Avi Limited Class Y · JSE:AVI
Avi Limited Class Y — H1 2009 Earnings Presentation
38 slides from Avi Limited Class Y's earnings presentation, March 2009
Slide 1: AVI Limited presentation to analysts
AVI LIMITED presentation to analysts for the SIX MONTHS ended 31 December 2008
Slide 2: Agenda
AGENDA • Key features • Group financial results • Operating environment • Projects and New Product Development • Prospects • Questions and Answers
Slide 3: Key Features
KEY FEATURES • Revenue from continuing operations up 18% • Gross margin down from 42,5% to 40,3% due to input cost pressures • Operating profit from continuing operations up 16% • HEPS from continuing operations up 12% • Cash from operations up 17% to R650 million • Interim dividend up 9% to 36 cent
Slide 4: Group Financial Results
Group ya FINANCIAL | lst = a results
Slide 5: Group Financial Results
GROUP FINANCIAL RESULTS CONTINUING OPERATIONS 1H09 1H08 Income statement Rm Rm %Δ Revenue 4 002,8 3 392,8 18,0 Gross profit 1 611,5 1 443,6 11,6 Gross margin % 40,3 42,5 (5,2) Operating profit 534,6 461,5 15,8 Operating margin % 13,4 13,6 (1,5) Net financing cost 69,3 21,1 228,4 HEPS (cps) 103,2 92,
Slide 6: Continuing Operations - Revenue 18% Up
GROUP FINANCIAL RESULTS CONTINUING OPERATIONS - REVENUE 18% UP
Slide 7: Continuing Operations - Gross Profit 12% Up
GROUP FINANCIAL RESULTS CONTINUING OPERATIONS - GROSS PROFIT 12% UP
Slide 8: Continuing Operations - Operating Profit 16% Up
GROUP FINANCIAL RESULTS CONTINUING OPERATIONS - OPERATING PROFIT 16% UP
Slide 9: Group Financial Results
GROUP FINANCIAL RESULTS CONTINUING OPERATIONS 1H09 1H08 Rm Rm %Δ Cash generated by operations 649,5 554,1 17,2 Working capital to revenue % 16,9 18,8 Capital expenditure 165,8 115,8 43,2 Depreciation and amortisation 87,0 80,1 8,6 Net debt 568,3 635,5 (10,6)
Slide 10: Group Financial Results
GROUP FINANCIAL RESULTS CONTINUING OPERATIONS • Gross margin pressure largely attributable to unrecovered raw material input costs • Demand pressure and down trading in some categories • Lower operating leverage with less volume growth • Selling and admin cost increases in line with inflation • Net
Slide 11: Discontinued Operation - Alpesca
GROUP FINANCIAL RESULTS DISCONTINUED OPERATION – ALPESCA • Ongoing process of disinvestment • Operating profit of R20,8 million compared to loss of R2,7 million in prior period - Improved shrimp prices - Benefit of good Euro / USD forward cover on export sales • Results remain highly dependant on ex
Slide 12: Operating environment
Operating environment
Slide 13: Consumer Demand
OPERATING ENVIRONMENT CONSUMER DEMAND
Slide 14: Consumer Demand
OPERATING ENVIRONMENT CONSUMER DEMAND • Biscuit demand impacted by price increases over 18 months and Sales volume % Δ vs slowing consumer spending growth 2007 • Snacks volumes boosted by strong Tea 0,6 promotional activity Biscuits (0,1) Snacks 10,9 • I&J reduction due to timing of sales Creamer 3,
Slide 15: Consumer Demand
OPERATING ENVIRONMENT CONSUMER DEMAND
Slide 16: Cost Pressures
OPERATING ENVIRONMENT COST PRESSURES • Commodity input costs • Impact of above increases = R155 million (R120 million > CPI) • Packaging input cost increases average 17% • Labour cost increases 10% - 11%
Slide 17: Selling Prices
OPERATING ENVIRONMENT SELLING PRICES • Change in average realised selling prices Average realised selling prices Category % Δ vs 2007 CPIX by category & primary drivers Inflation Tea (raw material, Rand) 15,4 12,4 17,5 Biscuits (raw material, Rand) 27,3 12,4 17,5 Snacks (raw material, Rand) 16,5 12,
Slide 18: A & D Spitz
OPERATING ENVIRONMENT A & D SPITZ • Core brands retain strong appeal • 6 new stores opened in 1H09, bringing total doors to 63 • Average trading space 15 253 m2 (1H08 12 686 m2) • Investment in people and systems complete • Lower trading density in both established and new stores • Supply chain dela
Slide 19: Market Share
OPERATING ENVIRONMENT MARKET SHARE • Mix change in some brands to lower priced / lower margin products • I&J reduction due to price discipline to protect margins • Toppers biscuit range moved from Baumann’s to Bakers
Slide 20: Sales and Marketing Expenditure
OPERATING ENVIRONMENT SALES AND MARKETING EXPENDITURE includes advertising and promotions, co-operative expenditure with customers and marketing department costs • Total expenditure for 1H09 was R293m compared to R250m 1H08
Slide 21: Unsolicited approach from Tiger Brands
Unsolicited approach from Tiger Brands
Slide 22: Unsolicited Approach from Tiger Brands
UNSOLICITED APPROACH FROM TIGER BRANDS • Terms of non-binding expression of interest to acquire entire issued share capital of AVI announced 17/11/08 • Revised proposal with conditional funding made to AVI 22/01/09 • Interest withdrawn 04/03/09 • No formal offer made • Inherently difficult transacti
Slide 23: Projects and NPD
Projects and NPD
Slide 24: Projects
PROJECTS AVI FIELD MARKETING • Improved execution in store – increased sales • Costs similar to outsourcing • Will cover Entyce, Snackworks and Indigo • Implement 1H09 I&J • Overseas marketing department restructured – annual savings R8m • Mossel Bay processing moved to Cape Town – annual savings R6
Slide 25: Projects (continued)
PROJECTS (continued) OTHER • Successful rationalization of Real Beverage to Western and Eastern Cape • Profitable disposal of The Tea Blenders – non-core private label tea and coffee packer • New Coffee extraction technology successfully commissioned – improved quality and consistency • SAP Retail i
Slide 26: New Product Development - Launches
NEW PRODUCT DEVELOPMENT LAUNCHES • Bakers new Romany range – Balls, Tartes, Cookies, Vanilla and Double Choc • Pyotts Mini Cheddars150g • Willards - Original Cut – new packaging - Crinkle Cut – now curvy cut, in new packaging and with new flavours: Pickled Onion and Cheese & Sweet Chilli - Kettle Ch
Slide 27: New Product Development - Launches (continued)
NEW PRODUCT DEVELOPMENT LAUNCHES (continued) • I&J - New products – Omega 3 Plus Fish Fingers, Chicken with Veg Fingers, Chicken and Veg Burgers, and I&J Meal Box, as well as limited edition Entertain Range • Denny mushrooms reusable and recyclable pack with new labeling • Lenthéric - Hoity Toity Ma
Slide 28: New Product Development - Developed for H2
NEW PRODUCT DEVELOPMENT DEVELOPED FOR H2 • Bakers - Flavoured Marie Biscuits: Cappuccino and Caramel - Mini Marie Biscuits - 3 banded packs on Eet Sum Mor, Tennis and Red Label Lemon Creams • Willards - Big Korn Bites mixed 30g baler - Pilot multipack tube of mixed 30g flavours • Ellis Brown alterna
Slide 29: New Product Development - Developed for H2 (continued)
NEW PRODUCT DEVELOPMENT DEVELOPED FOR H2 (continued) • I&J - Migration to electronic Customer Club - Expansion of the Homestyle Beef Burger Range with the launch of Homestyle Lamb Burger and Homestyle Sandwich Burger - Improved consumer value for Steam Fresh Fish portion range and Flame Grills Fish
Slide 30: Prospects
PROSPECTS
Slide 31: Prospects
PROSPECTS • Demand - Jan and Feb softer than budgeted - Disposable income likely to remain constrained - Consumers looking for best value - Softer European markets for I&J exports • Cost pressures - Lagged effect of decreases in some commodities - Rand prices of some commodities remain at high level
Slide 32: Prospects (continued)
PROSPECTS (continued) • Opportunities - AVI Field Marketing - Ongoing review of brand portfolio - Product innovation and top line growth “AVI is fortunate to have a portfolio of market-leading brands that has demonstrated defensive attributes over many decades, which together with planned efficiency
Slide 33: Questions and Answers
QUESTIONS JE answers cen
Slide 34: Thank you
THANK YOU VWWWV.avi.CO.zZa
Slide 35: Business Unit Information
Business UNIT information
Slide 36: Business Unit Financial Results
BUSINESS UNIT FINANCIAL RESULTS Segmental Segmental Revenue Operating Margin Operating Profit 1H09 1H08 Δ 1H09 1H08 Δ 1H09 1H08 Rm Rm % Rm Rm % % % Food & Beverage Brands 3 219,5 2 688,9 19,7 413,7 336,4 23,0 12,8 12,5 Entyce 887,4 762,9 16,3 103,9 94,8 9,6 11,7 12,4 Snackworks 1 127,9 883,7 27,6 13
Slide 37: Chilled & Frozen Convenience Brands - Seafood Products
CHILLED & FROZEN CONVENIENCE BRANDS ANALYSIS OF FINANCIAL RESULTS – SEAFOOD PRODUCTS Revenue Operating profit Fishing 1H09 1H08 1H09 1H08 resource Rm Rm Rm Rm South Africa 773,4 646,3 120,9 68,8 Other 34,7 51,6 4,8 5,7 Continuing 808,1 697,9 125,7 74,5 Argentina 275,7 219,7 20,8 (2,7) Total 1 083,8
Slide 38: Chilled and Frozen Convenience Brands - Quota
CHILLED AND FROZEN CONVENIENCE BRANDS QUOTA – SEAFOOD PRODUCTS Hake quota (tons) CY09 CY08 South Africa Total Allowable Catch (TAC) 118 578 130 532 I&J 33 199 36 530 % 28,0 28,0 Argentina TAC 266 000 270 000 Alpesca 19 875 20 270 % 7,5 7,5