade • Australian canola oil doubled in the past 40 years has doubled in the past 40 exports have trebled in the years past 10 year
Slide 32: Origination advantages to supply global demand growth markets
Origination advantages to supply global demand growth markets Wheat Imports to 2050(1) Demand growth in proximate regions Current wheat imports (mmt) Wheat import growth to 2050 (mmt) • Australia has freight advantages to import- 44 Wheat import growth to 2050 (%) dependent and growth markets for gr
Slide 33: Strategy Update: Earnings growth initiatives
Strategy Update Earnings growth initiatives
Slide 34: Earnings growth initiatives targeting ~$110M incremental underlying EBITDA by end FY16
Earnings growth initiatives targeting ~$110M incremental underlying EBITDA by end FY16 • “Gamechangers” represent previously announced strategic initiatives(1) – Good progress and target incremental EBITDA upgraded to ~$45M by end FY15(2) • Asset optimisation and Port flexibility growth initiatives
Slide 35: Gamechangers – strong progress on implementation of identified projects
Gamechangers – strong progress on implementation of identified projects • Target incremental underlying EBITDA → ~$45M by end FY15 with capex of ~$70M(1) Strengthen our grain Grow our grain Create and capture handling network Marketing business additional Malt value Key site and equipment upgrades
Slide 36: Asset Optimisation – Oils targeting synergies and growth
Asset Optimisation – Oils targeting synergies and growth • Optimise Oils business and build on our leading Australian presence • Target incremental underlying EBITDA → ~$25M by end FY16 with capex of ~$115M • Integration plan developed and synergies identified • $7M(1) in cost and procurement synerg
Slide 37: Asset Optimisation – Port terminal volume growth and network efficiencies
Asset Optimisation – Port terminal volume growth and network efficiencies • Currently handle ~3mmt of non-grain commodities across our unique port terminal portfolio(1) • Increase non-grain volumes at port terminals and pursue efficiency gains • Target incremental underlying EBITDA → ~$20M by end FY
Slide 38: Port Flexibility – port terminal flexibility and planning for bulk grain exports
Port Flexibility – port terminal flexibility and planning for bulk grain exports • Move towards Long Term Agreement (“LTA”) and Industry Code structures for access to bulk grain port terminal capacity will allow greater flexibility • Target incremental underlying EBITDA → ~$20M with minimal capex re
Slide 39: Earnings growth initiatives targeting ~$110M incremental underlying EBITDA by end FY16
Earnings growth initiatives targeting ~$110M incremental underlying EBITDA by end FY16 • Confident of delivery due to conservative assessment of progress to date, balance sheet strength, management track record in strategy execution and focused leadership team • Identified ~$250M(1) capex to deliver
Slide 40: Industry fundamentals support additional earnings growth
Industry fundamentals support additional earnings growth Growth in Australian grain supply to meet increased global demand Eastern Australian Grain Production Growth(1) • Australia is well positioned to double Million t/Ha agricultural exports by 2050(2) 26 Production - mmt (LHS) 2.4 24 Area - 25 ye
Slide 41: GrainCorp is Australia's leading agribusiness
GrainCorp is Australia’s leading agribusiness Integrated Business Model with an international “end-to-end” grain supply chain connecting consumers to growers Unique portfolio of local storage and logistics assets and local and international downstream processing assets linked by a global Mar
Slide 42: Appendices
2012 Results Release and Strategy Update Appendices
Slide 43: Appendix 1 – Significant Items reconciliation
Appendix 1 – Significant Items reconciliation Net $M Segment EBITDA D&A Tax NPAT Details Interest Underlying 414 (31) (91) (87) 205 Defined benefit Malt 17 - - (5) 12 Defined benefit plan adjustment reflects the re- curtailment measurement of the liability recognised in relation to the Australian To
Slide 44: Appendix 2 – Storage & Logistics throughput volumes
Appendix 2 – Storage & Logistics throughput volumes Volume driver (mmt) FY12 FY11 Comments Grain carry-in (1-Oct) 6.0 2.6 • High FY12 carry-in due to large FY11 crop Country network receivals 12.2 14.9 • 59% country receivals share of production(1) • Lower receivals versus prior year but higher vers
Slide 45: Appendix 3 – Storage & Logistics handling volumes
Appendix 3 – Storage & Logistics handling volumes Country Receivals and Carry-in - mmt Exports(1) Handled - mmt 24 15 Country Receivals Carry-in Grain Non-grain 20 12 1.8 16 2.6 6.0 9 1.5 12 3.3 2.2 2.9 6 1.4 1.3 8 10.6 14.9 1.2 12.2 1.4 8.1 10.8 9.6 4 4.9 3 5.3 5.2 7.4 2.1 5.8 1.5 3.5 2.3 1.0 1.0 m
Slide 46: Appendix 4 – Capital structure
Appendix 4 – Capital structure pro-forma post Oils acquisition • FY12 pro forma Core Debt(1) of $320M following completion of $472M Oils acquisition and pro-rata renounceable entitlement offer 1. FY12 2. Oils 3. Retail Pro 1. Cash balance at 30 Sep $M Actual Acquisition Offer Forma 2012 includes $10
Slide 47: Appendix 5 – Working capital
Appendix 5 – Working capital • Net working capital(1) $95M higher at FY12 compared to FY11 due to high Malt segment inventories and Marketing segment margin deposit receivables FY11-12 Net Working Capital - $M(1) $M FY11 FY12 Malt inventories 201 236 165 214 Inventories Marketing margin deposits 11
Slide 48: Appendix 6 – Growth capex supporting strategy
Appendix 6 – Growth capex supporting strategy • Business investment to drive growth through site and facility developments, upgrades and efficiency gains, new systems and platforms to facilitate growth • FY12 includes ~$20M applicable to pursuit of Gamechangers(1) • FY11 includes final year of Pinke
Slide 49: Appendix 7 – integrated and international end-to-end supply chain
Appendix 7 – integrated and international “end-to-end” supply chain • Our three integrated grain activities create value in our core grains by leveraging our: – Strategic supply chain storage and port infrastructure assets – Local and international soft commodity market insights – Grain processing e
Slide 50: Appendix 8 – year average EBITDA
Appendix 8 – 4 year average EBITDA 4-year $M FY09 FY10 FY11 FY12 Average Receivals (mmt) 9.6 7.4 14.9 12.2 11.0 Throughput (mmt) 16.9 13.9 24.1 28.5 20.9 Storage & Logistics 169 85 195 250 Marketing(1) 39 32 70 63 Malt(2) 133 119 99 117 Allied Mills (60% NPAT share) 10 9 9 10 Corporate(3) (37) (33)
Slide 51: Appendix 9 – Recap of Gamechangers
Appendix 9 – Recap of Gamechangers • Initially announced on 24 May 2012 as part of 2012 Investor Day presentation Strengthen our grain Grow our grain Create and capture handling network Marketing business additional Malt value 1 5 Enhance 7 Drive supply chain efficiency customer-focused growth Optim
Slide 52: Disclaimer
Disclaimer This presentation includes both information that is historical in character and information that consists of forward looking statements. Forward looking statements are not based on historical facts, but are based on current expectations of future results or events. The forward looking sta