Oceana Group Limited · JSE:OCE
Oceana — FY2020 Earnings Presentation
52 slides from Oceana's earnings presentation, Sep 30, 2020
Slide 1: Investor Presentation – Year Ended 30 September 2020
INVESTOR PRESENTATION YEAR ENDED 30 SEPTEMBER 2020 POSITIVELY IMPACTING LIVES 1
Slide 2: Legal Disclaimer and Basis of Preparation
LEGAL DISCLAIMER AND BASIS OF PREPARATION • For the purposes of this notice, the presentation (the “Presentation”) shall mean and include the slides that follow, the oral presentation of the slides by Oceana Group Limited (the “Company”) and/or its advisers, any question- and-answer session that fol
Slide 3: Agenda
GROUP OVERVIEW COVID-19 PERFORMANCE OVERVIEW FINANCIAL PERFORMANCE OPERATIONAL REVIEW STRATEGIC OVERVIEW & OUTLOOK POSITIVELY IMPACTING LIVES 3
Slide 4: Core Purpose and Evolution of Oceana Culture
Our core purpose is to make a positive impact on CORE society by creating long term sustainable value for PURPOSE all our stakeholders. Our actions are based on the premise that we live in an imbalanced society and that it is our responsibility, as a leader in our sector, to contribute to addressing
Slide 5: Diversified Operations and Earnings
DIVERSIFIED OPERATIONS AND EARNINGS 5 EUROPE Fishing NORTH 11% FAR EAST geographies AMERICA 1% 26% 45 REST OF AFRICA Customer 18% geographies EARNINGS PER REGION SA AUSTRALIA 43% 1% 16 VESSELS 11 VESSELS & 12 PLANES 18 VESSELS 8 COLD STORAGE FACILITIES 6 PRODUCTION FACILITIES 1 PRODUCTION FACILITY 4
Slide 6: Diversified Operations and Earnings
DIVERSIFIED OPERATIONS AND EARNINGS FISH SUPPLY EARNINGS SPECIES 2% 6% 9% 9% 26% 35% 38% 21% 43% 14% 11% 36% 32% 18% North America South Africa Canned fish Pilchards/sardines West Africa Rest of Africa Anchovy/menhaden Fishmeal and oil Europe Horse mackerel South Africa North America Hake Namibia Ot
Slide 7: Agenda
GROUP OVERVIEW COVID-19 GROUP OVERVIEW FINANCIAL PERFORMANCE OPERATIONAL REVIEW STRATEGIC OVERVIEW & OUTLOOK POSITIVELY IMPACTING LIVES 7
Slide 8: Covid-19 Response
COVID-19 RESPONSE ▪ Treated pandemic as a humanitarian crisis ▪ Demonstrated resilience, agile decision making and strong implementation ▪ Key focus areas: - Robust approach to health and safety of employees, resulting in rallying to the cause - Visible leadership at the coalface – operations, fleet
Slide 9: Agenda
INTRODUCTION COVID-19 PERFORMANCE OVERVIEW FINANCIAL PERFORMANCE OPERATIONAL REVIEW STRATEGIC OVERVIEW & OUTLOOK POSITIVELY IMPACTING LIVES 9
Slide 10: 2020 Performance Overview
2020 PERFORMANCE OVERVIEW REVENUE OPERATING PROFIT HEPS OPERATING PROFIT MARGIN 9% 21% 15% 2% 2020: R8.3bn (2019: R7.6bn) 2020: R1.4bn (2019: R1.2bn) 2020: 628.4c (2019: 544.3c) 2020: 16.8% (2019: 15.1%) CASH BALANCE LEVERAGE RATIO DPS VOLUMES SOLD 8% R1.2bn 1.4x 2% 2020: 263 265 ton
Slide 11: 2020 Performance Overview
2020 PERFORMANCE OVERVIEW FISHING DAYS LOST COVID-19 IMPACT FMO LANDINGS FMO PRICING TO COVID-19 HM (Namibia) 10% R50m 20% Africa 2% fishmeal (Actual costs) HM ( SA) 2% 21% fish oil 16% USA Hake 4% R75m FMO (US) 10% (Opportunity costs) Sales Price (US$MT) HORSE MACKEREL HAKE CANNED FISH CCS
Slide 12: Agenda
GROUP OVERVIEW COVID-19 PERFORMANCE OVERVIEW FINANCIAL PERFORMANCE OPERATIONAL REVIEW STRATEGIC OVERVIEW & OUTLOOK POSITIVELY IMPACTING LIVES 12
Slide 13: Results Snapshot
RESULTS SNAPSHOT 1. The increase in revenue was driven by increased fishmeal R’000 2020 2019 VAR sales volumes, strong demand for canned fish, favourable Revenue 1. 8 308 341 7 647 415 9% pricing and weaker exchange rate benefiting export Gross Profit 2. 2 970 273 2 620 636 13% revenue GP Margin 36%
Slide 14: Revenue
REVENUE (R’M) 8 500 12 32 185 8 000 306 127 7 500 7 000 8 308 6 500 7 647 6 000 5 500 5 000 Sep-19 Canned fish FMO (Africa) FMO (USA) Horse mackerel, hake, Commercial cold Sep-20 lobster and squid storage Increase Decrease POSITIVELY IMPACTING LIVES 14
Slide 15: Operating Profit
OPERATING PROFIT (R’M) 1 500 1 450 1 400 19 1 350 51 1 300 66 1 250 1 200 1 382 167 1 150 96 1 100 1 175 1 050 1 000 Sep-19 Canned fish FMO (Africa) FMO (USA) Horse mackerel, Commercial cold Sep-20 hake, lobster and storage squid Increase Decrease POSITIVELY IMPACTING LIVES 15
Slide 16: Foreign Exchange Impact
FOREIGN EXCHANGE IMPACT (US$) 180 000 000 160 000 000 NET EXPORT POSITION 140 000 000 120 000 000 100 000 000 80 000 000 60 000 000 40 000 000 20 000 000 - Inflows / Export revenue Outflows / Import costs Export revenue Daybrook Import costs POSITIVELY IMPACTING LIVES 16
Slide 17: Financial Position – Key Items
FINANCIAL POSITION – KEY ITEMS 1. Maintenance and replacement capex of R240m R’000 2020 2019 VAR incurred (2019: R254m) Property, plant & equipment 1. 1 856 973 1 697 221 9% 2. Intangible asset relates mainly to goodwill, Intangible assets 2. 5 388 881 4 886 609 10% intellectual property and tradema
Slide 18: Balance Sheet Strength
BALANCE SHEET STRENGTH 1. Reduction in net debt in Africa business attributed to 2020 2019 VAR settlement of term debt and high cash balances AFRICA R’000 attained through improved working capital utilisation Gross debt 1 520 000 1 798 000 15% 2. R1.1bn committed short term facilities in place and N
Slide 19: Working Capital Management
WORKING CAPITAL MANAGEMENT 140 120 112 118 ▪ Overall improvement in net working capital 120 99 100 days driven by: 99 100 92 • Reduced Lucky Star and Daybrook inventory 80 holdings 80 62 • Improved debtors days due to higher sales 60 from FMO (Africa) and Horse Mackerel 60 55 40 • Creditors days imp
Slide 20: Cash Flow
CASH FLOW (R'M) 3 000 2 500 459 678 2 000 240 1 500 611 1 653 41 1 000 1 213 500 588 - Sep-19 Cash operating Working capital Tax & dividends Capex Debt serviced Other Sep-20 profit changes paid Increase Decrease POSITIVELY IMPACTING LIVES 20
Slide 21: HEPS / DPS
HEPS / DPS HEPS / DPS (2017 to 2020) 3 year HEPS CAGR: 17.0% 700,0 600,0 500,0 400,0 300,0 200,0 100,0 - 2017 2018* 2019 2020 HEPS (basic) cents DPS cents To be confirmed *2018 excludes the one off deferred tax benefit of R237m POSITIVELY IMPACTING LIVES 21
Slide 22: Agenda
GROUP OVERVIEW COVID-19 PERFORMANCE OVERVIEW FINANCIAL PERFORMANCE OPERATIONAL REVIEW STRATEGIC OVERVIEW & OUTLOOK POSITIVELY IMPACTING LIVES 22
Slide 23: Canned Fish
Canned Fish POSITIVELY IMPACTING LIVES 23
Slide 24: Canned Fish
CANNED FISH KEY PERFORMANCE INDICATORS PERFORMANCE 2019 2020 Revenue % VAR 12% 4% ▪ Canned pilchards growth increased by 1% and realised a net PI of 4%, demonstrating Canned pilchard volumes defensive nature of product in tough trading ctns 8% 1% conditions ▪ Demand service levels improved to 96% Fr
Slide 25: Canned Fish - Demand
CANNED FISH - DEMAND ▪ Demand strong, notwithstanding certain SA retailers coming under pressure ▪ Consumption remains intact with affordability of product important especially to constrained consumer ▪ Emphasis on versatility of product resulted in increased meal occasions per household ▪ Despite d
Slide 26: Canned Fish - Supply
CANNED FISH - SUPPLY CARTONS ‘000 10 000 5% 5% 8 000 12% ▪ Pilchard resource showing signs of recovery but 6 000 40% 44% 54% remains overall at cyclical lows 4 000 ▪ Increased frozen fish imports after successful 2 000 48% 51% 41% renegotiation of payment terms, positively - impacting working capita
Slide 27: Fishmeal & Fish Oil
Fishmeal & Fish Oil POSITIVELY IMPACTING LIVES 27
Slide 28: Fishmeal and Fish Oil (Africa)
FISHMEAL AND FISH OIL (AFRICA) KEY PERFORMANCE INDICATORS PERFORMANCE 2019 2020 Revenue % VAR 37% 57% ▪ Performance of division driven by significant improvement in landings Landings ▪ tons 13% 20% Recovery of fish oil price resulted in flat average fishmeal and fish oil sales price for the Average
Slide 29: Fishmeal and Fish Oil (Africa) - Supply and Demand
FISHMEAL AND FISH OIL (AFRICA) - SUPPLY AND DEMAND 140 000 INDUSTRIAL FISH LANDINGS (TONS) VOLUMES SOLD PER REGION (MT) 120 000 100 000 UK & EUROPE 2020: 75% 80 000 FAR EAST 2020: 11% 60 000 SOUTH AMERICA 40 000 2020: 1% AFRICA 2020: 13% 20 000 - 11-Feb 22-Feb 07-Sep 18-Sep 29-Sep 06-Apr 17-Apr 28-A
Slide 30: Fishmeal and Fish Oil (US)
FISHMEAL AND FISH OIL (US) KEY PERFORMANCE INDICATORS PERFORMANCE 2019 2020 Revenue (USD) 12% 2% % VAR ▪ Landings down 16% due to - 12 days lost due to Covid-19; refit of new vessel Landings million fish 19% 16% also impacted - Precautionary shutdown of operations during Fish volumes sold hurricane
Slide 31: Fishmeal and Fish Oil (US) - Supply and Demand
FISHMEAL AND FISH OIL (US) - SUPPLY AND DEMAND GULF MENHADEN LANDINGS (M’FISH) VOLUMES SOLD PER REGION (MT) 900 000 800 000 700 000 600 000 UK & EUROPE 2020: 10% 500 000 ASIA 2020: 5% 400 000 NORTH AMERICA 2020: 85% 300 000 200 000 100 000 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 2
Slide 32: US Sales Analysis
US SALES ANALYSIS PET FOOD GROWTH / EXPORT REDUCTION PRICE COMPARISON 40 000 35 000 30 000 25 000 20 000 15 000 10 000 5 000 - 2018 2019 2020 2018 2019 2020 Pet food volume Other North Am volume Export volume Pet food price Other North Am price POSITIVELY IMPACTING LIVES 32
Slide 33: Blue Continent Products
Blue Continent Products ▪ Horse mackerel ▪ Hake ▪ Lobster & squid POSITIVELY IMPACTING LIVES 33
Slide 34: Horse Mackerel
HORSE MACKEREL KEY PERFORMANCE INDICATORS PERFORMANCE 2019 2020 Revenue % VAR 4% 9% ▪ Combined landings down 6% due to 66 fishing days lost in Namibia and 7 fishing days in South Landings Africa as a consequence of Covid-19 Tons 3% 6% ▪ Delays in finalisation of Namibian quota allocation resulting i
Slide 35: Horse Mackerel - Performance
HORSE MACKEREL - PERFORMANCE HORSE MACKEREL LANDINGS (TONS) NAMIBIAN LANDINGS (TONS) 70 000 60 000 60 000 50 000 50 000 40 000 40 000 30 000 30 000 20 000 20 000 10 000 10 000 - March December January June September April July August May November February - 2018 2019 2020 Namibia SA 2018 2019 2020 5
Slide 36: Hake
HAKE KEY PERFORMANCE INDICATORS PERFORMANCE 2019 2020 Revenue 10% 1% % VAR ▪ 20 fishing days lost due to Covid-19 disruption reducing vessel utilisation to 66% in H2 Landings 2% 5% Tons (H2:2019 72%) ▪ As a result of lockdown restrictions, strong Fuel costs 12% 5% demand experienced in Europe as in-
Slide 37: Lobster & Squid
LOBSTER & SQUID KEY PERFORMANCE INDICATORS PERFORMANCE 2019 2020 Lobster landings Tons 40% 3% ▪ Earnings under 1% of group operating profit ▪ Positive growth in lobster landings offset by Squid catch rate kg/ton 51% 39% weak demand and subsequent drop in prices following lockdown restrictions in Chi
Slide 38: Commercial Cold Storage
Commercial Cold Storage POSITIVELY IMPACTING LIVES 38
Slide 39: CCS
CCS KEY PERFORMANCE INDICATORS PERFORMANCE 2019 2020 Revenue 14% 3% % VAR ▪ Sector showing signs of recovery with marginal improvement in revenue earned per Revenue per pallet ZAR/pallet 13% 3% pallet after reversion experienced in 2019 ▪ Occupancy levels up 9% Occupancy levels 4% 11% % - Underpinne
Slide 40: Agenda
GROUP OVERVIEW COVID-19 PERFORMANCE OVERVIEW FINANCIAL PERFORMANCE OPERATIONAL REVIEW STRATEGIC OVERVIEW & OUTLOOK POSITIVELY IMPACTING LIVES 40
Slide 41: Strategy Remains Intact
STRATEGY REMAINS INTACT ▪ Pandemic continues to bring short term uncertainty - Resilient performance in 2020 driven by in-home consumption of most products and consistent supply, which was underpinned by strong safety protocols and healthy biomass - We expect that this will continue to drive our act
Slide 42: Canned Fish Growth
CANNED FISH GROWTH ▪ Opportunities in a depressed economic environment to increase meal occasions, driven by • Affordability on shelf, versatility and convenience • Solid trade relationships and support • Build on iconic status – street food culture, meal inspiration, youth BUILD ESTABLISH STREET DR
Slide 43: Adjacent Products
EXPANDING THE BRAND IN PLACE DEVELOPED CANNED FISH PRODUCTS ADJACENT POSITIVELY IMPACTING LIVES 43
Slide 44: Fishmeal and Fish Oil - Global Outlook 2021
FISHMEAL AND FISH OIL - GLOBAL OUTLOOK 2021 SUPPLY DEMAND GLOBAL FISHMEAL PRODUCTION ('000MT) ▪ Demand side recovery expected inline with feed/food recovery 6 000 ▪ Fishmeal consumption for 2020 in China revised upwards, 5 000 expectations of 10-15% increase on renewed aquaculture 4 000 farming effo
Slide 45: Daybrook
DAYBROOK 2 500 DAYBROOK FISHMEAL PRICE ($/MT) PERFORMANCE TO DATE 2 000 CAGR 2014-20 3,4% CAGR 2002-14 1 500 8,5% ▪ Debt levels and dividend flow 1 000 • Net debt at $87m ($127m at acquisition) ring fenced US cash flows 500 • R730m of R2,4bn cash from SA already - 2002 2003 2004 2005 2006 2007 2008
Slide 46: Daybrook Outlook
DAYBROOK OUTLOOK Focus on controllables - plant and catch capacity, production quality, target markets: ▪ Addition of 12th vessel and run boat in 2021 - 10 to 15% volume increment ▪ Focus capex spend to improve offload speeds and oil quality ▪ US pet food mid-tier focus - margin and steady pricing o
Slide 47: SA Quota Businesses and FRAP 2020
SA QUOTA BUSINESSES AND FRAP 2020 ▪ 80% of 2020 earnings from non-SA dependent quota businesses ▪ Remaining 20% subject to quota allocations in SA (incl. horse mackerel 2016) OCEANA FISH SUPPLY PILCHARD QUOTA HAKE QUOTA 4% 5% 12% 6% 23% 6% 38% 12% 45% 9% 7% 55% 7% 31% 8% 32% US GulfMenhaden menhaden
Slide 48: FRAP 2020 Timeframe and Case for Retention
FRAP 2020 TIMEFRAME AND CASE FOR RETENTION ▪ DEFF committed to transparent process and objective scoring and assessments ▪ Industry engagement is positive and ongoing ▪ Horse mackerel appeals review – agreement that process was flawed, allocations to be reviewed ▪ FRAP Policy will likely allocate qu
Slide 49: Sustainability Projects
SUSTAINABILITY PROJECTS Carbon neutrality project ▪ Formal commitment to carbon neutrality ▪ Key dates: - 2030 50% reduction - 2050 net zero emissions ▪ Mega renewable energy project SA, vessel Freon conversions, Daybrook and CCS solar projects ▪ Published KPIs, management targets in STIs Investment
Slide 50: Prospects – Next 12 Months
PROSPECTS – NEXT 12 MONTHS FMO HAKE ▪ US - Increase in demand in pet food ▪ Short term oversupply due to lack of food service volumes sector and consistent pricing ▪ Longer term demand for product remains intact ▪ Other - aquaculture volume growth in the short term ▪ Demand levels expected to normal
Slide 51: 2020 Closing Comments
2020 CLOSING COMMENTS ▪ Our learnings and outcomes - Demonstrated agility and ability in responding to dynamically changing circumstances - Designed innovative employee safety protocols and will continue to enhance these and monitor adherence - Built balance sheet strength and capacity to weather ne
Slide 52: Thank You
THANK YOU POSITIVELY IMPACTING LIVES 52