RCL Foods Limited · JSE:RCL
RCL Foods — FY2008 Earnings Presentation
31 slides from RCL Foods's earnings presentation, May 2008
Slide 1: Investors Presentation
Investors Presentation May 2008
Slide 2: Agenda
Agenda • Industry perspective • Strategy update • Market conditions • General • 2008 highlights • Financial a c a review e e • Prospects • Questions
Slide 3: Industry Perspective
Industry Perspective Estimated per capita consumption of broiler meat Kil Kilograms per capita i 26,4 25,8 23,1 21,7 21,1 19,7 20,1 19,4 19,7 18,6 18,9 17,6 17,8 16 2 16,2 14,5 14,5 14,4 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 Continues to reflect growing trend, different to other protein
Slide 4: Industry Perspective
Industry Perspective Average broiler production per week Million broilers (Excludes imports) 14,6 13,8 12,9 11,8 11,8 11,9 11,1 11,0 10,5 9,8 9,8 9,2 8,5 8,0 7,1 7,5 7,1 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 • Significant growth over last 3 years – CAGR of 7% • Recent investments in the
Slide 5: Industry Perspective
Industry Perspective Average broiler production per week by producer • 14,6m broilers Million broilers per week as at March 2008 produced per week • 1,3m tons per 4,2 annum 3,8 • Astral = Earlybird Farms + County Fair • Others = 2,6 approximately 50 smaller producers producing less than 200k broiler
Slide 6: Industry Perspective
Industry Perspective R / kg Beef, Pork and Poultry prices 21 20 19 18 17 16 15 Beef abattoir 14 selling prices 13 12 11 10 Broiler Pork abattoir 9 producer price contract prices 8 7 2004 2005 2006 2007 • Poultry prices becoming less volatile Source: SAPA • Beef prices increased significantly in the
Slide 7: Industry Perspective
Industry Perspective Total poultry imports (‘000 tons) For 12 months ending 31 March 289 Total 84 279 • Imports p decreased duringg the p past yyear 98 • Chicken products mainly dark meat and offal decreased by 14,8% over 2007. 225 Mechanically Deboned 69 Meat 198 35 60 37 Origin of poultry imports
Slide 8: Industry Perspective
Industry Perspective Pilgrim’s Pride “Our financial results in the second quarter of fiscal 2008 reflect fl t th the crisis i i ffacing i our company and d iindustry d t ffrom record-high feed costs caused by the federal government’s deeply flawed ethanol policy”, said Clint Rivers, president andd c
Slide 9: Strategic Framework
Strategic Framework Vision Rainbow Chicken will be at the heart of every meal. We will achieve this by creating innovative solutions and strong brands. Key to our success is consistent, profitable, sustainable demand. Strategic Drivers Consumers Customers Supply Chain Sustainability Culture The sing
Slide 10: Strategy delivers significantly improved results
Strategy delivers significantly improved results Pre IAS39 • Past 5 years focus on improving quality of earnings • Significant investment in last 3 years 14,1 12,7 • 5 year Compound Annual Growth Rate 12,5 to 2008: 23,4% 755,0 • Strategy sound, however further margin decline anticipated 668,3 8,5 7,
Slide 11: Strategy update
Strategy update Poultry market by channel (including imports) Rainbow focus 2008 vs 2004 2004 Contribution 2008 16,1 Retail Retail Foodservice 25% Foodservice 29% 29% 39% Wholesale Wholesale Total market 11,6 Wholesale Chains Chains Rbn Independents 16% Wholesale 11% Independents 30% 21% 6,2 56 5,6
Slide 12: Strategy update
Strategy update Rainbow Chicken sales contribution by channel and tons per day (TPD) growth • Strong growth in TPD growth TPD growth Foodservice +11% +5% and Retail channels Foodservice Retail 39% 29% • Foodservice channel growth areas 2008 - Quick Service Revenue Restaurants (QSRs) + 21,5% - New bu
Slide 13: Strategy update
Strategy update IQF Product Launches New New packaging for Rainbow IQF range
Slide 14: Strategy update
Strategy update FP Update Relaunch of retail FTF and Fully Cooked ranges based on initial learnings Very positive consumer p response Rainbow Simply Chicken range of polonies and viennas has shown h phenomenal h l growth h to 5.4% of CPM market (R1,7bn)
Slide 15: Strategy update
Strategy update New Farmer Brown Tenderbreast range This new range is packaged in a unique foil bag and is the latest value-added product to be launched. New TV Ad The new Farmer Brown advert was launched in February, an update of the classic 70’s commercial with the legendary pay off line “they tas
Slide 16: Market conditions
Market conditions • Economy grown by approximately 4% • Higher inflation and interest rates impacting on consumer demand • Local chicken market estimated to have grown by 17,7% to R16,1bn • Feed raw material prices currently at record levels – Local yellow maize prices of R1877 per ton are higher th
Slide 17: General
General • AI SA status unchanged • US Anti dumping tariff • Remgro minority offer • BEE transaction
Slide 18: BEE transaction
BEE transaction • 18 March 2008 shareholders approved a broad-based BEE transaction • Participants in the transaction (collectively “BEE BEE partners partners”)) are: – Imbewu Consortium 40,0% – Ikamva Labantu (a Corporate & Social Investment Community Trust) 16,7% – Rainbow employee trust 42,7% – M
Slide 19: 2008 highlights
2008 highlights 2007 2008 Revenue Rm 4 730,3 5 955,3 + 25,9% Headline EBITDA Rm 775 1 775,1 901 0 901,0 + 16 16,2% 2% Effective tax rate % 29,9 33,6 - 3,7% Headline earnings Rm 477,0 528,1 + 10,7% Adjusted headline earnings Rm 477,0 549,0 + 15,1% Adjusted HEPS - fully diluted cents 164,4 180,8 + 10,
Slide 20: 2008 highlights
2008 highlights Revenue + 25,9% Adjusted headline EBITDA + 17,5% 5,995 910,4 4,730 775,1 4,104 688,1 4,027 368,2 2005 2006 2007 2008 2005 2006 2007 2008 Adjusted headline earnings + 15,1% 15 1% Dividends per share maintained 68,0 68,0 549,0 57 0 57,0 477,0 400,3 30,5 211,0 2005 2006 2007 2008 2005 2
Slide 21: Financial review
Financial review Revenue (Rm) + 25,9% Chicken sales + 21,5% 5955,3 1376 8 1376,8 • Volumes up 6,5% including 5 extra 4730,4 trading days (2,0% impact). QSR sector, targeted customers and 963,2 4578,5 branded products all showing 4101,5 , T t l Total 4027 0 4027,0 l i growth pleasing h 766,4 746,0 Ex
Slide 22: Financial review – Raw material procurement
Financial review – Raw material procurement Global Stocks : Use Ratio (corn) % 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0 0% 0.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 Stock 10.1 8.5 6.0 4.9 10.3 9.1 6.0 5.8 1.5 (Weeks)
Slide 23: Financial review – Raw material procurement
Financial review – Raw material procurement Yellow maize and soya spot prices R/ton SAFEX Yellow Maize R/ton CBOT Soya Meal (US $/ton) US $ per ton 2,250 400 2,000 350 1,750 300 1,500 250 1,250 200 1 000 1,000 150 750 2 year increase 89% 2 year increase 169% 100 500 250 50 2007 2008 0 A M Industry J
Slide 24: Feed cost vs Sales Realisation Growth
Feed cost vs Sales Realisation Growth % Growth Feed Cost Sales realisation 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 2007 2008
Slide 25: Feed Cost vs Headline EBIT
Feed Cost vs Headline EBIT Feed Cost Adjusted headline EBIT pre IAS 39 2004 2005 2006 2007 2008
Slide 26: Financial review
Financial review Adjusted headline EBITDA margin - 1,1% Adjusted headline earnings + 15,1% 16,8% 16,4% 33,6 15,3% Effective 32,7 Tax rate 31 9 31,9 Adjusted 910,4 headline % 29,9 9,1% EBITDA 549,0 Margin 775,1 % 688,1 477,0 400,3 Adjusted 368,2 headline Adjusted 211,0 EBITDA Headline R Rm Earnings R
Slide 27: Financial review
Financial review Cash generated by ops - 24,9 % Capex spend R315,5m 19,7 17,6 15,0 15,1 Dep as % 821 5 821,5 HEBITDA 136,4 118,2 109,7 680,1 315,5 617,2 78,0 Dep & amort Rm 234,4 402,2 214 1 214,1 200,0 Cash Rm Capex Spend Rm 2005 2006 2007 2008 2005 2006 2007 2008 • Increased working capital • Cont
Slide 28: Financial review
Financial review Earnings / Growths Dividends per share Adjusted Adjusted 68,0 68,0 headline Earnings HEPS Diluted 48,0 44,0 Rm Cents 57,0 Dividend Di id d 40,0 per share 15,1% (cents) 549,0 30 5 30,5 14,4% 21,0 477,0 Final 188,0 24,0 20 0 20,0 164,4 17,0 Interim 9,5 2007 2008 2007 2008 2005 2006 20
Slide 29: Financial review
Financial review • Feed claim Pre IAS39 recovery and BEE p expense removed Post IAS39 14,1 14,2 • Reporting the 13,9 13,0 financial effects off certain 12,6 financial 12,4 instruments used 774,0 in feed raw 79 7,9 739 6 739,6 materiall Adjusted headline 671,1 656,9 procurement EBIT introduces 578,3
Slide 30: Prospects
Prospects • Consumer spending is expected to soften over the next six months as a consequence of the higher inflation and interest rate environment • Maize and soya prices are likely to remain at current higher levels translating into significantly higher feed input costs than the 2008 financial yea
Slide 31: Questions
RAINBOW Questions