Astral Foods Limited · JSE:ARL
Astral Foods — H1 2018 Earnings Presentation
69 slides from Astral Foods's earnings presentation, May 2018
Slide 1: Interim Results Presentation
INTERIM RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 31 MARCH 2018
Slide 2: Agenda
AGENDA Business Overview – Page 3 / Slide 3 Industry Trends – Page 11 / Slide 20 The Period in Perspective – Page 15 / Slide 28 Financial Overview – Page 16 / Slide 30 Industry Matters – Page 22 / Slide 41 Outlook – Page 23 / Slide 43 Additional Information – Page 25 / Slide 47 2
Slide 3: Business Overview
BUSINESS OVERVIEW RAW, KEEP REFRIGERATED BELOW 4°C / Astral Operations LTD, 92 Koranna Avenue, Doringkloof, 0157, South Africa ra than just feed Tel: 0860 102 485, www.astralpoultry.com | PRODUCT OF SOUTH AFRICA ~\ ASTRAL
Slide 4: Business Overview
BUSINESS OVERVIEW Results for the six months ended March 2018 are a significant improvement on the prior comparable period, which was one of the lowest reported profits in history Feed input costs reduced significantly due to lower maize prices on the back of a bumper maize crop for 2017 Suppl
Slide 5: Key Financial Indicators
BUSINESS OVERVIEW Revenue 15% Profit before interest and tax Key 393% Financial Indicators Earnings per share @ 1 973 cps 460% Headline earnings per share 455% 5
Slide 6: Business Overview: Poultry, Feed, Other Africa
BUSINESS OVERVIEW Poultry Feed Feeding cost decreased Maize price significantly down Bird performance improvement General market improvement Sales volumes up (3 contributors) Higher internal feed required Average sales realisations up Sales volumes up No impact from HPAI (bird flu)
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Slide 8: Poultry Division - Overview
POULTRY DIVISION - OVERVIEW Revenue - R million Operating profit - R million 6 000 900 800 836 5 000 5 481 700 4 000 4 456 600 500 3 000 400 2 000 300 200 1 000 100 22 - - 1H2017 1H2018 1H2017 1H2018 Revenue up 23% Operating profit up • Broiler sales volumes up 12.6% • Feed price down 11.2% • Br
Slide 9: Poultry Division - Overview
POULTRY DIVISION - OVERVIEW Broiler feed prices decreased by 11.2%, after significantly lower raw material costs offset the implementation of a further enhanced feeding programme Improved broiler production efficiencies with a better feed conversion achieved on a new feeding programme resulting
Slide 10: Poultry Division - Product Mix
POULTRY DIVISION - OVERVIEW Product Mix 23% 23% 1H2017 47% 1H2018 7% 204 887 Tons 7% 230 710 Tons 51% Volume increase ≈ 12.6% 14% 14% 5% 4% 3% 2% 10
Slide 11: Broiler Production Performance
BROILER PRODUCTION PERFORMANCE 108% 106% 104% 102% 100% 98% 96% Key indicators base-lined to 100% in F2012 94% F2012 F2013 F2014 F2015 F2016 F2017 1H2018 Average daily gain Slaughter age Live weight 11
Slide 12: Broiler Production Performance
BROILER PRODUCTION PERFORMANCE 140% 135% 130% 125% 120% 115% 110% 105% 100% 95% 90% Key indicators base-lined to 100% in F2012 85% F2012 F2013 F2014 F2015 F2016 F2017 1H2018 Broiler feed price index Feed conversion efficiency index Feeding cost index Source: Own Data 12
Slide 13: Broiler Production Performance
BROILER PRODUCTION PERFORMANCE 125% 120% 115% 110% 105% 100% 95% 90% 85% 80% Key indicators base-lined to 100% in F2012 75% F2012 F2013 F2014 F2015 F2016 F2017 1H2018 Mortality Feed conversion efficiency Efficiency factor (PEF) 13
Slide 14: Feed Division
Astral Astral_is aleading Southern African integrated poultry producer FEED DIVISION
Slide 15: Feed Division - Overview
FEED DIVISION - OVERVIEW Revenue - R million Operating profit - R million 4 000 200 192 184 3 448 3 000 3 097 2 000 100 1 000 - - 1H2017 1H2018 1H2017 1H2018 Revenue down 10.2% Operating profit up 3.8% • Raw material costs down • Net margin 6.2% 1H2017: 5.3% • Average selling prices down 16.3% •
Slide 16: Feed Division - Overview
FEED DIVISION - OVERVIEW SAFEX yellow maize prices decreased significantly for the period under review 1H2018 avg. R1 981 per ton (1H2017: R2 973) down R992 per ton year-on-year Feed volumes increased due to both higher internal feed requirements and higher external feed sales Internal feed sa
Slide 17: Feed Division - Sales
FEED DIVISION - SALES Meadow Feeds - Sales Mix 13% 13% 1H2017 21% 1H2018 21% 656 169 Tons 703 827 Tons Volume increase ≈ 7.3% 59% 59% 7% 7% 17
Slide 18: Other Africa Division
OTHER AFRICA DIVISION
Slide 19: Other Africa Division - Overview
OTHER AFRICA DIVISION - OVERVIEW Revenue - R million Operating profit - R million 250 20 200 216 17 15 185 150 10 100 5 50 5 - - 1H2017 1H2018 1H2017 1H2018 Revenue down 14.4% Operating profit up • Raw material costs down • Net margin 9.1% 1H2017: 2.4% • Average selling prices down 9.6% • All co
Slide 20: Industry Trends
INDUSTRY TRENDS RAW, KEEP REFRIGERATED BELOW 4°C / Astral Operations LTD, 92 Koranna Avenue, Doringkloof, 0157, South Africa ra than just feed Tel: 0860 102 485, www.astralpoultry.com | PRODUCT OF SOUTH AFRICA ~\ ASTRAL
Slide 21: SAFEX Yellow Maize Price
SAFEX YELLOW MAIZE PRICE Source: CJA Strategic Risk Brokers 21
Slide 22: SAFEX Yellow Maize Price vs. CBOT in Rand Terms
SAFEX YELLOW MAIZE PRICE vs. CBOT IN RAND TERMS Source: CJA Strategic Risk Brokers 22
Slide 23: Durban Soya Meal Price
DURBAN SOYA MEAL PRICE Source: CJA Strategic Risk Brokers 23
Slide 24: Poultry Imports per Month
- 5 000 15 000 70 000 10 000 20 000 25 000 30 000 35 000 40 000 45 000 50 000 55 000 60 000 65 000 Source: SAPA Oct-11 Tons Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Total poultry imports Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15
Slide 25: Broiler Selling Prices
80% 90% 100% 110% 120% 140% 150% 170% 180% 130% 160% Oct-11 Dec-11 Source: Own Data Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Broiler selling price index Oct-14 BROILER SELLING PRICES Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-
Slide 26: Broiler Price vs. Food Price Inflation
BROILER PRICE vs. FOOD PRICE INFLATION 180% 180% 170% IQF cost 170% recovery on 160% 160% new legislated 150% brine levels 150% 140% 140% 130% 130% 120% 120% 110% 110% 100% 100% 90% 90% 80% 80% 70% 70% Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 Oct-17 Feb-12 Jun-12 Feb-13 Jun-13 Feb-14 Jun-14 Feb-15
Slide 27: Change in Broiler Price vs. Feed Price
10% 20% 30% 40% -30% -20% -10% 0% Oct-11 Dec-11 Source: Own Data Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 % Change in feed price Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 CHANGE IN BROILE
Slide 28: The Period in Perspective
THE PERIOD IN PERSPECTIVE RAW, KEEP REFRIGERATED BELOW 4°C / Astral Operations LTD, 92 Koranna Avenue, Doringkloof, 0157, South Africa ra than just feed Tel: 0860 102 485, www.astralpoultry.com | PRODUCT OF SOUTH AFRICA ~\ ASTRAL
Slide 29: Operating Profit (PBIT) Reconciliation
THE PERIOD IN PERSPECTIVE Operating profit (PBIT) reconciliation (R million) 1 400 443 -176 1 200 -138 1 000 52 1 044 800 554 600 400 97 200 212 - Other Broiler Prices Incentive Volumes PBIT 1H2017 Feeding Cost PBIT 1H2018 Processing Bonuses Broiler Cost 29
Slide 30: Financial Overview
FINANCIAL OVERVIEW RAW, KEEP REFRIGERATED BELOW 4°C / Astral Operations LTD, 92 Koranna Avenue, Doringkloof, 0157, South Africa ra than just feed Tel: 0860 102 485, www.astralpoultry.com | PRODUCT OF SOUTH AFRICA ~\ ASTRAL
Slide 31: Income Statement
INCOME STATEMENT 2018 2017 % change Six months ended 31 March R million R million Revenue 6 666 5 795 15% Operating profit (PBIT) 1 044 212 393% Operating profit margin 15.7% 3.7% Net finance income / (costs) 22 (16) Profit before tax 1 066 196 444% Tax (300) (60) Profit for the period 766 136 463%
Slide 32: Group Six Monthly Revenue and Profitability
GROUP SIX MONTHLY REVENUE AND PROFITABILITY 2000 6 666 (R million) 6 556 1800 6000 6 131 5 755 5 823 5 795 15.7% 1600 5 511 5000 13.2% 1400 4 902 4 700 4000 4 219 4 290 1200 4 039 4 122 1000 1 044 3000 866 800 600 2000 550 551 400 429 1000 324 3.7% 280 200 208 213 212 153 59 120 0 0 1H12 2H12 1H13 2
Slide 33: Feed Six Monthly Revenue
FEED SIX MONTHLY REVENUE 4500 1,8 (R million) 4000 1,6 1,4 3500 1,2 3000 1,0 2500 0,8 3 729 3 461 3 448 3 405 3 275 0,6 2000 3 096 2 956 2 961 2 519 2 550 0,4 2 397 2 175 2 152 1500 0,2 1000 0,0 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17 1H18 Revenue Change in volumes Change in feed
Slide 34: Poultry Six Monthly Revenue
POULTRY SIX MONTHLY REVENUE 6000 2,0 5500 (R million) 1,8 5000 1,6 4500 1,4 4000 1,2 3500 1,0 5 394 5 480 3000 0,8 4 693 4 503 4 436 4 456 4 237 2500 0,6 3 650 3 317 2000 2 956 2 952 3 049 0,4 2 878 1500 0,2 1000 0,0 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17 1H18 Revenue Change in
Slide 35: Group Six Monthly Operating Profit (PBIT)
GROUP SIX MONTHLY OPERATING PROFIT (PBIT) 1,9 1880 (R million) 1,4 1380 1 044 867 880 191 0,9 550 551 207 429 324 186 836 380 280 237 0,4 203 213 212 608 153 59 233 154 120 351 310 157 197 194 140 135 156 173 252 184 45 59 -3 -117 5 -135 22 -120 -0,1 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16
Slide 36: Balance Sheet
BALANCE SHEET March 2018 September 2017 % change R million R million Non-current assets 2 302 2 228 3% Net working capital 813 862 6% Current assets (excl. cash) 2 610 2 461 6% Current liabilities (excl. borrowings) (1 797) (1 599) 12% Non-current liabilities (excl. borrowings) (598) (610) 2% Net as
Slide 37: Working Capital
WORKING CAPITAL March 2018 September 2017 Variance R million R million R million Current assets 2 610 2 461 149 Biological assets 759 658 101 Inventory - Poultry 288 316 (28) - Feed 271 185 86 - Other Africa 35 50 (15) Trade receivables 1076 1049 27 Receivables – investment sold 16 56 (40) Other rec
Slide 38: Statement of Cash Flows
STATEMENT OF CASH FLOWS 2018 2017 For the six months ended 31 March R million R million Cash operating profit 1 102 282 Working capital movement (50) (39) 1 052 243 Tax paid (259) (50) Net interest received / (paid) 25 (14) Capital expenditure (136) (69) 682 110 Dividends paid (339) (39) Other cash
Slide 39: Capital Expenditure
CAPITAL EXPENDITURE 2018 2017 Six months ended 31 March R million R million Depreciation 78 73 Total amount capitalised to PPE 162 65 Net movement in advance / outstanding payments (26) 4 136 69 Commitments 144 Total spend and committed 280 39
Slide 40: In Summary
IN SUMMARY Improvement in profits in 1H2018 with a profit margin at 15.7% (1H2017: 3.7%) Cash positive throughout the period Net surplus cash at end March 2018 (R934 million) Astral is well positioned for investment in future growth Interim dividend of R10.00 per share (2x cover) within th
Slide 41: Industry Matters
INDUSTRY MATTERS RAW, KEEP REFRIGERATED BELOW 4°C / Astral Operations LTD, 92 Koranna Avenue, Doringkloof, 0157, South Africa ra than just feed Tel: 0860 102 485, www.astralpoultry.com | PRODUCT OF SOUTH AFRICA ~\ ASTRAL
Slide 42: Industry Matters
INDUSTRY MATTERS Poultry imports – Page 32 / Slide 62 Highly Pathogenic Avian Influenza (HPAI) – Page 33 / Slide 63 Listeriosis– Page 34 / Slide 65 42
Slide 43: Outlook
N } a \ , Sealed in freshness —s Fresh for longer ~ ‘ i, = ) : vA xp RQ OUTLOOK 100% South African “ae X . \ < RAW, KEEP REFRIGERATED BELOW 4°C F R ES IF C H | Cc K [E N Astral Operations LTD, 92 Koranna Avenue, Doringkloof, 0157, South Africa More than just feed Tel: 0860 102 485, www.astralpoultry
Slide 44: Investment in Future Growth
INVESTMENT IN FUTURE GROWTH Capital projects amounting to R1.3 billion over the next three years have been approved by the Astral board that support our stated strategy, as well as organic growth and efficiency improvement opportunities. Project Description Existing Capacity Added Capacity New sta
Slide 45: Outlook
OUTLOOK General business confidence improved as well as the prospect for foreign direct investment following the election of a new President for the country A bumper maize crop in 2017 and the country set to harvest an above average maize crop in 2018 will stand us in good stead over the next pe
Slide 46: Astral's strategy
“ Astral’s strategy is to be the best cost integrated poultry producer in selected African countries ”
Slide 47: Additional Information
ADDITIONAL INFORMATION RAW, KEEP REFRIGERATED BELOW 4°C / Astral Operations LTD, 92 Koranna Avenue, Doringkloof, 0157, South Africa ra than just feed Tel: 0860 102 485, www.astralpoultry.com | PRODUCT OF SOUTH AFRICA ~\ ASTRAL
Slide 48: What We Said in November 2017
WHAT WE SAID IN NOVEMBER 2017 The negative political landscape and policy uncertainty has contributed to a weak economic environment that could lead to a further downgrade by the credit rating agencies. Record unemployment levels and lower levels of disposable income are unlikely to improve due to
Slide 49: World Corn Ending Stocks vs. STU
WORLD CORN ENDING STOCKS vs. STU Million Tons 250 24% 228 222 23% 225 215 22% 200 191 186 21% 19,85% 175 167 19,37% 18,99% 20% 150 19% 132 125 18% 125 17% 15,51% 100 15,40% 16% 15,23% 75 15% 13,58% 14% 50 12,6% 13% 25 12% 0 11% 2018E 2019F 2012 2013 2014 2015 2016 2017 End stock STU Source: CJA Stra
Slide 50: South Africa - Total Maize Supply & Demand
SOUTH AFRICA – TOTAL MAIZE SUPPLY & DEMAND Marketing year (May to April) 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18E 2018/19F '000 tons Actual Actual Actual Actual Actual Estimate Forecast Carry In (1 May) 991 1,414 589 2,074 2,471 1,093 3,969 Crop Estimate 12,121 11,811 14,250 9,955 7,779 16,8
Slide 51: RSA Maize Carry Out & Stock to Use Ratio
RSA MAIZE CARRY OUT & STOCK TO USE RATIO ‘000 Tons 30,29% 4 000 31% 3 500 26% 24,28% 21,75% 3 000 21% 2 500 16,62% 16% 2 000 12,23% 11% 1 500 9,87% 6% 1 000 4,96% 500 1% 0 -4% 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18E 2018/19F Carry out Maize stock to use ratio Source: CJA Strategic Risk Brok
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 - Vegetation Health Index
SOUTHERN AFRICA – VEGETATION 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 100% 6,2 6,1 6,4 6,7 7,3 7,8 8,6 0,3 0,4 0,3 0,3 0,4 0,5 0,5 90% 4,3 4,8 7,5 7,3 14,0 6,6 0,3 15,6 0,4 14,9 14,9 9,9 7,5 0,2 0,4 17,2 7,4 4,7 5,0 0,5 18,8 14,6 4,2 6,2 6,4 21,5 80% 9,1 6,9 4,7 0,4 6,8 6,2 5,4 7,1 10,3 10,3 0,5 6,0 0,9 9,1 6,1 7
Slide 55: Brazil, EU & USA Product Cost Benchmark
BRAZIL, EU & USA PRODUCT COST BENCHMARK Ex BRAZIL – May 2018 FROZEN LEG QUARTERS BULK PACKED CIF DBN US$ per ton TON 1 050.00 1 050.00 1 050.00 SA COST R/$ exchange rate R$ 12.00 12.50 13.00 Rand per ton TON 12 600.00 13 125.00 13 650.00 19 209.00 Rand per kg KG 12.60 13.13 13.65 19.21 Duty per kg K
Slide 56: Brazil, EU & USA Product Cost Benchmark
BRAZIL, EU & USA PRODUCT COST BENCHMARK EUROPE Ex Denmark with Safeguard Duty @ 0% – May 2018 (Safeguard Duty expired on 3 July 2017) FROZEN LEG QUARTERS BULK PACKED CIF DBN € per ton TON 1 250.00 1 250.00 1 250.00 SA COST R/€ exchange rate R$ 15.00 15.50 16.00 Rand per ton TON 18 750.00 19 375.00 2
Slide 57: Local Broiler Production & Market Share
LOCAL BROILER PRODUCTION & MARKET SHARE 22% 27% 4% 4% 20% 8% 7% 8% Astral RCL Country Bird Daybreak Sovereign Grainfields Chubby Chick Other Local broiler production ≈ 19.0 million birds per week Source: Own Estimates 57
Slide 58: Local Broiler Production & Market Share
LOCAL BROILER PRODUCTION & MARKET SHARE 19% 30% 14% 15% 6% 5% 3% 5% 3% Astral RCL Country Bird Daybreak Sovereign Grainfields Chubby Chick Other Imports Avg. poultry imports ≈ 8.3 million birds per week (6 months ending March 2018) Source: Own Estimates 58
Slide 59: Total Poultry Imports
TOTAL POULTRY IMPORTS (CHICKEN, TURKEY, MDM) Tons 600 000 500 000 400 000 300 000 200 000 100 000 F2015 F2016 F2017 F2018 0 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep F2015 42 363 81 170 108 674 137 660 168 965 209 337 247 672 285 532 327 180 375 717 417 427 460 255 F2016 37 789 83 258 126 866
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 - 2017 imports - March 2018 YTD Other 3,9% Other 3,8% US 15,6% US 19,5% Argentina 5,9% Brazil Brazil 60,6% 59,9% Argentina 7,3% EU 14,0% EU 9,5% 556 878 tons 140 279 tons Source: SAPA 60
Slide 61: Total Poultry Imports - Country of Origin
TOTAL POULTRY IMPORTS – COUNTRY OF ORIGIN Country Imports (tons) 2015 2016 2017 2018 YTD Brazil 241 180 233 787 337 476 84 038 Netherlands 61 995 110 344 112 105 United Kingdom 15 985 45 647 1 366 75 Spain 27 090 39 620 11 138 - United States 331 26 573 87 059 27 343 Belgium 35 613 24 256 23 451 23
Slide 62: Poultry Imports
POULTRY IMPORTS Provisional safeguard duties against the EU of 13.9% that were implemented during December 2016 at 13.9% expired on 3 July 2017 A decision on a permanent safeguard duty against the EU is still awaited following efforts made by an industry, DTI and DAFF work group to secure better
Slide 63: Highly Pathogenic Avian Influenza
HIGHLY PATHOGENIC AVIAN INFLUENZA South Africa reported its first case of H5N8 infection in domestic poultry in June 2017 in Mpumalanga From that date H5N8 has caused wide spread damage to the local poultry industry and in particular significantly affected commercial laying hens and broiler bree
Slide 64: Highly Pathogenic Avian Influenza
HIGHLY PATHOGENIC AVIAN INFLUENZA Vaccination / Compensation progress: Vaccine challenge studies underway as requested by DAFF Only one out of five vaccines tested so far (100% liveability) Virus shedding data awaited from this one trial Expected to be completed late autumn or early winter
Slide 65: Listeriosis
LISTERIOSIS World’s worst outbreak of Listeriosis with 1 019 cases reported from 1 January 2017 to 17 April 2018 with 199 deaths confirmed, representing 28.5% of incidents with known outcomes. Sovereign Foods Hartebeespoort operations shut down on 22 December 2017 for 3 days following the detect
Slide 66: Listeriosis
LISTERIOSIS Primary Impact on the Poultry Market - chicken products were incorrectly implicated on various occasions prior to the identification of the source. Health officials did little to address this misconception but the sales of chicken products remained largely unaffected prior to the minis
Slide 67: Listeriosis
LISTERIOSIS Impact on the Pork Industry the sale of pork products has been more heavily impacted than poultry by the identification of the source of the Listeriosis outbreak, due to the association of pork with processed meats in general and the Enterprise brand in particular. The resultant slow d
Slide 68: South African Protein Price Comparison
SOUTH AFRICAN PROTEIN PRICE COMPARISON Cents per kg 5000 4500 4000 3500 3000 2500 2000 1500 1000 Chicken Pork Beef Feed Conversion Rate 1.55 2.2 5.5 Per Capita Consumption 38.9 kg 4.6 kg 17.8 kg Source: FNB, Red Meat Industry Forum, Own Data 68
Slide 69: Contact Details
CONTACT DETAILS Chris Schutte Chief Executive Officer Tel : +27 (0) 12 667 5468 Fax : +27 (0) 86 504 2002 email: [email protected] www.astralfoods.com Daan Ferreira Chief Financial Officer Tel : +27 (0) 12 667 5468 Fax : +27 (0) 86 504 1602 email: [email protected]