Astral Foods Limited · JSE:ARL
Astral Foods — H1 2020 Earnings Presentation
65 slides from Astral Foods's earnings presentation, May 17, 2020
Slide 1: Interim Results Presentation
Interim Results Presentation for the 6 months ended 31 March 2020
Slide 2: Agenda
AGENDA Business Overview Slide 3 – Chris Schutte Operational Overview Slide 8 – Andy Crocker, Gary Arnold Industry Matters Slide 26 – Gary Arnold Financial Overview Slide 29 – Daan Ferreira Outlook Slide 40 – Chris Schutte Additional Information Slide 44 5/17/2020 2 2
Slide 3: Business Overview
Chris Schutte Chief Executive Officer BUSINESS OVERVIEW 5/17/2020
Slide 4: Salient Points
Business Operational Financial Industry Matters Outlook Overview Overview Overview SALIENT POINTS Feed input costs increased over the period on higher maize prices, following poor yields and a smaller crop for 2019 Poultry production efficiencies on farm were maintained in line with performance
Slide 5: Key Financial Indicators
Business Operational Financial Industry Matters Outlook Overview Overview Overview KEY FINANCIAL INDICATORS Revenue 4.3% Profit before interest and tax @ R546 million 8.5% Profit for the period @ R371 million Headline earnings per share @ 951 cps No interim dividend declared 5
Slide 6: Divisional Overview
Business Operational Financial Industry Matters Outlook Overview Overview Overview DIVISIONAL OVERVIEW Poultry Feed Feeding cost increased Raw material costs up Bird performance improvement Less internal feed required Broiler sales volumes down External sales volumes up Broiler sales r
Slide 7: The Period in Perspective
Business Operational Financial Industry Matters Outlook Overview Overview Overview THE PERIOD IN PERSPECTIVE (R million) 700 17 650 600 109 550 241 500 77 450 20 15 400 546 503 350 300 R43 million 250 Feed conversion Other Raw material cost PBIT H1 F2019 Broiler selling PBIT H1 F2020 Broiler sales E
Slide 8: Andy Crocker, Managing Director: Commercial
Andy Crocker Managing Director: Commercial 5/17/2020
Slide 9: Feed Division
Business Operational Financial Industry Matters Outlook Overview Overview Overview FEED DIVISION Revenue - R million Operating profit - R million 4 000 250 239 243 3 509 200 3 000 3 303 150 2 000 100 1 000 50 - - 1H2019 1H2020 1H2019 1H2020 Revenue up 6.2% Operating profit up 1.7% • Raw material
Slide 10: Feed Division
Business Operational Financial Industry Matters Outlook Overview Overview Overview FEED DIVISION SAFEX yellow maize prices increased for the period under review 1H2020 avg. R2 703 per ton (1H2019: R2 579) up R124 per ton y-o-y Internal feed sales volumes decreased marginally by 1.2% due to impro
Slide 11: Feed Division – Sales Mix
Business Operational Financial Industry Matters Outlook Overview Overview Overview FEED DIVISION – SALES MIX 15% 14% 1H2019 1H2020 21% 697 569 Tons 22% 694 083 Tons Volume decrease ≈ 0.5% 59% 59% 5% 5% 5/17/2020 11
Slide 12: SAFEX Yellow Maize Price
Business Operational Financial Industry Matters Outlook Overview Overview Overview SAFEX YELLOW MAIZE PRICE 5/17/2020 Source: CJA Strategic Risk Brokers 12
Slide 13: SAFEX Yellow Maize Price vs. CBOT in Rand Terms
Business Operational Financial Industry Matters Outlook Overview Overview Overview SAFEX YELLOW MAIZE PRICE vs. CBOT IN RAND TERMS 5/17/2020 Source: CJA Strategic Risk Brokers 13
Slide 14: Durban Soya Meal Price
Business Operational Financial Industry Matters Outlook Overview Overview Overview DURBAN SOYA MEAL PRICE 5/17/2020 Source: CJA Strategic Risk Brokers 14
Slide 15: Poultry Commercial
PORELBY DIVISION oe Commercial
Slide 16: Poultry Division - Consolidated
Business Operational Financial Industry Matters Outlook Overview Overview Overview POULTRY DIVISION - CONSOLIDATED Revenue - R million Operating profit - R million 6 000 300 5 644 287 5 000 5 472 250 258 4 000 200 3 000 150 2 000 100 1 000 50 - - 1H2019 1H2020 1H2019 1H2020 Total revenue up 3.1%
Slide 17: Poultry Division - Commercial
Business Operational Financial Industry Matters Outlook Overview Overview Overview POULTRY DIVISION - COMMERCIAL Profits increased for the period under review Broiler selling prices increased with less promotional activity relative to the comparable period Broiler slaughter numbers at an avera
Slide 18: Poultry Division – Product Mix
Business Operational Financial Industry Matters Outlook Overview Overview Overview POULTRY DIVISION – PRODUCT MIX 22% 22% 1H2019 1H2020 51% 8% 50% 8% 228 172 Tons 222 437 Tons Volume decrease ≈ 2.5% 13% 13% 4% 5% 2% 2% 5/17/2020 18
Slide 19: Change in Broiler Selling Price vs. Feed Price
Business Operational Financial Industry Matters Outlook Overview Overview Overview CHANGE IN BROILER SELLING PRICE vs. FEED PRICE 40% 30% 20% 10% 0% Feb-17 Dec-14 Feb-15 Jun-15 Feb-16 Jun-16 Jun-17 Feb-18 Jun-18 Feb-19 Jun-19 Feb-20 Aug-15 Dec-15 Aug-16 Dec-16 Aug-17 Dec-17 Aug-18 Dec-18 Aug-19 Dec-
Slide 20: Gary Arnold, Managing Director: Agriculture
Gary Arnold Managing Director: Agriculture 5/17/2020 Agriculture
Slide 21: Poultry Division - Agriculture
Business Operational Financial Industry Matters Outlook Overview Overview Overview POULTRY DIVISION - AGRICULTURE Parent stock sales were higher for the period under review as demand for the Ross genetics increased Parent breeder productions were good, with an improvement in the number of chicks
Slide 22: Broiler Production Performance
Business Operational Financial Industry Matters Outlook Overview Overview Overview BROILER PRODUCTION PERFORMANCE 108% 106% 104% 102% 100% 98% 96% Key indicators base-lined to 100% in F2015 94% F2015 F2016 F2017 F2018 F2019 1H2020 Slaughter age Live weight Average daily gain 5/17/2020 22
Slide 23: Broiler Production Performance
Business Operational Financial Industry Matters Outlook Overview Overview Overview BROILER PRODUCTION PERFORMANCE 125% 120% 115% 110% 105% 100% 95% 90% 85% Key indicators base-lined to 100% in F2015 80% F2015 F2016 F2017 F2018 F2019 1H2020 Mortality Feed consumption Performance efficiency factor 5/1
Slide 24: Other Africa Division
OTHER Srrmis AFRICA DIVISION
Slide 25: Other Africa Division (Zambia, Mozambique & Swaziland)
Business Operational Financial Industry Matters Outlook Overview Overview Overview OTHER AFRICA DIVISION (Zambia, Mozambique & Swaziland) Revenue - R million Operating profit - R million 250 20 239 223 200 15 16 150 10 100 7 5 50 - - 1H2019 1H2020 1H2019 1H2020 Revenue up 7.0% Operating profit u
Slide 26: Industry Matters
5/17 /2020 é7Astral INDUSTRY MATTERS
Slide 27: Poultry Imports per Month
Business Operational Financial Industry Matters Outlook Overview Overview Overview POULTRY IMPORTS PER MONTH Tons 70000 65000 60000 55000 50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 Feb-16 Feb-15 Jun-15 Jun-16 Feb-17 Jun-17 Feb-18 Jun-18 Feb-19 Jun-19 Aug-19 Feb-20 Dec-14 Aug-15 Dec
Slide 28: Industry Overview
Business Operational Financial Industry Matters Outlook Overview Overview Overview INDUSTRY OVERVIEW Based on industry statistics current broiler slaughter numbers are an average of 19.6 million birds per week For the period under review the industry has remained stable with no consolidation or
Slide 29: Financial Overview
Daan Ferreira Chief Financial Officer FINANCIAL OVERVIEW 5/17/2020
Slide 30: Income Statement
Business Operational Financial Industry Matters Outlook Overview Overview Overview INCOME STATEMENT 2020 2019 Six months ended 31 March R million R million % change Revenue 7 069 6 775 4% Operating profit 546 503 8% Operating profit margin 7.7% 7.4% Net finance (cost) / income (27) 18 Profit before
Slide 31: Group Six Monthly Revenue and Profitability
Business Operational Financial Industry Matters Outlook Overview Overview Overview GROUP SIX MONTHLY REVENUE AND PROFITABILITY 7 069 (R million) 6 775 6 600 6 710 6 556 6 379 6 131 15.7% 5 755 5 823 5 795 5 511 14.2% 4 902 4 700 1036 906 7.4% 7.7% 866 550 551 5.6% 546 503 429 379 280 213 212 120 1H1
Slide 32: Feed Six Monthly Revenue
Business Operational Financial Industry Matters Outlook Overview Overview Overview FEED SIX MONTHLY REVENUE (R million) 3 729 3 461 3 448 3 405 3 509 3 275 3 303 3 271 3 096 3 102 2 956 2 961 2 550 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17 1H18 2H18 1H19 2H19 1H20 Revenue Change in volumes Change in f
Slide 33: Poultry Six Monthly Revenue
Business Operational Financial Industry Matters Outlook Overview Overview Overview POULTRY SIX MONTHLY REVENUE (R million) 5 415 5 472 5 405 5 644 5 394 5 124 4 503 4 693 4 456 4 237 4 436 3 650 3 317 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17 1H18 2H18 1H19 2H19 1H20 Revenue Change in poultry selling
Slide 34: Group Six Monthly Operating Profit
Business Operational Financial Industry Matters Outlook Overview Overview Overview GROUP SIX MONTHLY OPERATING PROFIT (R million) 1044 875 898 191 207 266 550 551 546 503 429 186 379 237 243 280 239 233 212 213 120 250 197 157 184 45 59 351 310 194 252 616 836 617 258 113 287 22 -135 1H14 2H14 1H15
Slide 35: Balance Sheet
Business Operational Financial Industry Matters Outlook Overview Overview Overview BALANCE SHEET March 2020 September 2019 R million R million % change Non-current assets 3 148 2 658 18% Right of use assets 645 - Net working capital 1 113 1 288 14% Current assets (excl. cash) 3 148 2 982 6% Current
Slide 36: Capital Expenditure
Business Operational Financial Industry Matters Outlook Overview Overview Overview CAPITAL EXPENDITURE 1H2020 2H2019 1H2019 Six months ended 31 March R million R million R million Depreciation 197 88 88 Property, plant & equipment 91 88 88 Right of use assets 106 - - Total capex spend 311 312 345 Fe
Slide 37: Working Capital
Business Operational Financial Industry Matters Outlook Overview Overview Overview WORKING CAPITAL March 2020 September 2019 Variance R million R million R million Current assets 3 148 2 982 166 Biological assets 801 759 42 Inventory - Poultry 512 337 175 - Feed 428 291 137 - Other Africa 40 63 (23)
Slide 38: Statement of Cash Flows
Business Operational Financial Industry Matters Outlook Overview Overview Overview STATEMENT OF CASH FLOWS 2020 2019 Six months ended 31 March R million R million Cash operating profit 715 407 Share based payments (24) Lease payments (122) - 569 407 Working capital movement (116) 100 453 507 Tax pai
Slide 39: In Summary
Business Operational Financial Industry Matters Outlook Overview Overview Overview IN SUMMARY Group operating profit up 8.5% Finance charges up Change in accounting for leases No change in earnings for the period Net impact of lease accounting R(14) million Net cash outflow of R82 millio
Slide 40: Outlook
Chris Schutte Chief Executive Officer OUTLOOK 5/17/2020
Slide 41: Negative Influences Exacerbated by Lockdown
Business Operational Financial Industry Matters Outlook Overview Overview Overview NEGATIVE INFLUENCES EXACERBATED BY LOCKDOWN Unprecedented unemployment rate expected following the hard lockdown, and resultant financial impact on businesses and the economy at large Consumer disposable income wi
Slide 42: Positive Influences
Business Operational Financial Industry Matters Outlook Overview Overview Overview POSITIVE INFLUENCES All of Astral’s operations are running like clockwork, and to date no disruptions have been experienced, with stringent social distancing, screening and employee welfare measures (sufficient PPE)
Slide 43: Confirmed August 2019
“ ” Confirmed August 2019 5/17/2020
Slide 44: Additional Information
ADDITIONAL INFORMATION 5/17/2020
Slide 45: Accounting Considerations – March 2020
ACCOUNTING CONSIDERATIONS – MARCH 2020 Operating Finance R million Revenue Expenses Inventory Other Profit Charges Consignment distribution model Recognition of sales (166) (19) 132 Recognition of distribution costs 69 69 Leases – change in accounting Additional amortisation 106 Reallocate lease pay
Slide 46: World Corn Ending Stocks
WORLD CORN ENDING STOCKS Million Tons 375 30% 350 27,71% 27,80% 26,22% 325 300 25,00% 24,82% 24,35% 25% 275 22,87% 250 225 19,82% 200 20% 175 150 125 100 15% 75 50 25 0 10% 2014 2015 2016 2017 2018 2019 2020E 2021F End Stock Maize stock to use ratio 5/17/2020 Source: CJA Strategic Risk Brokers 46
Slide 47: South Africa – Total Maize Supply & Demand
SOUTH AFRICA – TOTAL MAIZE SUPPLY & DEMAND Marketing year (May to April) 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20E 2020/21F '000 tons Actual Actual Actual Actual Actual Estimate Forecast Carry In (1 May) 589 2 074 2 471 1 093 3 689 2 662 1 011 Crop Estimate 14 250 9 955 7 779 16 820 12 510 11
Slide 48: South Africa – Total Maize Supply & Demand
SOUTH AFRICA – TOTAL MAIZE SUPPLY & DEMAND ‘000 Tons 4 000 28,31% 30% 3 500 25% 3 000 21,75% 20,19% 20% 2 500 16,62% 15,97% 2 000 15% 9,87% 3 689 1 500 7,84% 2 662 10% 2 471 2 062 2 146 1 000 5% 500 1 093 1 011 0 0% 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20E 2020/21F Carry out Maize stock to u
Slide 49: El Niño Southern Oscillation - Forecast
EL NIÑO SOUTHERN OSCILLATION - FORECAST 5/17/2020 Source: International Research Institute for Climate and Society (IRI) – Columbia University 49
Slide 50: Southern Africa - Vegetative Health Index
SOUTHERN AFRICA - VEGETATIVE HEALTH INDEX VHI of previous year VHI of current year 5/17/2020 Source: NOAA - National Environmental Satellite, Data, and Information Service (VHI) 50
Slide 51: Broiler Feed – Ingredient Inclusion & Cost Contribution
BROILER FEED – INGREDIENT INCLUSION & COST CONTRIBUTION 0,4 0,5 0,5 0,4 0,4 0,3 0,4 100% 1,8 4,7 1,8 5,4 2,9 6,0 3,3 5,4 3,3 3,0 3,2 5,3 3,6 3,8 6,6 4,2 7,4 9,9 4,7 8,7 90% 0,5 7,6 7,7 7,0 14,6 16,6 16,6 14,8 5,6 9,1 0,4 18,2 6,0 13,8 0,5 80% 6,9 1,7 0,7 0,6 0,7 0,7 6,2 5,8 19,8 23,4 5,0 21,2 5,6 20
Slide 52: Broiler Selling Price
80% 90% 100% 110% 120% 130% 150% 140% Oct-14 5/17/2020 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Lower brine effect Oct-16 Dec-16 Feb-17 Apr-17 Broiler selling price index Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 BROILER SELLING PRICE Oct-18 Dec-18 F
Slide 53: Broiler Price vs. Food Price Inflation
100% 110% 120% 130% 150% 90% 140% Oct-14 5/17/2020 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Broiler selling price index Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18 Dec-18 Feb-19 Apr-19 Jun-19 SA food price index Aug-1
Slide 54: South African Protein Price Comparison
SOUTH AFRICAN PROTEIN PRICE COMPARISON cents / kg 9 000 8 000 7 000 6 000 5 000 4 000 3 000 2 000 1 000 Jun-16 Dec-19 Feb-15 Jun-15 Feb-16 Feb-17 Jun-17 Feb-18 Jun-18 Feb-19 Jun-19 Feb-20 Dec-14 Aug-15 Dec-15 Aug-16 Dec-16 Aug-17 Dec-17 Aug-18 Dec-18 Aug-19 Oct-14 Oct-15 Oct-16 Apr-17 Oct-17 Oct-18
Slide 55: Local Broiler Production & Market Share
LOCAL BROILER PRODUCTION & MARKET SHARE 21% 26% 4% 5% 8% 20% 7% 9% Astral RCL Country Bird Daybreak Sovereign Grainfields Chubby Chick Other Local broiler production ≈ 19.6 million birds per week 5/17/2020 Source: Own Estimates 55
Slide 56: Local Broiler Production & Market Share
LOCAL BROILER PRODUCTION & MARKET SHARE 18% 29% 14% 6% 15% 5% 3% 4% 6% Astral RCL Country Bird Daybreak Sovereign Grainfields Chubby Chick Other Imports Avg. poultry imports ≈ 7.7 million birds per week (6 months ending March 2020) 5/17/2020 Source: Own Estimates 56
Slide 57: Total Poultry Imports (Chicken, MDM, Turkey)
TOTAL POULTRY IMPORTS (CHICKEN, MDM, TURKEY) Tons 600 000 500 000 400 000 300 000 200 000 F2017 F2018 F2019 F2020 100 000 0 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep F2017 50 324 101 279 135 812 173 187 212 399 278 057 319 933 367 106 409 557 453 981 499 952 551 867 F2018 46 348 92 223 140 823
Slide 58: Total Poultry Imports – Country of Origin
TOTAL POULTRY IMPORTS – COUNTRY OF ORIGIN Country of origin for poultry Country of origin for poultry imports - 2019 imports – March 2020 YTD Other 3,5% Other 2,8% US 16,6% US 22,2% Argentina Brazil Brazil 7,0% 49,8% 50,2% Argentina 7,1% EU 23,1% EU 17,7% 538 605 tons 257 443 tons 5/17/2020 Source:
Slide 59: Total Poultry Imports – Country of Origin
TOTAL POULTRY IMPORTS – COUNTRY OF ORIGIN Country Imports (tons) 2018 2019 2020 YTD Brazil 348 155 268 869 64 844 United States 91 374 89 598 28 722 Poland 13 463 50 419 4 294 Argentina 33 278 37 939 9 110 Ireland 26 328 31 221 7 450 Denmark 25 672 23 325 4 198 Spain 4 932 18 824 6 495 Thailand 9 01
Slide 60: COVID-19 Measures
COVID-19 MEASURES 5/17/2020 60
Slide 61: COVID-19 Measures
COVID-19 MEASURES 5/17/2020 61
Slide 62: COVID-19 Measures
COVID-19 MEASURES 5/17/2020 62
Slide 63: COVID-19 Measures
COVID-19 MEASURES 5/17/2020 63
Slide 64: COVID-19 Measures
COVID-19 MEASURES 5/17/2020 64
Slide 65: 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] 5/17/2020