Astral Foods Limited · JSE:ARL
Astral Foods — FY2015 Earnings Presentation
70 slides from Astral Foods's earnings presentation, November 2015
Slide 1: Annual Results Presentation
Annual Results Presentation for the year ended 30 September 2015
Slide 2: Agenda
AGENDA Business Overview Poultry Industry Trends Financial Overview Industry Matters Prospects Q&A 2
Slide 3: Business Overview
Lt, i —— | : yy : Tae “of = \b ; I | ae BUSINESS OVERVIEW
Slide 4: The Period in Perspective
THE PERIOD IN PERSPECTIVE The period under review reflects a record performance, with most of the major ‘stars’ aligned for Astral, as a result of an expansion in poultry and feed volumes, assisted by lower feed costs and increased poultry selling prices Revenue 17% Operating profit 123% Finan
Slide 5: The Period in Perspective
THE PERIOD IN PERSPECTIVE Increase in poultry sales volumes, in particular from the expansion at County Fair which now processes additional broilers contracted from Quantum Good poultry selling prices coupled with strong demand and lower stock levels up to June 2015 Good poultry production eff
Slide 6: The Period in Perspective
THE PERIOD IN PERSPECTIVE Poultry imports continued at high levels with no impact from the EU anti- dumping remedies implemented in February 2015 Depreciation of the Rand against the US Dollar eroding most of the benefit of lower priced CBOT maize import opportunities to the coastal regions of R
Slide 7: Poultry Division
POULTRY DIVISION 7
Slide 8: Poultry Division - Overview
POULTRY DIVISION - OVERVIEW Revenue - R million Operating profit - R million 9,000 700 8,739 8,000 661 600 7,000 6,967 500 6,000 5,000 400 4,000 300 3,000 200 2,000 100 1,000 104 - - F2014 F2015 F2014 F2015 Revenue up 25% Operating profit up 533% • Broiler volumes up 13% • Net margin 7.6% F2014:
Slide 9: Poultry Division - Overview
POULTRY DIVISION - OVERVIEW Broiler sales volumes increased year-on-year by 12.8% (Slide 10) Broiler selling prices increased year-on-year by 11.9% Product mix improvement with fresh increasing by 2% and IQF reducing by 2% Improved broiler production efficiencies – improved mortality rate (S
Slide 10: Poultry Division - Sales Product Mix
POULTRY DIVISION - SALES Product Mix 21% 22% 3% F2015 3% F2014 458 881 Tons 406 821 Tons 53% 7% 55% 8% Volume increase ≈ 13% 10% 12% 3% 3% 10
Slide 11: Poultry Division - Production
POULTRY DIVISION - PRODUCTION Poultry Production Volume Growth 1.0% Farm efficiencies = 44 000 bpw 3.0% Increased placements = 126 000 bpw 13.1% Quantum = 552 000 bpw F2014 = 4 200 000 F2015 = 4 922 000 Average birds per week (increase of 722 000 birds ≈ 17.2%) 11
Slide 12: Broiler Production Performances
BROILER PRODUCTION PERFORMANCES 120% 115% 110% 105% 100% 95% 90% 85% 80% 75% Key indicators base-lined to 100% in 2009 70% F2009 F2010 F2011 F2012 F2013 F2014 F2015 Mortality Feed conversion (FCR) Efficiency factor (PEF) 12
Slide 13: Broiler Production Performances
BROILER PRODUCTION PERFORMANCES 106% 105% 104% 103% 102% 101% 100% 99% 98% 97% 96% Key indicators base-lined to 100% in 2009 95% F2009 F2010 F2011 F2012 F2013 F2014 F2015 Slaughter age Live weight Processing yield 13
Slide 14: Poultry Division - Prospects
POULTRY DIVISION - PROSPECTS Higher feed costs in the new financial reporting period Higher poultry stock levels in general will exert pressure on selling prices USA export quota (AGOA) could be additive to already high poultry imports Proposed brining regulations – impact on volumes and IQF
Slide 15: Feed Division
FEED DIVISION 15
Slide 16: Feed Division - Overview
FEED DIVISION - OVERVIEW Revenue - R million Operating profit - R million 450 6,000 6,236 400 423 5,506 5,000 350 354 300 4,000 250 3,000 200 2,000 150 100 1,000 50 - - F2014 F2015 F2014 F2015 Revenue up 13% Operating profit up 20% • Sales volumes up 12% • Net margin at 6.8% F2014: 6.4% • Avg. s
Slide 17: Feed Division - Overview
FEED DIVISION - OVERVIEW Feed volumes increased by 12.4% due to higher inter-group volumes (up 23.7%) Rand per ton margin improvement on prior year despite a competitive landscape Inflationary costs were successfully recovered from the market Operational cost benefits from the new Standerton
Slide 18: Feed Division - Sales Mix
FEED DIVISION - SALES Meadow Feeds - Sales Mix 13% 14% F2015 20% 22% 605F2014 066 Tons 1 429 772 Tons 1 272 298 Tons 55% Volume increase ≈ 12% 60% 9% 7% 18
Slide 19: Feed Division - Prospects
FEED DIVISION - PROSPECTS Maize crop of 9,9 million tons for 2015/16 – smallest crop since 2007 Strong El Niño impact to cause extremely dry and hot conditions this summer Adverse planting conditions could lead to a consecutive poor maize crop Increasing local maize prices with excessive upw
Slide 20: Other Africa Division
OTHER AFRICA DIVISION 20
Slide 21: Other Africa Division - Overview
OTHER AFRICA DIVISION - OVERVIEW Revenue - R million Operating profit - R million 550 40 500 499 35 494 35 450 400 30 350 25 300 20 250 200 15 17 150 10 100 5 50 - - F2014 F2015 F2014 F2015 Revenue down 1% Operating profit down 51% • Feed volumes down 3% • Net margin 3.4% F2014: 7.1% • Hatchery
Slide 22: Other Africa Division - Overview
OTHER AFRICA DIVISION - OVERVIEW • Zambia Profitability at Tiger Animal Feeds severely impacted by currency exchange movements Tiger Chicks sales volumes increased by 6% over comparative period with this business posting an improved performance • Mozambique & Swaziland Profitability at Meadow
Slide 23: Other Africa Division - Prospects
OTHER AFRICA DIVISION - PROSPECTS • Zambia The procurement, financing and storage of maize in the local currency will reduce exposure to USD denominated raw material purchases Tiger Chicks increasing exports of hatching eggs and day old chicks into other African markets • Mozambique & Swaziland
Slide 24: Industry Trends
INDUSTRY TRENDS 24
Slide 25: SAFEX Yellow Maize Price
SAFEX YELLOW MAIZE PRICE Source: CJA Strategic Risk Brokers 25
Slide 26: SAFEX Soya Beans Price
SAFEX SOYA BEANS PRICE Source: CJA Strategic Risk Brokers 26
Slide 27: 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 18.50 19.00 19.50 Source: SAPA Oct-09 13.22 13.47 Dec-09 13.41 12.70 Feb-10 11.96 11.95 Apr-10 11.75 12.22 Jun-10 11.75 11.76 Aug-10 12.29 Rand per kilogram 11.83 Oct-10 12.33 12.83 Dec-10 13.51 13.34 Feb-11 13
Slide 28: Change in Broiler Selling Price vs Feed Price
0% 10% 20% 30% 40% -30% -20% -10% Oct-09 Dec-09 Feb-10 Source: SAPA & Own Data Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 % Change in feed price Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 CHANGE IN BROILER SELLING PRICE VS FE
Slide 29: Poultry Imports per Month
POULTRY IMPORTS PER MONTH Tons 50,000 48 357 tons 45,000 EU anti-dumping duties imposed 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 - Sep-14 Mar-14 Mar-15 Jan-10 Mar-10 Sep-10 Jan-11 Mar-11 Sep-11 Jan-12 Mar-12 Sep-12 Jan-13 Mar-13 Sep-13 Jan-14 Jan-15 Nov-10 Nov-11 Nov-12 Nov-13 Nov-14 M
Slide 30: Financial Overview
FINANCIAL OVERVIEW 30
Slide 31: Abridged Statement of Comprehensive Income
ABRIDGED STATEMENT OF COMPREHENSIVE INCOME 2015 2014 Year ended 30 September % change R million R million Revenue 11 266 9 602 17% Operating profit 1 101 493 123% Operating profit margin 9.8% 5.1% Net finance costs (10) (25) Share of profit in associates 3 2 Profit before tax 1 094 470 133% Tax (314
Slide 32: Group Six Monthly Revenue and Profitability
GROUP SIX MONTHLY REVENUE AND PROFITABILITY 6000 2000 (R million) 5755 1800 5511 5000 1600 4902 4700 1400 4000 4219 4290 4039 4122 1200 3744 3663 3675 3534 3591 3552 3319 3415 3000 1000 800 2000 600 550 551 400 1000 407 375 302 304 299 324 279 281 280 200 208 213 141 153 59 0 0 1H08 2H08 1H09 2H09 1
Slide 33: Group Annual Revenue
GROUP ANNUAL REVENUE 16.000 (R billion) 14.000 12.000 11.3 10.000 9.6 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 3.7 8.7 4.000 2.7 2.5 2.8 7.0 5.8 6.0 2.7 2.7 5.1 5.3 4.6 5.0 2.000 2.7 4.4 2.0 3.3 3.6 2.2 2.3 1.3 1.7 0.000 2001 2002 2003 2004 2005 200
Slide 34: Group Six Monthly Operating Profit
GROUP SIX MONTHLY OPERATING PROFIT 680 (R million) 1.5 1.3 580 550 551 1.1 480 380 375 186 0.9 299 324 304 237 281 280 0.7 280 133 213 203 180 153 0.5 151 130 154 149 80 59 157 197 0.3 124 134 128 229 140 135 156 173 5 45 59 351 310 -20 0.1 -3 -117 -120 -0.1 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1
Slide 35: Group Annual Operating Profit
GROUP ANNUAL OPERATING PROFIT 16.0% 1101 1080 (R million) 14.8% 14.0% 12.8% 880 12.3% 12.0% 809 766 423 674 9.8% 10.0% 680 9.6% 597 581 585 548 9.3% 8.3% 272 333 8.4% 477 493 8.0% 480 7.3% 6.6% 389 214 282 5.9% 328 6.7% 6.0% 261 281 5.8% 262 280 203 220 151 5.1% 153 385 4.0% 79 289 130 354 80 3.1% 1
Slide 36: Abridged Statement of Financial Position
ABRIDGED STATEMENT OF FINANCIAL POSITION September 2015 September 2014 % change R million R million Non-current assets 2 234 2 242 Net working capital 776 452 72% Current assets (excl. cash) 2 261 2 003 13% Current liabilities (excl. borrowings) (1 485) (1 551) -4% Non-current liabilities (excl. bor
Slide 37: Working Capital
WORKING CAPITAL 2015 2014 Variance For the twelve months ended 30 September R million R million R million Current assets 2 261 2 003 258 Inventory 1 370 1 096 274 Trade receivables 786 777 9 Other 105 130 (25) Current liabilities (1 485) (1 551) 66 Trade payables (1 156) (1 352) 196 Other (329) (199
Slide 38: Abridged Statement of Cash Flow
ABRIDGED STATEMENT OF CASH FLOW 2015 2014 For the twelve months ended 30 September R million R million Cash operating profit 1 436 671 Working capital movement (441) 33 995 704 Tax paid (344) (100) Net interest paid (10) (37) Capital expenditure (203) (395) 438 172 Dividends paid (321) (163) Other c
Slide 39: Capital Expenditure
CAPITAL EXPENDITURE 2015 2014 Year ended 30 September R million R million Depreciation 153 135 Total capex 203 395 Commitments 67 Total spent and committed 270 39
Slide 40: Key Financial Ratios
KEY FINANCIAL RATIOS 70 30 65 60 55 25 51 48 48 49 50 46 45 20 41 39 39 16.5 40 37 36 14.5 34 36 33 13.9 15 31 31 31 30 14.8 29 30 11.4 26 26 11.1 12.8 25 11.0 10.0 12.3 23 9.9 21 8.9 9.3 20 10 20 7.5 7.4 19 9.8 9.6 9.3 8.3 8.4 6.5 5.9 8.0 7.8 13 7.3 6.1 5.8 5.1 5 10 5.5 5.5 4.7 4.4 4.7 4.8 4.1 4.3
Slide 41: Key Financial Indicators
KEY FINANCIAL INDICATORS 70 61.05 60 49.95 50 44.16 41.36 41.65 40 37.43 35.38 33.47 34.24 29 28.28 30 26 23.83 24 22 21 21 21 19 18 20 23 17 20 15 16 14.34 14 10.79 17.36 11 9 10 15 8.53 14 10 12 12 9 9 2 7 0 3 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-
Slide 42: Headline Earnings per Share & Dividend per Share
HEADLINE EARNINGS PER SHARE & DIVIDEND PER SHARE 2500 (cents per share) 2016 2000 1500 1381 1286 1148 1150 1000 958 960 890 864 840 787 631 810 760 700 700 700 487 656 500 585 434 326 272 440 380 230 222 90 108 168 0 F2001 F2002 F2003 F2004 F2005 F2006 F2007 F2008 F2009 F2010 F2011 F2012 F2013 F2014
Slide 43: In Summary
IN SUMMARY Poultry division reported a more normalised profit margin Poultry division benefited from various volume growth initiatives Feed division benefited from Standerton feed mill contribution Net debt to equity ratio of 2.4% (30 Sep 2014: Net debt to equity ratio of 8.9%) Final divid
Slide 44: Industry Matters
lil —— INDUSTRY MATTERS
Slide 45: Brining
BRINING 70 : 30 - current industry practice 75 : 25 - industry proposal 85 : 15 - draft DAFF regulations Various interactions with the DAFF Minister & Deputy Minister DAFF “mistakenly” released a press statement on 1 October 2015 stating “Total brine injection allowed for individual portio
Slide 46: Imports (EU & US)
IMPORTS (EU & US) On 27 Feb 2015 anti-dumping duties on bone-in portions were imposed on Germany, Netherlands and United Kingdom Duties range from 3.86% to 73.33% on frozen bone in chicken portions EU imports are now originating from Spain, Belgium and France US quota of 65 000 tons leg quar
Slide 47: Prospects
PROSPECTS
Slide 48: Prospects
PROSPECTS The slowing level of growth in the economy and higher unemployment levels will continue to hamper an increase in the per capita consumption of poultry. The strong El Niño and impact on planting conditions will negatively impact crop yields leading to higher feed prices in the new reporting
Slide 49: million
“If you want to go fast, go alone…. if you want to go far, go together” R1,1 billion 40,7 million RECORD PROFIT IN ASTRAL’S HISTORY 5,0 2,4% DEBT : EQUITY LIVE BIRDS ON FARM million BROILERS SLAUGHTERED PER WEEK 1,5 million TONS OF ANIMAL FEED PRODUCED AT SEVEN MILLS 49 10 April 2015
Slide 50: Additional Information
ADDITIONAL INFORMATION 50 50
Slide 51: Poultry - Six Monthly Revenue
POULTRY – SIX MONTHLY REVENUE 6000 5500 (R million) 1.4 5000 1.2 4500 4503 1.0 4000 4237 0.8 3500 3650 3317 3000 0.6 3049 2878 2956 2952 2500 2581 2606 2652 0.4 2449 2000 0.2 1500 1000 0.0 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 Revenue Change in realisations (SAPA) Change in vol
Slide 52: Feed - Six Monthly Revenue
FEED – SIX MONTHLY REVENUE 4500 1.60000 (R million) 1.40000 4000 1.20000 3500 1.00000 3275 3000 2956 2961 0.80000 2500 2519 2550 0.60000 2397 2000 2175 2152 0.40000 1847 1730 1770 1708 1500 0.20000 1000 0.00000 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 Revenue Change in volumes Cha
Slide 53: SAFEX Yellow Maize vs CBOT Corn in Rand Terms
SAFEX YELLOW MAIZE VS CBOT CORN IN RAND TERMS Source: CJA Strategic Risk Brokers 53
Slide 54: South Africa - Total Maize Supply & Demand
SOUTH AFRICA – TOTAL MAIZE SUPPLY & DEMAND Marketing year (May to April) 2010/11 2011/12 2012/13 2013/14 2014/15E 2015/16F 2016/17F '000 tons Actual Actual Actual Actual Actual Estimate Forecast Carry In (1 May) 2,131 2,336 991 1,414 589 2,077 1,221 Crop Estimate 12,815 10,360 12,121 11,811 14,250 9
Slide 55: RSA Maize Carry Out and Stock to Use Ratio
RSA MAIZE CARRY OUT AND STOCK TO USE RATIO ‘000 Tons 2,500 24.2% 25% 22.9% 20.1% 2,000 20% 14.8% 1,500 15% 11.8% 10.4% 1,000 10% 6.0% 5.3% 500 5% 0 0% 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16E 2016/17F Carry out Maize stock to use ratio Source: CJA Strategic Risk Brokers 55
Slide 56: World Corn Ending Stocks and STU Ratio
WORLD CORN ENDING STOCKS AND STU RATIO Million Tons 250 24% 225 216 23% 22% 200 194 22.3% 21% 175 168 19.9% 20% 150 137 140 19% 129 125 17.7% 18% 116 16.7% 17% 100 16.2% 16% 75 15.2% 15% 50 13.1% 14% 25 13% 0 12% 2016E 2010 2011 2012 2013 2014 2015 End stock STU Source: CJA Strategic Risk Brokers 56
Slide 57: El Niño Southern Oscillation (ENSO) - Forecast
EL NIÑO SOUTHERN OSCILLATION (ENSO) – FORECAST Source: International Research Institute for Climate and Society (IRI) – Columbia University 57
Slide 58: El Niño Impact on South Africa
EL NIÑO IMPACT ON SOUTH AFRICA Source: International Research Institute for Climate and Society (IRI) – Columbia University 58
Slide 59: South Africa - Vegetation Health Index
SOUTH AFRICA – VEGETATION HEALTH INDEX Source: NOAA - National Environmental Satellite, Data, and Information Service (VHI) 59
Slide 60: Ingredient Inclusion and Cost Contribution
BROILER FEED INGREDIENT INCLUSION AND COST CONTRIBUTION 100% 7.1 9.9 8.4 7.9 10.5 10.9 0.3 0.3 0.4 1.4 0.3 0.3 0.4 90% 13.2 0.4 0.9 6.1 0.5 6.0 14.7 0.4 3.5 7.0 16.6 0.3 8.5 18.5 7.5 7.4 3.6 4.1 5.5 21.9 80% 3.8 22.4 1.1 2.4 5.4 1.2 6.8 4.2 6.2 5.7 16.6 8.0 17.0 0.9 1.3 70% 14.0 18.9 7.4 14.7 16.5 7
Slide 61: Brazil & Europe Product Cost Benchmark
BRAZIL & EUROPE PRODUCT COST BENCHMARK Ex BRAZIL – November 2015 FROZEN LEG QUARTERS BULK PACKED CIF DBN US$ per ton TON 1 000.00 1 000.00 1 000.00 SA COST R/$ exchange rate R$ 13.50 13.82 14.25 Rand per ton TON 13 500.00 13 820.00 14 250.00 21 750.00 Rand per kg KG 13.50 13.82 14.25 21.75 Duty per
Slide 62: Brazil & Europe Product Cost Benchmark
BRAZIL & EUROPE PRODUCT COST BENCHMARK Ex NETHERLANDS – November 2015 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$ 13.50 13.82 14.25 Rand per ton TON 14 175.00 14 511.00 14 962.50 21 750.00 Rand per kg KG 14.18 14.51 14.96 21.75 Duty
Slide 63: Local Broiler Production and Market Share
LOCAL BROILER PRODUCTION AND MARKET SHARE 25% 33% 5% 23% 6% 8% Astral RCL Country Bird Afgri Sovereign Other Local broiler production ≈ 19,3 million birds per week Source: Own Estimates 63
Slide 64: Total Poultry Market Participation
TOTAL POULTRY MARKET PARTICIPATION 19% 26% 17% 24% 5% 4% 5% Astral RCL Country Bird Afgri Sovereign Other Imports Avg. poultry imports ≈ 6,9 million birds per week (to August 2015 avg. 8 months) Source: Own Estimates & SAPA (Imports) 64
Slide 65: Total Poultry Imports (Chicken, Turkey, MDM)
TOTAL POULTRY IMPORTS (CHICKEN, TURKEY, MDM) Tons 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 F2012 F2013 F2014 F2015 0 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep F2012 33,348 67,819 100,540 135,614 170,194 204,560 244,296 278,914 305,472 326,520 353,296 387,173 F2013
Slide 66: Total Poultry Imports - Country Split
TOTAL POULTRY IMPORTS – COUNTRY SPLIT Country of origin for poultry Country of origin for poultry imports - 2014 imports - 2015 YTD Thailand Other 3.2% Argentina 1.8% Other 0.5% Argentina 5.5% 6.5% Brazil 42.9% EU 39.5% EU 48.5% Brazil 51.7% Source: SAPA 66
Slide 67: Local Broiler Production, Imports & Per Capita Consumption
LOCAL BROILER PRODUCTION, IMPORTS & PER CAPITA CONSUMPTION Million birds per week / Rand per kg 29 40 27 35 25 23 30 21 25 19 17 20 15 15 13 11 10 9 5 7 5 0 Jun-12 Feb-10 Jun-10 Feb-11 Jun-11 Feb-12 Feb-13 Jun-13 Feb-14 Jun-14 Feb-15 Jun-15 Dec-10 Dec-09 Aug-10 Aug-11 Dec-11 Aug-12 Dec-12 Aug-13 Dec
Slide 68: Broiler Price vs Food Price Inflation
BROILER PRICE VS FOOD PRICE INFLATION 150 150 145 145 140 140 135 135 130 130 Index (October 2008 = 100) 125 125 120 120 115 115 110 110 105 105 100 100 95 95 90 90 85 85 80 80 75 75 70 70 Jun-10 Feb-13 Feb-09 Jun-09 Feb-10 Feb-11 Jun-11 Feb-12 Jun-12 Jun-13 Feb-14 Jun-14 Feb-15 Jun-15 Dec-08 Aug-09
Slide 69: South African Protein Price Comparison
SOUTH AFRICAN PROTEIN PRICE COMPARISON Cents per kg 6000 5500 5000 4500 4000 3500 3000 2500 2000 1500 1000 Feb-10 Jun-10 Feb-11 Jun-11 Feb-12 Jun-12 Feb-13 Jun-13 Feb-14 Jun-14 Feb-15 Jun-15 Oct-09 Oct-11 Oct-12 Oct-13 Oct-14 Oct-10 Apr-11 Apr-15 Apr-10 Aug-10 Aug-11 Apr-12 Aug-12 Apr-13 Aug-13 Apr-
Slide 70: 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 Group Financial Director Tel : +27 (0) 12 667 5468 Fax : +27 (0) 86 504 1602 email: [email protected] 70