RCL Foods Limited · JSE:RCL
RCL Foods — H1 FY2016 Earnings Presentation
66 slides from RCL Foods's earnings presentation, Feb 24, 2016
Slide 1: Results for the six months ended 31 December 2015
RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2015 INVESTOR PRESENTATION: 24 FEBRUARY 2016
Slide 2: Slide 2
Slide 3: Highlights – six months ended 31 December 2015
Salient features | Strategic overview | Financial review | Operational reviews | Prospects HIGHLIGHTS – SIX MONTHS ENDED 31 DECEMBER 2015 Down 22.0% Financial Up Up Up Highlights 7.0% 0.7% 24.5% REVENUE PRE-IAS39 HEADLINE NET FINANCE R12.9bn EBITDA EARNINGS COSTS R1 102.7m PER SHARE R133.7m 87.2c ►
Slide 4: Platform for growth
Salient features | Strategic overview | Financial review | Operational reviews | Prospects PLATFORM FOR GROWTH REVENUE (Rbn) 22.6 23.4 19.5 12.9 10.1 2013 2014 2014 (pro 2015 2016 forma) (Interim) EBITDA – Pre-IAS 39 (Rm) EBITDA Margin (Pre-IAS 39) 2 117.8 9.1% 8.6% 1 533.4 6.3% 6.8% 1 221.0 1 102.7
Slide 5: Moving towards a more balanced portfolio
Salient features | Strategic overview | Financial review | Operational reviews | Prospects MOVING TOWARDS A MORE BALANCED PORTFOLIO Relative share of EBITDA Pre-IAS 39 Our recent acquisitions and 2015 2016 restructuring of the business have led 10% 13% to a stronger, more diversified 12% 12% busines
Slide 6: Main performance drivers
Salient features | Strategic overview | Financial review | Operational reviews | Prospects MAIN PERFORMANCE DRIVERS GROCERIES CHICKEN SUGAR CHICKEN Leading the Growth Under Pressure Affected by drought Under Pressure 6MMA 2015 18.4% Extreme drought Market has adversely impacted Sugar (2.0%) Over Sup
Slide 7: Progress against deliverables for 2016
Salient features | Strategic overview | Financial review | Operational reviews | Prospects PROGRESS AGAINST DELIVERABLES FOR 2016 1 Drive the new business model in Chicken 2 Drive Group synergies in Sugar, e.g. Sourcing, Route to Market 3 Implement turnaround plans for MillBake, Pies and Speci
Slide 8: Financial summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects FINANCIAL SUMMARY SIX MONTHS ENDED 31 DECEMBER 2015 Actual Actual Statutory 31 Dec ’15 31 Dec ’14 % var Revenue Rm 12 875.3 12 029.3 7.0 EBITDA Rm 1 145.8 1 206.1 (5.0) EBITDA margin % 8.9 10.0 (1.1) EBIT Rm 7
Slide 9: Operating environment
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING ENVIRONMENT General economic environment in South Africa remains challenged - Severe drought impacted negatively on prices of soft commodities - High unemployment and rising interest rates are risk
Slide 10: Results waterfall
Salient features | Strategic overview | Financial review | Operational reviews | Prospects RESULTS WATERFALL Reconciliation waterfall of Statutory EBITDA to headline earnings for the 6 months ended 31 December 2015 (Rm) 1 145.8 (363.4) (133.7) 751.8 97.2 29.5 11.9 (5.9) (29.6) EBITDA Depreciation, N
Slide 11: Key financial issues
Salient features | Strategic overview | Financial review | Operational reviews | Prospects KEY FINANCIAL ISSUES Segmental reporting RCL FOODS is reporting on its new segments of Consumer, Sugar & Milling and Logistics for the first time Release of provision for uncertain tax positions Included i
Slide 12: Key financial issues: debt and hedging profile
Salient features | Strategic overview | Financial review | Operational reviews | Prospects KEY FINANCIAL ISSUES Debt and hedging profile Term Value (Rm) Year 1 Year 2 Year 3 Year 4 1 355 5 year 400 847 4 year 250 3 year – RCF 498 Total 3 350 Hedged % 77% 77% 53% 53% Hedged (fixed rate) Unhedged Part
Slide 13: Key financial issues: debt covenants
Salient features | Strategic overview | Financial review | Operational reviews | Prospects KEY FINANCIAL ISSUES Debt covenants Covenant Required Status Senior leverage ratio (Net senior debt* /pre-IAS39 HEBITDA) <3.0 1.6 Repricing (a step-up margin of 0.25% is triggered if the senior leverage ratio
Slide 14: Operating results summary: revenue
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY Segmental analysis – Revenue (Rm) Actual Restated 31 Dec ‘15 31 Dec ’14 % var Consumer 6 708.6 6 157.3 9.0 Sugar & Milling 7 612.1 7 329.1 3.9 Logistics 994.5 986.7 0.8 Sales between
Slide 15: Operating results summary: EBITDA
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY Segmental analysis – EBITDA Actual Restated EBITDA (Rm) – Pre-IAS 39 31 Dec ’15 31 Dec ’14 % var Consumer 501.6 461.2 8.8 Sugar & Milling 472.9 527.9 (10.4) Logistics 134.9 110.5 22.0
Slide 16: Operating results summary: segment contribution
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY Segmental contribution to Revenue Dec ‘15 Dec ‘14 6% 7% 44% 42% 50% 51% Segmental contribution to EBITDA Dec ‘15 Dec ‘14 12% 10% 45% 42% 43% 48% Consumer Sugar & Milling Logistics 16
Slide 17: Segmental contribution to EBITDA improvement
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY Segmental contribution to EBITDA – Pre IAS 39 improvement (Rm) 40.4 (55.0) 24.4 (2.5) 1 102.7 1 095.4 2014 EBITDA-Pre- Consumer Sugar & Milling Logistics Group 2015 EBITDA-Pre- IAS 39
Slide 18: Cash flow summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects CASH FLOW SUMMARY Actual Actual Rm 31 Dec ’15 31 Dec ’14 Opening balance (including money market investment and net of overdraft) 870.5 1 472.7 Operating profit adjusted for non-cash flow items 1 174.6 1 311.7
Slide 19: Working capital movement
Salient features | Strategic overview | Financial review | Operational reviews | Prospects WORKING CAPITAL MOVEMENT Actual Actual Rm 31 Dec ’15 31 Dec ’14 Net (801.8) (695.0) Trade payables (126.0) 256.8 Inventory and biological assets (59.4) (620.7) Trade receivables (616.4) (331.1) Net working cap
Slide 20: Capital expenditure
Salient features | Strategic overview | Financial review | Operational reviews | Prospects CAPITAL EXPENDITURE Capital expenditure by segment Capital commitments by segment 3% 9% 27% 18% 47% 53% 20% 23% Consumer Sugar & Milling Logistics Group Capital expenditure (excluding intangibles) was R530.0
Slide 21: Consumer
CONSUMER
Slide 22: Operational review: Consumer
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CONSUMER Actual Restated Revenue (Rm) 31 Dec ’15 31 Dec ’14 % var Consumer 6 708.6 6 157.3 9.0 Sugar & Milling 7 612.1 7 329.1 3.9 Logistics 994.5 986.7 0.8 Sales between segments (2 440.0)
Slide 23: Operational review: Consumer
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CONSUMER Actual Restated Revenue (Rm) 31 Dec ’15 31 Dec ’14 % var Chicken 3 990.0 3 877.6 2.9 Groceries 2 323.1 1 915.9 21.3 Sales between business units (35.2) (48.5) (27.2) Cost recoverie
Slide 24: Operational review: Chicken
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CHICKEN Chicken Dec ’15 Dec ’14 Birds slaughtered per week (000’s) 4 515 4 623 The market is once again heavily oversupplied, through record high dumped imports Chicken responded by fur
Slide 25: Operational review: Chicken
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CHICKEN The poultry industry remains exposed to two critical issues, those being imports and dumping of leg quarters and the brining cap proposed by government - Impact of AGOA – The nego
Slide 26: Operational review: Groceries
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES Grocery Nola Mayonnaise – Canine Cuisine – Vol share Vol share (premium dry dog) 42.3 32.7 3.8 7.5 Pet Food volume growth 6.6% up on PY Canine Cuisine growth = 63% 6MMA 2014 6MM
Slide 27: Operational review: Groceries
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES Grocery Strong market share gains, with Nola taking market leadership from Crosse&Blackwell for the first time ever Pet Food, in particular the new and premium Canine Cuisine,
Slide 28: Operational review: Groceries
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES Vol growth 6 months to Beverage Dec ’15 Mageu No 1 6.8% Mageu No 1 Smooth 48.1% Total Mageu 10.1% Strong volume and profit growth was the result of increased focus and brilliant
Slide 29: Operational review: Groceries
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES Pies The Piemans business is being re-established as the leading Pie brand in market share, thinking and innovation Innovation will be launched within two months, opening new
Slide 30: Operational review: Groceries
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES Speciality RCL FOODS enjoys a strong relationship with Woolworths and seeks to be their “Most admired supplier” RCL FOODS is the largest supplier of food to Woolworths Woolw
Slide 31: Sugar & Milling
Ei FOODS’ SUGAR & MILLING
Slide 32: Operational review: Sugar and Milling
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR AND MILLING Actual Restated Revenue (Rm) 31 Dec ’15 31 Dec ’14 % var Consumer 6 708.6 6 157.3 9.0 Sugar & Milling 7 612.1 7 329.1 3.9 Logistics 994.5 986.7 0.8 Sales between segments
Slide 33: Operational review: Sugar and Milling
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR AND MILLING Actual Restated Revenue (Rm) 31 Dec ’15 31 Dec ’14 % var Animal Feed 2 818.1 2 777.8 1.5 Millbake 1 832.7 1 705.8 7.4 Sugar 3 015.7 2 875.6 2.9 Sales between business unit
Slide 34: Operational review: Animal Feed
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: ANIMAL FEED Vol share Vol share Animal Feed Dec ’15 Dec ’14 Epol 3.3 3.0 Molatek 12.2 12.3 EBITDA grew from R161.1m to R169.9m, an increase of 5.5%, with the associated margin improving f
Slide 35: Operational review: Millbake
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: MILLBAKE Vol share Vol Share 6MMA 6MMA Millbake Dec ’15 Dec ’14 Sunbake 3.2 3.7 Supreme 13.0 13.1 EBITDA grew from R133.6m to R139.4m, an improvement of 4.3%. The associated margin decrea
Slide 36: Operational review: Sugar
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR Vol share Vol Share 6MMA 6MMA Market Sugar Dec ’15 Dec ’14 growth Selati 30.7 28.6 1.2% EBITDA of R163.6m was down 29.9% on the comparative period, with the associated margin droppi
Slide 37: Operational review: Sugar
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR Vol share Vol Share 6MMA 6MMA Market Sugar Dec ’15 Dec ’14 growth Manufacturers share 51.1 47.8 6.9% Due to the outlook of limited sugar availability in the country, the Sugar indus
Slide 38: Operational review: Sugar – dam levels and rainfall
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR Dam levels Pongola Cum Rainfall 300 250% 250 200% Dam Dec 2015 Dec 2014 % deviation from LTA 200 150% Kwena 60.5% 78.6% mm 150 Driekoppies 56.8% 89.8% 100% 100 Maguga 43.3% 76.7% 50 5
Slide 39: Operational review: Sugar – water availability
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR Due to low dam levels higher restrictions are implemented - Currently 60% restriction in Nkomazi - From April/May restriction levels will go to 80% restriction if no rain - No irrig
Slide 40: Logistics
logisticsolutions LOGISTICS
Slide 41: Operational review: Logistics
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: LOGISTICS Actual Restated Revenue (Rm) 31 Dec ’15 31 Dec ’14 % var Consumer 6 708.6 6 157.3 9.0 Sugar & Milling 7 612.1 7 329.1 3.9 Logistics 994.5 986.7 0.8 Sales between segments (2 440.0
Slide 42: Operational review: Logistics
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: LOGISTICS Subdued revenue growth Subdued growth in revenue due to staggered due to customer changes Foodservice volumes resilient replacement of lost IN OUT business in merchandising and
Slide 43: Operational review: Logistics
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: LOGISTICS Operational efficiencies Peninsula expansion on track for completion by March 2016 (4.6%) 3.5% 5% Sales Volume Service Level Inventory F16 (Jul-Dec) F15 (Jul-Dec) 4.6% reduction i
Slide 44: Prospects
PROSPECTS
Slide 45: Prospects
Salient features | Strategic overview | Financial review | Operational reviews | Prospects PROSPECTS Key features for next period will be the pervasive impact of the drought as well as the impact of the weak rand on soft commodity prices These two issues are expected to drive food inflation and
Slide 46: Thank you
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Slide 47: Appendices
APPENDICES
Slide 48: RCL Foods in context
RCL FOODS IN CONTEXT Food, Liquor & Home care Banking Healthcare Insurance Industrial Infrastructure Media & Sport 48
Slide 49: Group structure
CONSUMER SUGAR & MILLING LOGISTICS GROUP DIVISION DIVISION DIVISION FUNCTIONS FINANCE CHICKEN SUGAR WAREHOUSING INFORMATION TECHNOLOGY GROCERY MILLING & BAKING DISTRIBUTION HUMAN SUPPLY CHAIN RESOURCES SPECIALITY ANIMAL FEED INTELLIGENCE CEO OFFICE PIES AND BEVERAGES SALES SOLUTIONS LEGAL ®ULATOR
Slide 50: More food to more people, more often
ee as ’ AZ NA SZ NIZ Z1i~. Ve NZ oe es ae See 4 IN SZ Se TIS Se ’ ty \7 NZIS OSS oe Fis in * EI re | ees Ne ONY NY AN ‘N <6n MORE FOOD TO MORE PEOPLE, MORE OFTEN S N DOING MORE ingle minded pi top that by nourishing people while sustaining our resources, everyone wins. Communities will be enriched w
Slide 51: Our values
OUR VALUES SEEING & DOING THINGS DIFFERENTLY We pride ourselves on seeing & doing things differently. We are energetic, passionate and driven by a desire to innovate in every part of our business. Not only do we encourage change to create value, we embrace it. ACT RESPONSIBILY We believe we have bot
Slide 52: Our business model
52 Speciality, Pies, Food Solutions Chicken, Sugar, Grains (Wheat, Maize), Animal Feed MAXIMISE IN SA
Slide 53: Strategic thrusts
STRATEGIC THRUSTS STRATEGIC THRUSTS STRATEGIC GOALS F16-F20 GROW THROUGH Invest behind brands, grow key markets and our shares STRONG BRANDS Accelerate added Value, maximise core categories in South Africa PARTNER WITH Partner with strategic customers, driving common growth & profit STRATEGIC
Slide 54: Platform for growth
PLATFORM FOR GROWTH Revenue (Rbn) 22.4 23.4 19.5 12.0 12.9 11.6 10.1 8.7 4.5 Interim Full Interim Full Interim Full Interim Full Interim year year year year 2013 2014 2014 (pro 2015 2016 forma) EBITDA (Rm) 2 224.0 1 434.6 1 122.2 1 206.1 1 145.8 889.1 688.3 445.3 196.0 Interim Full Interim Full Inte
Slide 55: Integrated organisation
INTEGRATED ORGANISATION RCL FOODS Consumer Sugar & Milling Logistics Division Division Division BUSINESS UNITS BUSINESS UNITS BUSINESS UNITS Chicken, Speciality, Sugar, Milling and Baking, Logistics business Grocery, Pies & Beverages, Animal Feed responsible for Group-wide FoodSolutions Route to Mar
Slide 56: Consumer: Chicken
Salient features | Strategic overview | Financial review | Operational reviews | Prospects CONSUMER: CHICKEN Limpopo Province Tzaneen Polokwane Botswana Mpumalanga Windhoek Rustenburg North Nelspruit Roodepoort West Midrand Swaziland Klerksdorp Carolina Namibia Wolwehoek KwaZulu Natal Newcastle Free
Slide 57: Consumer: Chicken – farm to fork supply chain
Salient features | Strategic overview | Financial review | Operational reviews | Prospects CONSUMER: CHICKEN Integrated supply chain from “farm to fork” GP operation Agriculture Processing Grandparent Broiler chicks Grandparent farms Parent farms farms Processing Rearing Laying Hatching Rearing Layi
Slide 58: Consumer: Groceries
Salient features | Strategic overview | Financial review | Operational reviews | Prospects CONSUMER: GROCERIES Grocery Pie The Grocery Division consists of a portfolio of well The Pie Division produces a range of high quality, recognised brands with market leading positions predominantly meat pies u
Slide 59: Consumer: Groceries
Salient features | Strategic overview | Financial review | Operational reviews | Prospects CONSUMER: GROCERIES Beverage Speciality The Beverage Division produces a maize-based The Speciality Division produces a range of superior ready health drink under the Mageu No 1, Smooth, to eat products, inclu
Slide 60: Sugar & Milling: Animal Feed
Salient features | Strategic overview | Financial review | Operational reviews | Prospects SUGAR & MILLING: ANIMAL FEED 7 feed mills Limpopo Province 5 produce grain based feeds Tzaneen 2 produce molasses Polokwane based feeds Botswana Windhoek Rustenburg Pretoria Mpumalanga 1.4m tons of feed
Slide 61: Sugar & Milling: Millbake
Salient features | Strategic overview | Financial review | Operational reviews | Prospects SUGAR & MILLING: MILLBAKE Baking Milling The Baking Division is the fourth largest bakery group The Milling Division operates the largest single site in the country, operating seven bakeries and flour mill in
Slide 62: How Selati sugar is made
Salient features | Strategic overview | Financial review | Operational reviews | Prospects SUGAR & MILLING: SUGAR HOW SELATI SUGAR IS MADE 62
Slide 63: Sugar & Milling: Sugar
Salient features | Strategic overview | Financial review | Operational reviews | Prospects SUGAR & MILLING: SUGAR Sugar Mills Mill Mill Established Notes Nkomazi Malalane 1968 Nkomazi produces approximately Komati 1993 560 000 tons of sugar per year Pongola Pongola 1954 Pongola produces approximatel
Slide 64: Operational review: Logistics
S a l i e n t f e a t u rSeas l i|e n Stt rfaetaetguirce so v|e rSvt ireaw t e |g iFc i noavn e cr v i ai e lwrev | iF e iwn a|n O c ip ael re avtio ewn a|l O r epveireaw t iso n | aPlr orsepvei cetw s s | Prospects OPERATIONAL REVIEW: LOGISTICS Services Manufacturers Vector Cold Vector Primary Prin
Slide 65: Operational review: Logistics
S a l i e n t f e a t u rSeas l i|e n Stt rfaetaetguirce so v|e rSvt ireaw t e |g iFc i noavn e cr v i ai e lwrev | iF e iwn a|n O c ip ael re avtio ewn a|l O r epveireaw t iso n | aPlr orsepvei cetw s s | Prospects OPERATIONAL REVIEW: LOGISTICS Customers Principals Customer Secondary Distribution (
Slide 66: Operational review: Logistics
S a l i e n t f e a t u rSeas l i|e n Stt rfaetaetguirce so v|e rSvt ireaw t e |g iFc i noavn e cr v i ai e lwrev | iF e iwn a|n O c ip ael re avtio ewn a|l O r epveireaw t iso n | aPlr orsepvei cetw s s | Prospects OPERATIONAL REVIEW: LOGISTICS Infrastructure Vector infrastructure Limpopo Province