Tiger Brands Limited · JSE:TBS
Tiger Brands — H1 2019 Earnings Presentation
38 slides from Tiger Brands's earnings presentation, May 22, 2019
Slide 1: Unaudited Group Results for the six months ended 31 March 2019
UNAUDITED GROUP RESULTS For the six months ended 31 March 2019
Slide 2: Index
Index Operating environment & performance overview Financial & operational performance Conclusion 2
Slide 3: Disclaimer
Disclaimer Forward-looking statement This document contains forward looking statements that, unless otherwise indicated, reflect the company’s expectations as at 22 May 2019. Actual results may differ materially from the company’s expectations if known and unknown risks or uncertainties affect the b
Slide 4: Operating environment & performance overview
Operating environment & performance overview Lawrence Mac Dougall – Chief Executive Officer
Slide 5: Low growth environment to persist
Low growth environment to persist Q1 GDP recovery expected to be short-lived Landscape GDP Growth % o Concerns of contraction in Q2 2019 o Eskom – destabilising fiscal position 3.8% 4.0% • Impacting production & costs 3.5% 3.2% Fear of Revised 3.0% contraction Revised downward • Significant investme
Slide 6: Shoppers are spending less – but also stretching their wallets
Shoppers are spending less – but also stretching their wallets Shopping on promotion more Spending less than ever before Spending more on 65% Bread* actively compare prices across brands Toilet Tissue R11 650 Soya based substitutes [-10%] Canned Pilchards 25% Soap 60 R194 stock up on premium brand
Slide 7: Market shares improve in value & volume
Market shares improve in value & volume Driven by Beverages, ST&B, Bread, Home Care & Groceries Value (m) Tiger Brands Value Drivers by Category Total SA l 6mm TY 11 000 10 800 10 600 10 400 10 200 10 000 9 800 9 600 TOTAL TIGER 6MM BEVERAGES SWEETS&TREATS BREAD PRODUCTS HOMECARE TOTAL CULINARY TOTA
Slide 8: Brands prove resilient
Brands prove resilient Marketing investment maintained at 3.2% of revenue, impacted by phasing 33%* 27% 35% 53% #1 #1 #1 #1 74%* 34% 32% 54% #1 #2 #1 #1 21% 47% 53% 90%* #2 #1 #1 #1 Source: % = Nielsen 6mm volume share to March 2019 | * Bread unit share | Cooking oats | Homogenised Food OPERATING EN
Slide 9: New launches anchored in consumer insights
New launches anchored in consumer insights Value & premium sectors gaining, 33% of consumers trading up Health & Wellness Best-of-Both Ace Plus Fiber Genius On-the-go Fruit & Yoghurt Pouches Value Tinkies Variety Pack Four can value pack Convenience Dombolo, Vetkoek Quick Cooking Rice Instant Baby M
Slide 10: HEPS down 12%
HEPS down 12% Impacted by VAMP & Oceana Ex-VAMP HEPS+ down 12% Group revenue+ Down 2% excluding Oceana Up 4% to R15.2 billion down 2% to R15.4 billion -12% 900 Gross margins+ Down 140bps to 32.7% 868 down 200bps to 31.3% 850 Group operating income+** Down 9% to R1.8 billion down 24% to R1.5 billion
Slide 11: Recovery in domestic volumes & market share, low price inflation impact margins
Recovery in domestic volumes & market share, low price inflation impact margins Deliberate interventions yield results Positive outcomes Challenging outcomes HPC Grains o Recovers in line with guidance, following a weak pest season last o Maize – increased competition / differentiation challenging y
Slide 12: Financial & operational performance
Financial & operational performance Noel Doyle Chief Financial Officer
Slide 13: Operating income impacted by VAMP losses in H1 & gross margin compression ex-VAMP
Operating income impacted by VAMP losses in H1 & gross margin compression ex-VAMP Associate income impacted by Oceana unbundling decision, EPS boosted by non-recurrence of recall costs & profit from Oceana sale in current year Continuing operations – Rm H1 2019 H1 2018 % change Revenue 15 402.1 15 6
Slide 14: Abnormal profits boosted by sale of Oceana shares to Brimstone
Abnormal profits boosted by sale of Oceana shares to Brimstone As well as R100m insurance proceeds related to VAMP Rm H1 2019 H1 2018 Profit on sale of shares in associate investment 282 - Proceeds from VAMP recall insurance claim 100 50 VAMP recall cost provision (25) (415) Restructuring & related
Slide 15: Income from associates impacted by accounting treatment of Oceana
Income from associates impacted by accounting treatment of Oceana Carozzi’s strong underlying trading performance offset by forex losses linked to Argentinian business -41% +4% Rm Rm 400 200 R341m R163m R169m 350 35 300 10 150 35 43 250 R200m 10 10 200 178 100 43 150 10 31 118 116 100 50 50 118 116
Slide 16: Oceana unbundling decision & VAMP distort comparisons
Oceana unbundling decision & VAMP distort comparisons Headline earnings ex-Oceana down 1% R’m H1 2019 H1 2018 % change Earnings Earnings as reported 1 431 1 396 3% Oceana equity accounted earnings (31) (178) Oceana – profit on sale of shares to Brimstone (282) - Adjusted earnings (excl Oceana) 1 118
Slide 17: Domestic volumes, ex-VAMP, up 2%
Domestic volumes, ex-VAMP, up 2% R15.7bn R15.4bn Total Price/Mix Volume Forex Grains 2% 3% (1%) - Consumer Brands – Food (ex VAMP) 8% 4% 4% - HPCB 19% 9% 10% - Total domestic business (ex VAMP) 6% 4% 2% LAF (5%) (3%) (6%) 4% Balance of Exports & International (7%) 1% (11%) 3% Total continuing operat
Slide 18: HPC delivers a solid recovery, offset by Grains
HPC delivers a solid recovery, offset by Grains Positive impact from Deli & Deciduous Fruit interventions Consumer Domestic Brands Food business Exports & Group Grains (ex VAMP)* HPC (ex VAMP) International (ex VAMP) VAMP Group** Volume ▼1% ▲5% ▲6% ▲2% ▼15% - ▼78% ▼5% R6.7bn R5.8bn R1.0bn R13.5bn R1
Slide 19: Grains
Grains Margin compression reflects competitive pricing environment o Wheat-to-bread volumes hold up in the face of sustained price-led Rm Grains 8 000 competition 6 594 6 697 • Margins decline somewhat 15.9% 11.8% o Maize most significant period-on-period decline 4 000 • Driven by less favourable pr
Slide 20: Overall volume share maintained in tough environment
Overall volume share maintained in tough environment 50% 45% 43.5% 41.1% 40% 38.2% 36.4% 34.3% 34.5% 34.8% 35% 32.9% 32.6% 29.0% 29.1% 30% 27.4% 25.6% 25% 20% 17.8% 15% 11.2% 12.5% 10% 8.4% 7.7% 5% 0% Grains Maize Samp Flour Cereals Rice Dry Pasta Instant Noodles Bread 6MM LY 6MM TY Source: Nielsen
Slide 21: Consumer Brands – Food
Consumer Brands – Food Groceries delivers solid top line recovery o Revenue up 8% Rm Groceries 4 000 • Inflation of 5% 2 982 3 000 2 749 • Volume growth of 3% - Strong volume growth in condiments & ingredients 2 000 7.8% 9.6% - Double digit growth in the independent trade 1 000 264 233 o Industrial
Slide 22: Supply constraints impacted availability in key Q1
Supply constraints impacted availability in key Q1 Particularly in tomato sauce & mayonnaise 70% 61.3% 60% 57.9% 55.3% 54.6% 50% 42.6% 40% 34.1% 34.4% 32.0% 30% 20% 10% 0% Beans Tomato Sauce Peanut Butter Mayo/Salad Cream 6MM LY 6MM TY Source: Nielsen 6mm volume share as at March 2019 FINANCIAL & OP
Slide 23: Snacks, Treats & Beverages
Snacks, Treats & Beverages S&T – strong top line growth & share gains diluted by competitive pricing & supply chain challenges o Revenue up 7% Rm Snacks & Treats 1 500 o Volumes up 5% 1 129 1 204 • Driven by chocolate & snacking 1 000 • Innovation underpins growth in key sugar brands 17.2% 13.9% 500
Slide 24: Volume share gains in Snacks & Treats
Volume share gains in Snacks & Treats New variants drive chocolate gains 50% 45% 42.8% 43.8% 40% 35% 30% 25% 22.4% 23.8% 20% 14.7% 15% 13.1% 10% 5% 0% Sweet Treats Sugar Chocolate 6MM LY 6MM TY Source: Nielsen 6mm volume share as at March 2019 FINANCIAL & OPERATIONAL PERFORMANCE 24
Slide 25: Market share growth across all segments
Market share growth across all segments 45% 40.5% 41.0% 40% 35% 30% 27.7% 28.4% 25.3% 26.1% 25% 20% 16.6% 16.3% 15% 10% 5% 0% Beverages Liquid Concentrates Sport Drinks Ready To Drink 6MM LY 6MM TY Source: Nielsen 6mm volume share as at March 2019 FINANCIAL & OPERATIONAL PERFORMANCE 25
Slide 26: VAMP
VAMP Delays in re-opening & managing increased complexity impacted service levels o Elected to not participate in deli segment due to regulatory risk o Private label contract not fully restored o Positive release protocol initially impacted service levels o Brand health remains strong o Marketing ef
Slide 27: Home, Personal & Baby Care (HPCB)
Home, Personal & Baby Care (HPCB) Delivers a strong performance o Home Care Rm HPCB 2 000 • Recovers from poor pest season last year 1 455 1 500 1 221 - Pesticides volumes increase by 15% • Operating income up 96% 1 000 16,1% 20.3% o Personal Care 500 196 295 • Challenging category dynamics persist
Slide 28: Pest impacted by selling price inflation
Pest impacted by selling price inflation Strong volume share gains in Baby nutrition 80% 71.0% 70% 68.1% 63.5% 65.3% 60% 50% 40% 30% 20% 10% 5.8% 5.5% 0% Home Care (Pest) Personal Care Baby Nutrition 6MM LY 6MM TY Source: Nielsen 6mm volume share as at March 2019 | Baby nutrition includes homogenise
Slide 29: Exports & International
Exports & International Deciduous Fruit & Deli Foods respond to interventions o Exports impacted by change in Nigerian distributor Rm Exports & International 1 892 • New distributor finalised 2 000 1 678 • First orders shipped in April 2019 1 500 o Mozambique remains extremely challenging 1 000 4.5%
Slide 30: Outlook
Outlook Operating environment remains tough Environment Counter strategies Full year EPS boosted by Oceana unbundling Focus on reducing costs & improving efficiencies Continued cost push in conversion & distribution Improve on shelf availability & service levels Consumer environment unlikely to impr
Slide 31: Conclusion
Conclusion Lawrence Mac Dougall
Slide 32: Strategy execution gaining momentum
Strategy execution gaining momentum What’s working What’s challenging o Naked margins holding o Constrained consumer increasingly price sensitive • Driven by centralised procurement • Low inflation & low volume environment o Centres of Excellence provide increased capability/visibility o Conversion
Slide 33: Strategy execution is gaining momentum
Strategy execution is gaining momentum Challenged by low inflation & growth Growth drivers Key measure Progress Availability & fair share o Market share o Share gains in Baby Food, Bread, ST&B & Milling offset by Groceries & o Availability Personal Care o Weighted distribution o Maintaining market s
Slide 34: Building a winning culture gaining momentum
Building a winning culture gaining momentum Greater focus on costs & efficiencies in current environment Be efficient Great people Sustainable future o Centralised procurement delivering o Increased focus on talent & leadership o Deliberate focus on Enterprise and naked margin benefit development &
Slide 35: Our competitive advantages
Our competitive advantages Great people & strong brands supported by a winning culture o Resilient brands with strong market shares o Embedding operating model & culture development o Sustainable premiums o Focus on consumer centricity o Brands resonate strongly across all income groups • Delivering
Slide 36: Tartrazine Free
TARTRAZINE FREE
Slide 37: Additional information
Additional information H1 2019 H1 2018 Working capital per rand of turnover 21.8 21.3 Net working capital days 99.3 88.6 Stock days 95.3 79.0 Debtor days 37.4 46.8 Creditor days 33.4 37.2 Effective tax rate 30.6% 30.5% 37
Slide 38: Contribution to revenue & operating income
Contribution to revenue & operating income Revenue Operating income before IFRS 2 30% 40% 39% 27% 19% 19% 15% 18% 10% 11%12% 11%13%10% 9% 10% 9% 3% 3% 4% 14% 14% 1% 12% 11% 9% 8% 7% 8% 6% 7% 5% 2% 2% -19% 1% H1 2019 H1 2018 H1 2019 H1 2018 Milling and Baking Other Grains Groceries Snacks & Treats Be