Oceana Group Limited · JSE:OCE
Oceana — FY2016 Earnings Presentation
70 slides from Oceana's earnings presentation, 2016
Slide 1: Investor Presentation
Oceana Group Limited Investor Presentation Year ending 30 September 2016
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 foll
Slide 3: Agenda
AGENDA GROUP FINANCIAL OPERATIONAL OUTLOOK & OVERVIEW REVIEW OVERVIEW GUIDANCE
Slide 4: Core Purpose and Key Value Proposition
CORE PURPOSE AND KEY VALUE PROPOSITION OUR KEY VALUE PROPOSITION Our ability to convert fishing resources into value is greatly facilitated by being a large player in the sector. The diversity of operations OUR CORE PURPOSE and activities within a larger group ensures is to be Africa’s most greater
Slide 5: Oceana Group Key Stats
OCEANA GROUP KEY STATS • Established 1918 • Largest black owned and controlled fishing company in Africa • Market cap over $1billion • 5,690 employees • Land approximately 520,000 tons of fish annually, in South Africa, Namibia, Angola and the USA • Produce approximately 279,000 tons of fish and fis
Slide 6: Group Overview
GROUP OVERVIEW 9 4 9 3 5 steel refrigerated steel refrigerated vessels, wholly owned, canneries fishmeal plants seawater vessels in seawater vessels co-owned or joint South Africa in Namibia ventures 1 11 12 production facility fishing vessels spotter planes 1 2 5 1 2 horse mackerel horse mackerel h
Slide 7: BEE Journey
BEE JOURNEY TOP EMPOWERMENT COMPANY RANKING 70 59 54 4 8 15 32 17 4 2 1 1 2 0 10 20 30 40 50 60 70 80 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Level 4 Level 3 Final Level 4 Level 4 Level 2 Level 2 Level 2 Level 2 Level 2 Level 1 stringent INDEPENDENT B-BBEE AUDIT RESULTS B-BB
Slide 8: 2016 Performance: Tailwinds
2016 PERFORMANCE TAILWINDS • Improved landings o Gulf menhaden o SA anchovy and redeye o Hake o SA Horse Mackerel • Canned fish volumes • Exchange rate • Frozen fish procurement strategy • CCS occupancies
Slide 9: 2016 Performance: Headwinds
2016 PERFORMANCE HEADWINDS • Import cost of canned fish • Namibia HM contracted quota • HM $ price
Slide 10: Agenda
AGENDA GROUP FINANCIAL OPERATIONAL OUTLOOK & OVERVIEW REVIEW OVERVIEW GUIDANCE
Slide 11: Income Statement - Group
INCOME STATEMENT - GROUP SEP SEP R'000 2016 Var 2015 Revenue 8,243,988 34% 6,168,777 Gross profit 3,192,974 37% 2,335,781 GP margin 39% 38% Operating profit before share based payments 1,715,032 56% 1,098,341 Share-based payments (85,540) -6% (91,086) Operating profit before other operating items 1,
Slide 12: Income Statement - Africa Operations
INCOME STATEMENT - AFRICA OPERATIONS SEP SEP R'000 2016 Var 2015 Revenue 6,313,065 13% 5,594,450 Gross profit 2,134,672 2% 2,088,513 GP margin 34% 37% Operating profit before share based payments 1,046,879 14% 916,845 Share-based payments (85,540) -4% (89,202) Operating profit before other operating
Slide 13: Income Statement - Daybrook
INCOME STATEMENT - DAYBROOK SEP SEP SEP SEP 2016 2015 2016 2015 $'000 Var $'000 R'000 Var R'000 Revenue 130 349 201% 43 330 1 930 923 236% 574 328 Gross profit 59 010 216% 18 669 872 621 253% 247 268 GP margin 45% 43% 45% 43% Operating profit before share based payments 45 361 219% 14 215 668 152 26
Slide 14: Revenue Movement
REVENUE MOVEMENT 9,000 8,000 197 23 43 365 1,357 7,000 867 6,000 5,000 Decrease 4,000 8,244 Increase R’m 6 887 3,000 6,169 2,000 1,000 0 September Canned fish Horse Lobster, Commercial Discontinued Africa Fishmeal and September 2015 and fishmeal mackerel and squid, french cold storage non-core Busin
Slide 15: Revenue by Sector & Geography
REVENUE BY SECTOR & GEOGRAPHY REVENUE BY SECTOR REVENUE BY GEOGRAPHY 5% 2% 2% 12% 3% 7% 9% 2% 15% 6% 19% 15% 12% 47% 53% 58% 61% 10% 13% 24% 14% 11% Canned fish and fishmeal (Africa) Fishmeal and fish oil (USA) South Africa Rest of Africa Horse mackerel and hake Lobster and squid UK and Europe North
Slide 16: Operating Profit Movement
OPERATING PROFIT MOVEMENT 1,800 1,600 1,400 489 18 25 8 1,200 58 76 1,000 Decrease R’m 800 1,629 Increase 600 1,141 1,007 400 200 0 September Canned fish Horse Lobster, squid, Commercial Discontinued Africa Fishmeal and September 2015 and fishmeal mackerel and french fries cold storage non-core Busi
Slide 17: Operating Profit Margin
OPERATING PROFIT MARGIN 12% Canned fish and fishmeal (Africa) 13% 35% Fishmeal and fish oil (USA) 31% 22% Horse mackerel and hake 16% 2016 2015 8% Lobster, squid, french fries 11% 30% Commercial cold storage 26% 0% 5% 10% 15% 20% 25% 30% 35% 40%
Slide 18: Forex Revenue & Cost Splits
FOREX REVENUE & COST SPLITS REVENUE COSTS 33% 32% 42% 43% 48% 53% 67% 68% 58% 57% 52% 47% 2014 2015 2016 2014 2015 2016 ZAR Other currencies ZAR Other currencies
Slide 19: Dividends per Share
DIVIDENDS PER SHARE 704 588 549 488 456 469 377 365 322 301 2012 2013 2014 2015 2016 HEPS DPS 1.5 times dividend cover 1.6 times dividend cover
Slide 20: Revenue & Earnings - 5 Year Analysis
REVENUE & EARNINGS - 5 YEAR ANALYSIS 8,244 GROUP REVENUE (ZARm) 6,169 5,039 4,702 4,648 56% CAGR 15.4% 58% 48% 47% 54% 53% 44% 46% 52% 42% 2012 2013 2014 2015 2016 First half Second half 703 588 HEPS (cents) 565 488 456 67% 55% 63% CAGR 11.5% 51% 63% 49% 45% 37% 33% 37% 2012 2013 2014 2015 2016 Firs
Slide 21: Balance Sheet (Key Items)
BALANCE SHEET (KEY ITEMS) SEP SEP R'000 2016 2015 Property, plant and equipment 1,669,373 1,678,406 Intangible assets 4,605,275 4,609,802 Cash and cash equivalents 1,312,942 1,181,273 SA 578,143 394,404 USA 734,799 786,869 Other non-current assets 461,038 535,839 Other current assets 3,058,173 2,808
Slide 22: Net Debt & Working Capital
NET DEBT & WORKING CAPITAL LEVERAGE POSITION WORKING CAPITAL CYCLE 4,000,000.00 3.50 100 90 3,500,000.00 3.00 80 3,000,000.00 2.89 2.50 70 2,500,000.00 60 2.00 1.72 50 2,000,000.00 1.50 89 85 1,500,000.00 40 81 1.00 30 1,000,000.00 20 45 37 33 39 35 39 500,000.00 0.50 10 - - 0 2015 2016 2014 2015 20
Slide 23: Cash Flow
CASH FLOW 3,500 95 86 3,000 337 2,500 R’m 708 2,000 1,727 Utilised Generated 492 48 1,500 1,000 1,313 1,181 500 0 September Cash Working Investment Interest paid Taxation paid Dividends Other cash September 2015 generated capital income paid effects 2016 from changes received operations
Slide 24: Agenda
AGENDA GROUP FINANCIAL OPERATIONAL OUTLOOK & OVERVIEW REVIEW OVERVIEW GUIDANCE
Slide 25: Canned Fish
Canned Fish ss | OCEANA/GROUP
Slide 26: Canned Fish Performance
CANNED FISH PERFORMANCE • Price increase o March 2016 - 6% • Pricing competitive against other proteins • Volumes up 13% to over 9 million cartons o South Africa 15% growth o BLNS 17% growth o ROA and International 24% decline • Market share remains entrenched
Slide 27: Trended CPI
TRENDED CPI 12.0% CPI Food 10.0% 8.0% 6.0% Lucky Star Pilchards 4.0% CPI Headline 2.0% 0.0% Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 -2.0% CPI Headline CPI Food Lucky Star Pilchards
Slide 28: Canned Fish Volumes – South Africa
CANNED FISH VOLUMES – SOUTH AFRICA 1,600,000 10,000,000 9,000,000 1,400,000 8,000,000 1,200,000 7,000,000 1,000,000 6,000,000 Cartons 800,000 5,000,000 4,000,000 600,000 3,000,000 400,000 2,000,000 200,000 1,000,000 0 - Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 2016 Monthly 2015 Monthly 2016 C
Slide 29: Canned Fish Volumes – Rest of Africa
CANNED FISH VOLUMES – REST OF AFRICA 900,000 800,000 200,000 700,000 +15% 272,000 -24% 237,000 600,000 Cartons 500,000 ROA BLNS 400,000 +3% +17% 300,000 631,000 526,000 539,000 200,000 100,000 - 2014 2015 2016
Slide 30: Canned Fish Performance
CANNED FISH PERFORMANCE TOP-END MARKETS: PILCHARD CATEGORY SALES CONTRIBUTION BY REGION 18% 37% 17% 9% 9% 10%
Slide 31: Canned Fish Supply
CANNED FISH SUPPLY • Local fresh fish supply impacted by reduction in TAC to 65,000 tons • Exchange rate negatively impacted cost of imported product • Shortfall therefore supplemented by increased local production from frozen fish imports
Slide 32: Cartons Produced / Purchased
CARTONS PRODUCED / PURCHASED 100% 90% 31% 80% 39% 43% 70% 5% -5% 60% 5% procured internationally -5% 4% 50% 11% -4% procured SA -11% 15% own frozen -15% -43% 43% 40% own fresh 30% 20% 45% -39% 37% -43% 10% -1% 22% 0% 2014 2015 2016
Slide 33: Canned Fish Production
CANNED FISH PRODUCTION • Amawandle (Foodcorp) canning facility upgraded • Spare capacity in SHB and Namibia utilised • Increase in imported frozen fish to just over 45,000 tons (2015: 15,000 tons) • Significant increase in labour hours
Slide 34: Labour Hours by Site
LABOUR HOURS BY SITE 3,500,000 3,000,000 36% 2,500,000 4% 2,000,000 73% Laaiplek - 8% 7% Hout Bay 1,500,000 St Helena Bay 1,000,000 60% 92% 73% 500,000 - 2014 2015 2016
Slide 35: SA Fishmeal & Oil
SA Fishmeal & Oil CE SSC CS LG oon hs OCEANA/GROUP
Slide 36: SA Fishmeal & Oil Review
SA FISHMEAL & OIL REVIEW • SA landings of anchovy and redeye increased by 20% • 13,000 tons landed in Angola • Pricing affected by Peruvian landings • Offset by favourable exchange rate
Slide 37: Daily Landings
DAILY LANDINGS 160,000 148 523 140,000 127 152 120,000 125 642 100,000 80,000 60,000 40,000 20,000 - Oct '15 - Mar '16 April May June July Aug Sept 2014 2015 2016
Slide 38: Fishmeal & Fish Oil Pricing Comparison
US $ / ton 1 000 1 200 1 400 1 600 1 800 2 000 2 200 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 FISHMEAL & FISH OIL PRICING COMPARISON
Slide 39: Review of Foodcorp Pelagic Assets
REVIEW OF FOODCORP PELAGIC ASSETS • Amawandle Pelagic – Oceana 75%, Ulwandle fishing 25% • Utilisation of facilities has increased 216% • Crew contracts converted to permanent • No. of employees increased by 38% • Labour hours increased by 156% • Average salary per employee increased by 153%
Slide 40: Daybrook
OCEANA LonsraR Prrsws sHiNG OCEANA/GROUP
Slide 41: Daybrook Performance
DAYBROOK PERFORMANCE • Landings 5% up on prior season • Meal yield consistent, oil yield above 13% (2015: 10%) • Sales volumes increase in line with landings • Closing stock levels marginally up on prior period, value improved • Pricing largely consistent over the period
Slide 42: Daybrook Catch Comparison
DAYBROOK CATCH COMPARISON 800,000 700,000 600,000 2016 500,000 2015 000 Standard Fish 10 year avg 400,000 300,000 200,000 100,000 - 1 6 11 16 21 26 Weeks
Slide 43: Fishmeal & Fish Oil Price Comparison
Price M/T - 500 1,000 1,500 2,000 2,500 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Fishmeal Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Fishoil Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 FISHMEAL & FISH OIL PRICE COMPARISON Sep-16 Oct-16
Slide 44: Inventory - September
INVENTORY - SEPTEMBER 35,000 30,000 6,749 9,592 25,000 Metric tons 20,000 Fish oil 15,000 Fishmeal 24,620 22,814 10,000 5,000 - 2015 2016
Slide 45: Daybrook Investment Review
DAYBROOK INVESTMENT REVIEW • Landings in first two seasons improved on 10 year average • Pricing impacted by Peruvian landings but global supply and demand dynamics still reflect long term assumptions • EBITDA investment case $45m, actual 2016 $49,6m • Good operating margins and highly cash generati
Slide 46: Horse Mackerel & Hake
Horse Mackerel & Hake OCEANA LonsraR (CALAMARI FISHING OCEANA/GROUP
Slide 47: Horse Mackerel – South Africa
HORSE MACKEREL – SOUTH AFRICA • Landings materially improved in H2 • Trend positive in relation to 10 year history (excluding 2014, 2015) • Pricing marginally up on prior year • Loss in H1 has largely been recouped in H2 • FRAP provisional allocations announced, errors being addressed
Slide 48: Horse Mackerel: Desert Diamond Landings
HORSE MACKEREL DESERT DIAMOND LANDINGS H2 (APRIL TO SEPTEMBER) Metric tons 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 H2
Slide 49: Horse Mackerel – Namibia
HORSE MACKEREL – NAMIBIA • TAC decreased by 4% to 335,000 tons • Capacity reduced in October 2015 • Adopted more measured approach to purchased quota • Catch rates consistent with prior period • Pricing softer but offset by favourable exchange rate • Margin materially improved
Slide 50: Horse Mackerel – Namibia Quota
HORSE MACKEREL – NAMIBIA QUOTA AND QUOTA USAGE FEE PRICE 90,000 20% 19% 80,000 18% 16% 16% 70,000 14% 60,000 12% Contracted quota Tons 50,000 Own quota 10% 40,000 Quota usage fees 8% price increase 30,000 6% 20,000 4% 10,000 2% 0% - 0% 2014 2015 2016
Slide 51: Horse Mackerel - Namibia Prices
1,000 1,100 1,200 400 500 600 700 800 900 Sep-14 775 640 850 1,070 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 20+ Apr-15 May-15 Jun-15 Jul-15 18+ Aug-15 Sep-15 Oct-15 Nov-15 16+ HORSE MACKEREL - NAMIBIA Dec-15 Jan-16 Feb-16 Mar-16 16m Apr-16 HORSE MACKEREL AVERAGE EX HATCH PRICES (US$ PER TON) May-16
Slide 52: Hake
OCEANA LonsraR Prive sHiNG vAveRook ce A our
Slide 53: Hake TAC
HAKE TAC • TAC unchanged 123,020 tons • Catch rates improved but offset by smaller size mix • Pricing in local and export markets higher in real terms Z • Bolstered by favourable exchange rate • Operating efficiencies have improved margin • Substantial improvement in operating profit
Slide 54: Hake Quota, Vessels & Catch Rate
HAKE QUOTA, VESSELS & CATCH RATE 18,000 10% 16,000 8% 14,000 6% 4% 12,000 4% 10,000 Contracted quota 2% 8,000 Own and JV quota 0% Average catch rate 6,000 0% -2% 4,000 -4% 2,000 -4% 0 -6% 2014 2015 2016 4 vessels 7 vessels 6 vessels
Slide 55: Lobster Squid
Lobster Squid
Slide 56: Lobster & Squid Review
LOBSTER & SQUID REVIEW LOBSTER • Fishing under exemption 2016/2017 season • Lower industry landings • Performance bolstered by exchanged rate and pricing but overall profit reduced SQUID • Good volumes landed • Euro pricing improved • Favourable exchange rate
Slide 57: CCS
ce A our
Slide 58: CCS Performance
CCS PERFORMANCE • Occupancies improved • 24% increase in number of pallets handled • Healthy demand – dairy and poultry • Transport division growing • Sold non-core fruit division • Good growth in operating profit, margins impacted by leased operations
Slide 59: Occupancy & Pallets
OCCUPANCY & PALLETS 140,000 96% 120,000 94% 100,000 92% 80,000 90% Number of pallet spaces 60,000 88% Occupancy 40,000 86% 20,000 84% - 82% 2014 2015 2016
Slide 60: Product Handled per Category
PRODUCT HANDLED PER CATEGORY 100% 6% 9% 7% 3% 90% 3% 7% 10% 7% 2% 4% 80% 9% 11% 5% 70% 6% Other 10% 60% Dairy 27% 28% Pallets handled Fruit 50% 23% Vegetables 40% Meat Poultry 30% Fish 45% 20% 41% 37% 10% 0% 2014 2015 2016
Slide 61: Agenda
AGENDA GROUP FINANCIAL OPERATIONAL OUTLOOK & OVERVIEW REVIEW OVERVIEW GUIDANCE
Slide 62: Outlook: Canned Fish
OUTLOOK CANNED FISH • Shortfall in TAC will be supplemented by frozen fish raw material imports • Still maintain good relationships with Thai canneries • October PI 6% • Pricing remains favourable against other proteins • Continued strong customer base in SA • Africa markets developing • Expanded pr
Slide 63: Outlook: Fish Meal and Fish Oil - Africa
OUTLOOK FISH MEAL AND FISH OIL - AFRICA • Improved opening inventory in SA • Angola o Fishing season commenced October – landings positive o Volumes intended to fill H1 gap in fishmeal sales in SA • Short term pricing impacted by Peruvian landings • Long term supply/demand dynamics remain intact • F
Slide 64: Historic Fishmeal Price
US$/t 1,000 1,500 2,000 2,500 3,000 0 500 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 HISTORIC FISHMEAL PRICE Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Source: www.indexmundi.com Apr-15 Oct-15 Apr-16 Oct-16
Slide 65: Outlook: Daybrook
OUTLOOK DAYBROOK • Resource assessment healthy • Continue seeking efficiencies – most notably on production elements o Address plant spare capacity o Improve production flows/processes for oil • Logistics/transport efficiencies – capex $2m
Slide 66: Daybrook Resource Assessment
- 1,000 2,000 3,000 4,000 5,000 6,000 1977 1978 1979 1980 1981 1982 1983 1984 Age 0 1985 1986 1987 1988 Age 1 1989 1990 1991 1992 Age 2 1993 1994 1995 Age 3 1996 1997 1998 1999 Age 4 2000 2001 2002 2003 2004 2005 2006 DAYBROOK RESOURCE ASSESSMENT 2007 2008 2009 2010 2011 Source: NOAA Fisheries GDAR
Slide 67: Outlook: Horse Mackerel and Hake
OUTLOOK HORSE MACKEREL • SA landings showing promising signs although still inconsistent • Namibia catch rates expected to continue, size mix is a concern • Cost of purchased quota expected to become more commercially viable • FRAP 2016 – provisional allocations announced, inconsistencies identified
Slide 68: Outlook: Lobster & Squid, CCS, Group
OUTLOOK LOBSTER & SQUID • Lobster rights allocations expected once TAC is determined • State of resource is a concern, red listing probable • Squid catch rates expected to improve • US $ and Euro pricing positive CCS • Strong base in South Africa continue to extract efficiencies • Exploring viable A
Slide 69: Guidance
GUIDANCE • Expect to replicate operating performance in SA and USA • Landings crucial to performance • Exchange rate impact • H1/H2 expected to mirror 2016
Slide 70: Questions
Questions