Tiger Brands Limited · JSE:TBS
Tiger Brands — FY2011 Earnings Presentation
64 slides from Tiger Brands's earnings presentation, November 2011
Slide 1: Tiger Brands Limited Final Results Presentation to Investors
Group Grains Consumer Brands Exports and International TIGER BRANDS LIMITED FINAL RESULTS PRESENTATION TO INVESTORS for the year ended 30 September 2011
Slide 2: Agenda
Group Grains Consumer Brands Exports and International Agenda Strategic Review Financial Analysis Business Performance - Grains Business Performance - Consumer Brands Business Performance – International Outlook 2
Slide 3: Strategic Review
Group Grains Consumer Brands Exports and International Strategic Review Peter Matlare Chief Executive Officer
Slide 4: Where we are today
Group Grains Consumer Brands Exports and International Where we are today • The South African economic environment has become increasingly challenging o Competition is fierce as local and multi-national competitors and retailers battle for market share o Cost inflation has re-emerged due to global s
Slide 5: Economic context for performance 2011
Group Grains Consumer Brands Exports and International Economic context for performance 2011 – challenging global and domestic environment IMF global outlook downgraded • International markets remain in turmoil and growth forecasts have been lowered – with negative impact on the Rand • Africa growth
Slide 6: Household consumption expenditure drops. Consumer confidence slows.
Group Grains Consumer Brands Exports and International Household consumption expenditure drops. Consumer confidence slows. Household expenditure decelerates • Consumers remain under pressure and 10.0% 35 consumer confidence falls to a 2 year 7.5% 25 low 5.0% 15 Y.o.Y. % change 2.5% 5 • Real househol
Slide 7: FMCG market volumes contract as inflation increases
Group Grains Consumer Brands Exports and International FMCG market volumes contract as inflation increases Total market growth (volume & value) • Price inflation in FMCG markets Categories in which Tiger Brands participates rises to +4.2% for 3 months to Source: Nielsen September 2011 • Low levels o
Slide 8: The changing retail landscape
Group Grains Consumer Brands Exports and International The changing retail landscape The Customer landscape has and continues to undergo significant change, which impacts on Brand manufacturers and marketers • Consolidation & globalisation • The race for retail space • Changing shopper habits • Cate
Slide 9: Brand performance
Group Grains Consumer Brands Exports and International Brand performance Source: Nielsen Volume (packs) Shares – 12mm to Sept 2011 Position In Category HOMECARE Insecticides 1 Tiger Brands retains No 1 Aircare 3 Sanitary Cleaners 2 or 2 position across most of PERSONAL CARE Face Care 2 the categorie
Slide 10: Salient features
Group Grains Consumer Brands Exports and International Salient features • Turnover 6% • Operating income 8% • EPS 17.5% • HEPS 13% (6% normalised) 10
Slide 11: HEPS (cents) – year ended September
Group Grains Consumer Brands Exports and International HEPS (cents) – year ended September 1,600 1 575 1,550 1,500 1 490 +13% 1,450 +6% 1,400 1 393 Excl. BEE 1,350 1,300 2010 2010 (excl BEE) 2011 11
Slide 12: Total distributions – cents per share
Group Grains Consumer Brands Exports and International Total distributions – cents per share 850 800 791 750 746 +6.0% 700 650 600 2010 2011 12
Slide 13: Financial Analysis
Group Grains Consumer Brands Exports and International Financial Analysis Funke Ighodaro Chief Financial Officer
Slide 14: Income statement for the year ended September
Group Grains Consumer Brands Exports and International Income statement for the year ended September % Rm 2011 2010 Change Turnover 20,430 19,316 6 Operating Income 3,245 3,015 8 Income from investments 19 19 - Net financing costs (64) (83) 22 Income from Associates 265 252 5 Profit before taxation
Slide 15: Income statement for the year ended September
Group Grains Consumer Brands Exports and International Income statement for the year ended September % Rm 2011 2010 Change Profit after taxation before abnormal items 2,463 2,327 6 Abnormal items 127 (188) Tax on abnormal items (12) 36 Net profit for the year 2,578 2,175 19 Attributable to: Ordinary
Slide 16: Abnormal items for the year ended September
Group Grains Consumer Brands Exports and International Abnormal items for the year ended September Rm 2011 2010 Equity accounted take-on gain - National Foods Holdings Zimbabwe 91 - Recognition of pension fund surpluses 44 1 Empowerment transaction costs – BEE Phase II - (188) Other (8) (1) Total 12
Slide 17: Reconciliation between profit for the year and headline earnings
Group Grains Consumer Brands Exports and International Reconciliation between profit for the year and headline earnings Rm 2011 2010 Profit attributable to ordinary shareholders 2,584 2,192 Adjusted for: Equity accounted take-on gain - National Foods Holdings Zimbabwe (91) - Associates - goodwill im
Slide 18: Turnover by operating segment
Group Grains Consumer Brands Exports and International Turnover by operating segment % Rm 2011 2010 Change Total 20,430 19,316 6 DOMESTIC OPERATIONS 18,049 17,494 3 Grains 8,349 8,085 3 - Milling and Baking 6,192 5,849 6 - Other Grains 2,157 2,236 (4) Consumer Brands 9,704 9,417 3 - Groceries 3,423
Slide 19: Contribution to turnover
Group Grains Consumer Brands Exports and International Contribution to turnover 2011 2010 Intergroup Deciduous Deciduous sales -1% Intergroup Fruit 5% Fruit 5% International International sales -1% operations operations 3% 4% Exports 2% Exports 3% HPCB 9% HPCB 9% OOH 1% OOH 1% VAMP 7% VAMP 7% Bevera
Slide 20: Operating income before abnormal items
Group Grains Consumer Brands Exports and International Operating income before abnormal items Operating Income % % Operating margins Rm 2011 2010 Change 2011 2010 Total 3,245 3,015 8 15.9 15.6 Domestic operations 3,036 2,989 2 17.2 17.4 Grains 1,746 1,678 4 20.9 20.7 - Milling and Baking 1,382 1,364
Slide 21: Contribution to operating income
Group Grains Consumer Brands Exports and International Contribution to operating income 2011 2010 International Deciduous Deciduous International Other -5% operations Other -5% Fruit -1% Fruit -3% operations 2% 3% Exports 4% Exports 2% HPCB 15% HPCB 14% OOH 2% OOH 2% VAMP 4% VAMP 5% Beverages 3% Bev
Slide 22: Group balance sheet as at September
Group Grains Consumer Brands Exports and International Group balance sheet as at September Rm 2011 2010 Assets Property, plant & equipment 3,317 2,586 Intangibles 3,826 1,986 Investments 2,360 1,717 Current Assets 6,187 5,774 Net cash - 41 15,690 12,104 Equity and Liabilities Ordinary Shareholders E
Slide 23: Key statistics as at September
Group Grains Consumer Brands Exports and International Key statistics as at September 2011 2010 Net (Debt)/Cash (Rm) (1,671) 42 Net Debt/Equity % 16 N/A Working capital per R1 turnover (cents) 21.8 20.7 Net interest cover (times) 50.9 36.9 Operating income margin % 15.9 15.6 Effective tax rate befor
Slide 24: Cashflow statement for the year ended September
Group Grains Consumer Brands Exports and International Cashflow statement for the year ended September Rm 2011 2010 Cash operating profit 3,777 3,493 Working capital requirements (173) (113) Cash generated from operations 3,604 3,380 Dividends received net of financing costs 107 67 Taxation paid (1,
Slide 25: Capital expenditure and commitments
Group Grains Consumer Brands Exports and International Capital expenditure and commitments Rm 2011 2010 Capital expenditure 818 634 - Replacement 387 363 - Expansion 431 271 Capital commitments 421 817 - contracted 299 547 - approved 122 270 25
Slide 26: Grains
Group Grains Consumer Brands Exports and International Grains Thabi Segoale Business Executive
Slide 27: Grains
Group Grains Consumer Brands Exports and International Grains Key performance highlights Performance drivers Net sales +3.3% • Expanded Albany market universe EBIT +4.1% • Cost containment interventions Operating margin 20.9% • Increased contribution of value-added products Key market dynamics • Pri
Slide 28: Maize and Wheat Milling
Group Grains Consumer Brands Exports and International Maize and Wheat Milling Satisfactory performance • Price inflation drives top line growth • Volumes negatively impacted by extra- ordinary competitive landscape • Strong performance: o Albany, Consumer Premixes & Ace Instant • New Hennenman mill
Slide 29: Albany
Group Grains Consumer Brands Exports and International Albany Triumph over challenging trading landscape • Volumes contract by 3.9% driven by widened NEW price gaps in top-end retail • Top-end retail Albany market share stats: 12mm Sep 2011 o Maintained No 1 market share in value o Lost 1.1% points
Slide 30: Tastic
Group Grains Consumer Brands Exports and International Tastic Tastic grows category consumption • Positive momentum maintained • Tastic gains share in a static market • Strong global price inflation during Q4 11 • Tastic wins No 1 brand in Essential Foods category* • Price inflation expected to slow
Slide 31: Breakfast Cereals
Group Grains Consumer Brands Exports and International Breakfast Cereals Convenient/affordable offers drive growth • Category volume growth improves (+1% - 12mm Mar 11 vs +3.8% - 12 mm Sep 2011) • Star performance from Ace Instant (+12% volume) & Jungle Oats Instant (+15% volume) • Leading market sh
Slide 32: Summary
Group Grains Consumer Brands Exports and International Summary Stable fundamentals withstand market challenges • Satisfactory performance in FY 11 • Re-establish volume growth momentum • Enhancing consumer value is core to our future success • Progress on strategic priorities o Contribution of value
Slide 33: Consumer Brands
Group Grains Consumer Brands Exports and International Consumer Brands Phil Roux Business Executive
Slide 34: 2nd Half: Steady progress
Group Grains Consumer Brands Exports and International 2nd Half Steady progress Key challenges Action Low market growth Revenue growth management Low cost competition Cost reduction and efficiency focus Top End Grocer (TEG) growth rate Broader channel focus and share loss 34
Slide 35: 2nd Half: Steady progress EBIT performance
Group Grains Consumer Brands Exports and International 2nd Half Steady progress EBIT performance 1st Half 2nd Half FY Groceries *- 6,5% *+ 56,4% *+ 17,5% Snacks & Treats *- 41,7% *+ 31,2% *- 16,9% HPCB *- 4,1% *+ 2,0% *- 1,2% OOH *- 7,0% *+ 24,4% * + 9,2% Enterprise *- 6,0% *- 31,0% *- 17,9% Beverag
Slide 36: Groceries: Good recovery
Group Grains Consumer Brands Exports and International Groceries Good recovery Volume • Beans +15% Volume + 6,0% • Peanut Butter +14% EBIT + 17,5% • Mayonnaise + 7% • Pasta + 3% • Tomato Sauce + 3% Channel Strategy Value Price management Drivers Costs and efficiency improvements Brand strength 36
Slide 37: KOO is South Africa's Favourite Brand!
Group Grains Consumer Brands Exports and International KOO is South Africa’s Favourite Brand! 2011 • South Africa’s Favourite Brand • Top brand in Canned Foods (Sunday Times) • Top brand in Canned Foods (Beeld Iconic Brands) 2010 • 2nd Favourite Brand 2009 • 3rd Favourite Brand 37
Slide 38: Snacks & Treats: Solid progress
Group Grains Consumer Brands Exports and International Snacks & Treats Solid progress Net sales Flat EBIT -16,9% Market Volume Contraction -6% (12mm Nielsen) • Cost base reduced a • Management changes a • Margin correction a • Growth plans a • Innovation commercialized a 38
Slide 39: Snacks & Treats
Group Grains Consumer Brands Exports and International Snacks & Treats April to August 2011/2010 Net Sales + 8,0% GM + 16,3% EBIT + 156,5% (R87m vs R34m) EBIT % 13,0% vs 5,5% 39
Slide 40: Beverages: Challenging times
Group Grains Consumer Brands Exports and International Beverages Challenging times • Net Sales - 5,0% • EBIT - 16,0% Performance inhibitors Management action Winter volumes Lower breakeven point Price management Revenue Growth Management (RGM) disciplines Loss making categories Dairy Fruit Blends (D
Slide 41: Beverages: Core brand performance
Group Grains Consumer Brands Exports and International Beverages Core brand performance Market Share Volume 55 54.1 2011 54 +10% 53 52.2 Volume 48.1 51.4 MAT MAT 52 51.1 LY TY 51 50.4 12mm 50 49 48 Jun July August Sep Nielsen 12mm 56 Volume Share 53.8 54.0 54 52 49.8 50 48 46 12mm 2YA 12mm PY 12mm C
Slide 42: HPCB: Top-line challenged
Group Grains Consumer Brands Exports and International HPCB Top-line challenged Net sales Healthy margins Homecare - 2,1% 19,4% Personal care - 1,3% EBIT Full Year - 8,0% 26,5% EBIT 1st Half - 19,9% Baby care + 6,3% 29,3% (Nutrition + 7%) Performance inhibitors • Reorganization • Strong competition
Slide 43: HPCB: Baby category
Group Grains Consumer Brands Exports and International HPCB: Baby category Challenging Times Performance drivers • Innovation • Consumer insight & understanding • Category leadership with trade partners • Growth of Purity Master Brand • Focus on Channel specific activation Challenges • Entry of nume
Slide 44: HPC Priorities
Group Grains Consumer Brands Exports and International HPC Priorities Personal care Homecare • R/margin focus • Defend and grow insecticides • Core brand renovation • Strengthen Jeyes brand position • Status brand integration • Relaunch key segments • TEG channel growth • Interrogate cost base / Bro
Slide 45: Enterprise: Fierce low cost competition
Group Grains Consumer Brands Exports and International Enterprise Fierce low cost competition • Net sales + 2,5% • EBIT - 17,9% • EBIT Margin 8,5% Challenges • Low cost branded competition • Private label growth • Lowering of entry barriers 45
Slide 46: Enterprise: Strategic review completed
Group Grains Consumer Brands Exports and International Enterprise Strategic review completed Priorities • Share recovery in key segments • Cost and efficiency focus • Invest in brand and price position • Redefine channel strategy Anticipated Outcome • Margin compression – short / medium term • Volum
Slide 47: Langeberg & Ashton Foods
Group Grains Consumer Brands Exports and International Langeberg & Ashton Foods The fruits ripen 1st Half Full Year EBIT R44,5m loss R43,3m loss Driving Forces - 2012 • Fully contracted • Double digit price increases • Euro zone challenged • Exchange rate 47
Slide 48: Consumer Brands: In summary
Group Grains Consumer Brands Exports and International Consumer Brands In summary • Clear improvements, but WIP • Market / categories will remain highly competitive • Strong, resilient and leading brands • Management agility required in challenging times • Restoring competitiveness No 1 priority 48
Slide 49: Tiger Brands International
Group Grains Consumer Brands Exports and International Tiger Brands International Neil Brimacombe Business Executive
Slide 50: Tiger Brands: Africa Footprint
Group Grains Consumer Brands Exports and International Tiger Brands: Africa Footprint • Traction in priority zones Mali Niger Sudan • Davita footprint complementary Burkina Faso Nigeria Ethiopia • Route to market capability improving Cameroon Uganda Gabon Kenya DRC Tanzania Angola Zambia On shore ma
Slide 51: Tiger Brands International: Exports (incl. Davita)
Group Grains Consumer Brands Exports and International Tiger TIGERBrands BRANDSInternational: INTERNATIONALExports (incl. Davita) : EXPORTS Continued good progress • Net sales R712.0m* (2010: R370.4m) • EBIT R170.2m* (2010: R53.6m) * Davita 4 months Growth drivers • Strong demand from Zimbabwe, Zamb
Slide 52: Tiger Brands International: Exports
Group Grains Consumer Brands Exports and International Tiger TIGERBrands BRANDSInternational: INTERNATIONALExports : EXPORTS Continued investment in core brands 52
Slide 53: Tiger Brands International: Davita Trading
Group Grains Consumer Brands Exports and International Tiger Brands International: Davita Trading Performance in line with expectations Growth drivers • Existing distributors remain committed and the order book is strong • New geographies and new distributors • Business integration is underway and s
Slide 54: Tiger Brands International: Davita Trading
Group Grains Consumer Brands Exports and International Tiger TIGERBrands BRANDSInternational: INTERNATIONALDavita Trading : DAVITA TRADING Building on distribution base and managing POS critical 54
Slide 55: Tiger Brands International: Haco Tiger Brands, Kenya
Group Grains Consumer Brands Exports and International Tiger Brands International: Haco Tiger Brands, Kenya Accelerating growth • Net sales R216.0m +14.0% • EBIT R 21.8m + 8.5% Growth drivers • Key category volume growth • Significant progress in regional exports • Focused support of core brands, in
Slide 56: Tiger Brands International: Chococam, Cameroon
Group Grains Consumer Brands Exports and International Tiger TIGERBrands BRANDSInternational: INTERNATIONALChococam, Cameroon : CHOCOCAM, CAMEROON Continued progress • Net sales R326.7m + 3.9% • EBIT R 41.5m + 13.4% Growth drivers • Major brands renovation completed and re-launched • Facilities upgr
Slide 57: Tiger Brands International: Chococam, Cameroon
Group Grains Consumer Brands Exports and International Tiger TIGERBrands BRANDSInternational: INTERNATIONALChococam, Cameroon : CHOCOCAM, CAMEROON Continued progress Selling wider and deeper • Route to market capability strengthened • Continued investment 57
Slide 58: Tiger Brands International: Chococam, Cameroon
Group Grains Consumer Brands Exports and International Tiger TIGERBrands BRANDSInternational: INTERNATIONALChococam, Cameroon : CHOCOCAM, CAMEROON Investing for future growth Outlook for 2012 remains positive • Continuous facility upgrade and capex deployment will ensure high service level and impro
Slide 59: Tiger Brands International: EATBI, Ethiopia
Group Grains Consumer Brands Exports and International Tiger Brands International: EATBI, Ethiopia Positive progress – investment on track • Net sales R 91.9m (4 months) • EBIT R 6.9m Growth drivers • Strong consumer demand • Mix, price and cost management • Efficiencies program beginning to benefit
Slide 60: Tiger Brands International: Deli Foods, Nigeria
Group Grains Consumer Brands Exports and International Tiger Brands International: Deli Foods, Nigeria Investment on track • Net sales R 187.7m (5 months) • EBIT R 11.8m Growth drivers • Significant efficiency improvements • Mix – premium innovation launched • Excellent distributor relationships • J
Slide 61: Tiger Brands International: UAC Foods, Nigeria
Group Grains Consumer Brands Exports and International Tiger Brands International: UAC Foods, Nigeria (Tiger 49%) Start up challenges • Net sales R 245.2m* (5 months) • EBIT R 28.5m* * 100% Growth drivers • Excellent procurement progress • Strong demand for Gala Sausage Roll Challenges • Capacity co
Slide 62: Tiger Brands International: In summary
Group Grains Consumer Brands Exports and International Tiger Brands International In summary • A key strategic growth vector • An emphasis on fix, optimise, and grow • Continuing to bed down / integrate acquisitions • Leverage new capabilities / drive synergies • Acquisitions remain a key theme 62
Slide 63: Towards 2012
Group Grains Consumer Brands Exports and International Towards 2012 Challenging year ahead • Pressure on the consumer not letting up • Food inflation on the rise • Increased focus on cost base for competitiveness • Strengthen our strategic alliances • Continued acquisitions on the continent 63
Slide 64: Disclaimer
Group Grains Consumer Brands Exports and International Disclaimer Certain statements in this presentation may be defined as forward looking statements within the meaning of the United States Securities legislation. Forward-looking statements involve known and unknown risks, uncertainties and other i