Astral Foods Limited · JSE:ARL
Astral Foods — FY2016 Earnings Presentation
67 slides from Astral Foods's earnings presentation, November 2016
Slide 1: Annual results presentation for the 12 months ended 30 September 2016
annual results presentation for the 12 months ended 30 September 2016 2016
Slide 2: Agenda
AGENDA Business Overview [# 03] Industry Trends [# 20] Financial Overview [# 28] Industry Matters [# 39] Outlook [# 41] Additional Information [# 44] 2
Slide 3: Business overview
business overview 2016 ee \ASTRAL
Slide 4: The period in perspective: financial indicators
THE PERIOD IN PERSPECTIVE The period under review reflects a significant decrease in profitability over the prior year, on the back of higher feed prices and the inability to recover input costs Revenue 6% Operating profit 50% Financial Indicators 52% Earnings per share Headline earnings p
Slide 5: The period in perspective
THE PERIOD IN PERSPECTIVE Increased poultry sales volumes despite production cutbacks Record high poultry imports ≈ 43% of local production Drop in poultry selling prices due to supply and demand imbalance Severe drought as a result of the strongest El Niño on record Rand depreciation impa
Slide 6: The period in perspective: PBIT reconciliation
THE PERIOD IN PERSPECTIVE PBIT reconciliation (R million) 1,300 1,100 900 700 709 1,101 500 207 50 300 549 100 -100 -300 -500 PBIT F2015 Internal Feed Broiler Selling Other PBIT F2016 Cost Price 6
Slide 7: Poultry division
poultry division 2016 “eTRAL
Slide 8: Poultry division - overview
POULTRY DIVISION - OVERVIEW Revenue - R million Operating profit - R million 10,000 700 9,000 661 9,129 600 8,000 8,740 7,000 500 6,000 400 5,000 300 4,000 3,000 200 2,000 100 1,000 59 - - F2015 F2016 F2015 F2016 Revenue up 4.5% Operating profit down 91.1% • Broiler volumes up 4.2% • Net margin
Slide 9: Poultry division - overview
POULTRY DIVISION - OVERVIEW Broiler sales volumes increased due to sales out of higher opening stock levels despite planned broiler production cutbacks during the period Broiler selling prices decreased marginally on the back of an imbalance in supply and demand leading to heightened promotional
Slide 10: Poultry division - sales
POULTRY DIVISION - SALES Product Mix 21% 21% 3% F2015 4% F2016 458 881 Tons 478 027 Tons 53% Volume increase ≈ 4.2% 53% 8% 8% 12% 11% 3% 3% 10
Slide 11: Broiler production performance
BROILER PRODUCTION PERFORMANCE 150% 140% 130% 120% 110% 100% 90% 80% Key indicators base-lined to 100% in 2010 70% F2010 F2011 F2012 F2013 F2014 F2015 F2016 Mortality Feed conversion (FCR) Efficiency factor (PEF) 11
Slide 12: Broiler production performance
BROILER PRODUCTION PERFORMANCE 104% 102% 100% 98% 96% Key indicators base-lined to 100% in 2010 94% F2010 F2011 F2012 F2013 F2014 F2015 F2016 Slaughter age Live weight Processing yield 12
Slide 13: Feed division
feed division 2016 2 \ASTRAL
Slide 14: Feed division - overview
FEED DIVISION - OVERVIEW Revenue - R million Operating profit - R million 8,000 500 485 7,000 7,190 400 423 6,000 6,236 5,000 300 4,000 200 3,000 2,000 100 1,000 - - F2015 F2016 F2015 F2016 Revenue up 15.3% Operating profit up 14.7% • Sales volumes down 2.3% • Net margin 6.8% F2015: 6.8% • Avera
Slide 15: Feed division - overview
FEED DIVISION - OVERVIEW Feed volumes decreased due to poultry production cutbacks and credit risk management in the external market SAFEX Yellow Maize – F2016 avg. R3 354 per ton (F2015: R2 367) up R987 per ton year-on-year Increased raw material costs - successfully recovered in the selling
Slide 16: Feed division - sales
FEED DIVISION - SALES Meadow Feeds - Sales Mix 13% 14% F2016 20% F2015 20% 1 396 301Tons 605 066 Tons 1 429 772 Tons Volume decrease ≈ 2.3% 60% 60% 7% 6% 16
Slide 17: Other Africa division
other africa division 2016 2 \ASTRAL
Slide 18: Other Africa division - overview
OTHER AFRICA DIVISION - OVERVIEW Revenue - R million Operating profit - R million 600 18 16 17 500 515 14 494 400 12 10 300 8 200 6 4 5 100 2 - - F2015 F2016 F2015 F2016 Revenue up 4.4% Operating profit down 70% • Sales volumes down 5% • Net margin 1% F2015: 3.4% • Average selling prices up 9.9%
Slide 19: Other Africa division - overview
OTHER AFRICA DIVISION - OVERVIEW Zambia Profitability at Tiger Animal Feeds improved for the period although negatively impacted by high diesel costs due to power outages Tiger Chicks – sales realisations under sever pressure impacted by an oversupply in the market and depressed demand Mozambiqu
Slide 20: Industry trends
industry trends \ASTRAL
Slide 21: SAFEX yellow maize price
SAFEX YELLOW MAIZE PRICE 21 Source: CJA Strategic Risk Brokers
Slide 22: SAFEX yellow maize vs. CBOT in rand terms
SAFEX YELLOW MAIZE vs. CBOT IN RAND TERMS 22 Source: CJA Strategic Risk Brokers
Slide 23: SAFEX soya beans price
SAFEX SOYA BEANS PRICE 23 Source: CJA Strategic Risk Brokers
Slide 24: Poultry imports per month
- 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 60,000 Source: SAPA Oct-09 Tons Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Total poultry imports Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13
Slide 25: Industry broiler selling prices
11.00 11.50 12.00 12.50 13.00 13.50 14.00 14.50 15.00 15.50 16.00 16.50 17.00 17.50 18.00 19.00 19.50 18.50 Source: SAPA Oct-10 12.33 12.83 Dec-10 13.51 13.34 Feb-11 13.42 13.20 Apr-11 13.38 13.46 Jun-11 13.18 12.79 Aug-11 12.86 13.56 Rand per kilogram Oct-11 13.91 14.90 Dec-11 15.53 14.51 Feb-12 13
Slide 26: Broiler price vs. food price inflation
BROILER PRICE vs. FOOD PRICE INFLATION 170 170 165 165 160 160 155 155 150 150 145 145 140 140 Index (October 2009 = 100) 135 135 130 130 125 125 120 120 115 115 110 110 105 105 100 100 95 95 90 90 85 85 80 80 75 75 70 70 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Oct-12 Oct-15 Jul-10 Jul-11 J
Slide 27: Change in broiler price vs. feed price
20% 30% 40% 0% 10% -20% -10% -30% Oct-10 Dec-10 Feb-11 Apr-11 Source: SAPA & Own Data Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 % Change in feed price Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 % Change
Slide 28: Financial overview
financial overview 2016 2 \ASTRAL
Slide 29: Abridged statement of comprehensive income
ABRIDGED STATEMENT OF COMPREHENSIVE INCOME 2016 2015 Year ended 30 September % change R million R million Revenue 11 954 11 266 6% Operating profit 549 1 101 50% Operating profit margin 4.6% 9.8% Net finance costs (22) (10) Share of profit in associates (1) 3 Profit before tax 526 1 094 52% Tax (154
Slide 30: Group annual revenue
GROUP ANNUAL REVENUE 16.000 (R billion) 14.000 12.0 12.000 11.3 10.000 9.6 7.2 8.5 6.2 8.2 8.000 7.4 7.2 6.9 7.0 5.5 6.3 4.3 4.9 6.000 5.2 4.0 3.5 4.8 3.6 3.5 5.1 3.9 4.1 9.1 4.000 3.7 2.7 8.7 2.5 2.8 7.0 2.7 5.8 6.0 2.7 5.1 5.0 5.3 2.000 2.7 4.4 4.6 2.0 3.3 3.6 2.2 2.3 1.3 1.7 0.000 2001 2002 2003
Slide 31: Group annual operating profit
GROUP ANNUAL OPERATING PROFIT 16.0% 1,101 1080 (R million) 14.8% 14.0% 12.8% 12.3% 880 809 423 12.0% 766 674 9.8% 10.0% 680 9.6% 597 581 585 9.3% 548 549 8.3% 272 477 493 8.0% 333 8.4% 480 7.3% 389 214 328 6.7% 6.6% 282 5.8% 6.0% 5.9% 261 281 262 280 220 151 5.1% 203 153 385 4.6% 4.0% 79 289 130 354
Slide 32: Group six monthly operating profit
GROUP SIX MONTHLY OPERATING PROFIT 1.9 (R million) 660 1.7 550 551 1.5 560 1.3 460 429 375 1.1 186 360 324 304 299 237 280 281 0.9 260 133 213 203 233 0.7 153 160 151 130 154 120 149 0.5 59 197 60 157 134 128 229 124 140 135 156 173 45 59 351 310 194 252 0.3 5 -40 -3 0.1 -117 -135 -140 -0.1 1H10 2H1
Slide 33: Abridged statement of financial position
ABRIDGED STATEMENT OF FINANCIAL POSITION September 2016 September 2015 % change R million R million Non-current assets 2 230 2 234 Assets held for sale 25 - Net working capital 1 003 776 29% Current assets (excl. cash) 2 588 2 261 14% Current liabilities (excl. borrowings) (1 585) (1 485) 7% Non-cur
Slide 34: Working capital
WORKING CAPITAL For the twelve months ended 2016 2015 Variance 30 September R million R million R million Current assets 2 588 2 261 327 Biological assets 735 668 67 Inventory - Poultry 314 425 (111) - Feed 362 245 117 - Other Africa 41 32 9 Trade receivables 998 786 212 Other 138 105 33 Current lia
Slide 35: Abridged statement of cash flow
ABRIDGED STATEMENT OF CASH FLOW 2016 2015 For the twelve months ended 30 September R million R million Cash operating profit 546 1 436 Working capital movement (46) (441) 500 995 Tax paid (122) (344) Net interest paid (22) (10) Capital expenditure (174) (203) 182 438 Dividends paid (373) (321) Other
Slide 36: Capital expenditure
CAPITAL EXPENDITURE 2016 2015 Twelve months ended 30 September R million R million Depreciation 144 153 Total capex 168 203 Commitments 105 Total spend and committed 273 36
Slide 37: Headline earnings & dividend per share
HEADLINE EARNINGS & DIVIDEND PER SHARE 2500 (cents per share) 2016 2000 1500 1381 1286 1148 1150 1000 958 960 965 890 864 840 787 810 631 760 700 700 700 487 656 500 585 434 326 490 272 440 380 230 222 90 108 168 0 F2001 F2002 F2003 F2004 F2005 F2006 F2007 F2008 F2009 F2010 F2011 F2012 F2013 F2014 F
Slide 38: In summary
IN SUMMARY Two major variables that negatively impacted profitability: Feed – drought related maize cost increases Poultry – no movement in selling prices Net debt to equity ratio of 10.1% (30 Sep 2015: 2.4%) Final dividend of 100 cps (2.0x cover), within the Group’s liquidity capability 3
Slide 39: Industry matters
industry matters 2016 a ~ \ASTRAL
Slide 40: Industry matters
INDUSTRY MATTERS AGOA / sanitary & phytosanitary measures [# 63] ITAC safeguard duty against the EU [# 64] Impact of new brining regulations [# 65] Industry consolidation and contraction [# 66] 40
Slide 41: Outlook
outlook “eTRAL
Slide 42: Outlook
OUTLOOK The weakened state of consumer spending is unlikely to improve due to poor economic growth and higher unemployment which will continue to constrain an increase in the per capita consumption of poultry. The new brining regulations will negatively impact total kilograms sold at the revised
Slide 43: Thank you
at \ASTRAL Thank you “Astral’s strategy is to be the best cost integrated poultry producer in selected African countries”
Slide 44: Additional information
additional information 2016
Slide 45: What we said in May 2016
WHAT WE SAID IN MAY 2016 It is expected that the demand for poultry will continue to be constrained due to limited consumer discretionary spend and weaker seasonal poultry consumption patterns. High maize and feed prices will continue until at least rainfall patterns normalise, with some mid-siz
Slide 46: Key financial ratios
KEY FINANCIAL RATIOS 70 30.0 65 60 25.0 55 50 48 51 48 49 46 20.0 45 16.5 41 40 39 39 37 36 14.5 36 13.9 15.0 33 31 31 34 31 14.8 30 11.4 26 26 30 29 25 11.1 10.0 12.8 12.3 8.9 9.3 9.3 11.0 23 20 10.0 9.9 21 20 7.5 9.6 7.4 9.8 7.3 9.3 19 19 5.9 8.3 8.0 8.4 6.5 16 7.8 4.5 13 5.8 6.1 5.8 12 5.1 5.0 10
Slide 47: Key financial indicators
KEY FINANCIAL INDICATORS 70 61.05 60 61.07 50 49.95 44.16 40 41.36 41.65 34 37.43 29 35.38 33.47 34.24 30 26 24 22 28.28 21 21 21 23.83 19 18 20 23 20 15 16 14 17.36 17 11 9 10 15 14.34 14 10 12 12 10.79 10 8.53 9 3 9 2 7 0 Sep-16 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10
Slide 48: World corn ending stocks vs. STU 2017E
WORLD CORN ENDING STOCKS vs. STU Million Tons 23.9% 250 24% 225 23% 229 22% 200 207 21% 192 175 20% 168 20.3% 150 19% 19.6% 143 142 125 134 18% 119 100 16.4% 17.7% 17% 17.4% 16% 75 15.7% 15% 50 14% 25 13% 13.5% 0 12% 2010 2011 2012 2013 2014 2015 2016 2017E End stock STU Maize carry out on the int
Slide 49: South Africa - total maize supply & demand
SOUTH AFRICA – TOTAL MAIZE SUPPLY & DEMAND Marketing year (May to April) 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17E 2016/18F '000 tons Actual Actual Actual Actual Actual Estimate Forecast Carry In (1 May) 2,336 991 1,414 589 2,074 2,270 813 Crop Estimate 10,360 12,121 11,811 14,250 9,955 7,537
Slide 50: RSA maize carry out & stock to use ratio
RSA MAIZE CARRY OUT & STOCK TO USE RATIO ‘000 Tons 2,500 25% 19.7% 19.9% 2,000 20% 16.6% 16.5% 1,500 15% 12.2% 1,000 10% 8.2% 7.3% 500 5% 5.0% 0 0% 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17E 2017/18F Carry out Maize stock to use ratio 50 Source: CJA Strategic Risk Brokers
Slide 51: El Niño Southern Oscillation (ENSO) forecast
EL NIÑO SOUTHERN OSCILLATION (ENSO) - FORECAST 51 Source: International Research Institute for Climate and Society (IRI) – Columbia University
Slide 52: South Africa - vegetation health index
SOUTH AFRICA – VEGETATION HEALTH INDEX VHI of previous year VHI of current year 52 Source: NOAA - National Environmental Satellite, Data, and Information Service (VHI)
Slide 53: Broiler feed ingredient inclusion & cost contribution
BROILER FEED INGREDIENT INCLUSION & COST CONTRIBUTION 100% 5.2 5.4 6.2 6.7 6.1 6.4 0.3 0.4 0.3 0.4 0.3 0.3 3.1 11.2 2.5 10.8 4.3 90% 0.4 0.9 4.8 7.5 0.3 0.4 14.9 14.9 7.3 14.0 7.0 4.1 6.0 5.5 15.6 7.5 7.4 0.2 0.4 5.4 3.9 4.2 6.2 4.7 5.0 80% 9.1 6.4 1.1 2.4 6.8 7.1 10.3 10.3 6.8 5.7 0.9 70% 17.0 1.3
Slide 54: Brazil, EU & USA product cost benchmark
BRAZIL, EU & USA PRODUCT COST BENCHMARK Ex BRAZIL – November 2016 FROZEN LEG QUARTERS BULK PACKED CIF DBN US$ per ton TON 1 100.00 1 100.00 1 100.00 SA COST R/$ exchange rate R$ 13.50 14.00 14.50 Rand per ton TON 14 850.00 15 400.00 15 950.00 25 680.00 Rand per kg KG 14.85 15.40 15.95 25.68 Duty per
Slide 55: Brazil, EU & USA product cost benchmark
BRAZIL, EU & USA PRODUCT COST BENCHMARK Ex EUROPE NON-TARIFF COUNTRIES – November 2016 FROZEN LEG QUARTERS BULK PACKED CIF DBN US$ per ton TON 1 180.00 1 180.00 1 180.00 SA COST R/$ exchange rate R$ 13.50 14.00 14.50 Rand per ton TON 15 930.00 16 520.00 17 110.00 25 680.00 Rand per kg KG 15.93 16.52
Slide 56: Local broiler production & market share
LOCAL BROILER PRODUCTION & MARKET SHARE 26% 33% 5% 22% 6% 8% Astral RCL Country Bird Daybreak Sovereign Other Local broiler production ≈ 19,2 million birds per week 56 Source: Own Estimates
Slide 57: Total poultry market participation
TOTAL POULTRY MARKET PARTICIPATION 18% 30% 16% 23% 5% 4% 4% Astral RCL Country Bird Daybreak Sovereign Other Imports Avg. poultry imports ≈ 8,2 million birds per week (past 12 months) 57 Source: Own Estimates & SAPA
Slide 58: Total poultry imports (chicken, turkey, MDM)
TOTAL POULTRY IMPORTS (CHICKEN, TRUKEY, MDM) 600,000 500,000 400,000 300,000 200,000 100,000 F2013 F2014 F2015 F2016 0 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep F2013 47,942 89,095 117,712 145,426 172,727 207,148 243,623 282,790 316,047 343,913 371,741 409,158 F2014 28,250 66,647 99,050 124,19
Slide 59: Total poultry imports - country of origin
TOTAL POULTRY IMPORTS – COUNTRY OF ORIGIN Country of origin for poultry Country of origin for poultry imports - 2015 imports - September 2016 YTD US 0.1% Other 2.1% Other 2.0% US 4.6% Argentina 5.8% Argentina 3.4% Brazil Brazil 43.3% 50.4% EU 46.6% EU 41.7% 478 447 tons 424 342 tons 59 Source: SAPA
Slide 60: Total poultry imports - country of origin
TOTAL POULTRY IMPORTS – COUNTRY OF ORIGIN Poultry imports according to main country of origin for 2013 to 2015 and 2016 YTD Country Imports (tons) 2013 2014 2015 2016 YTD Brazil 188 084 168 666 241 180 183 621 Netherlands 66 512 73 987 61 995 79 936 United Kingdom 39 190 43 009 15 985 34 419 Spain 1
Slide 61: Local broiler production, imports & per capita consumption
LOCAL BROILER PRODUCTION, IMPORTS & PER CAPITA CONSUMPTION Million birds per week / Rand per kg kilograms 40 30 35 25 30 25 20 20 15 15 10 10 5 5 0 Jan-11 Jan-10 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Oct-10 Oct-09 Apr-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-1
Slide 62: South African protein price comparison
SOUTH AFRICAN PROTEIN PRICE COMPARISON Cents per kg 7000 6000 5000 4000 3000 2000 1000 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Oct-14 Jul-15 Jul-16 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Apr-15 Oct-15 Apr-16 Chicken Pork Beef Mutton
Slide 63: AGOA & SPS measures
AGOA & SPS MEASURES The Government is to be approached to apply equal standards to poultry imports in terms of: Enforcement of sanitary and phytosanitary standards Veterinary inspection at port of entry Carcass grading standards / quality Brining certification / legislation Restricting r
Slide 64: Poultry imports
POULTRY IMPORTS The investigation for safeguard measures in terms of Article 16 of the TDCA against the EU was initiated by ITAC on 19 February 2016 These measures take the form of a safeguard duty on EU imports which are zero rated besides the anti-dumping duties against 3 EU countries ITAC h
Slide 65: Brining regulations
BRINING REGULATIONS The new brining regulations set at 85 : 15 for individually quick frozen (IQF) portions became effective on 22 October 2016 Astral was granted a dispensation to clear all product brined at 70 : 30 by the end of January 2017 Based on the new brining percentages sales volumes
Slide 66: Industry consolidation & contraction
INDUSTRY CONSOLIDATION & CONTRACTION Intentional short term cutbacks during 2016 due to an imbalance in supply and demand RCL indicates in September 2016 cutback plans which could impact ≈ 1 000 jobs Mike’s Chickens (Polokwane) closed in July 2016 shedding ≈ 600 jobs Country Bird Holdings mu
Slide 67: www.astralfoods.com
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] 67