Avi Limited Class Y · JSE:AVI
Avi Limited Class Y — Non-Deal Roadshow (November 2004)
46 slides from Avi Limited Class Y's roadshow presentation, Nov 23, 2004
Slide 1: International Roadshow Nov/Dec 2004
INTERNATIONAL ROADSHOW NOV/DEC 2004
Slide 2: Agenda
AGENDA • Nature of the business • Five year financial review • Refocus on core strategies • Overview of the SA consumer • Prospects • Consol as a business
Slide 3: Nature of Business
NATURE OF BUSINESS PROFILE AVI Limited is a leading Branded Consumer Products and Services Group with a number of well known South African brands within its portfolio PURPOSE We supply enjoyment to people through the supply of branded value-added products and services
Slide 4: Organogram
ORGANOGRAM AVI Limited Branded Consumer Packaging Logistics Products (30%)* (6%)* (64%)* Consol Vector * FY04 contribution to turnover
Slide 5: Branded Consumer Products
BRANDED CONSUMER PRODUCTS AVI Limited Branded Consumer Packaging Logistics Products (30%)* (6%)* (64%)* National Real Willards Indigo I&J Denny Brands Beverage (100%) (100%) (80%) (100%) (100%) Co (75%)
Slide 6: Divisional Breakdown
DIVISIONAL BREAKDOWN • National Brands Limited (NBL) – Manufactures, markets and distributes leading biscuit, tea and coffee brands, such as Bakers, Pyotts, Five Roses, Ciro and Frisco • Willards – Manufactures and markets a complete range of potato chips, baked snacks and extruded snack products •
Slide 7: Divisional Breakdown (cont.)
DIVISIONAL BREAKDOWN (cont.) • I&J – Integrated added-value seafood products – Operations in SA, Argentina and Australia – 70% of sales in foreign currencies • Real Beverage Company – Manufactures and markets short-life juices and iced teas under the Real Juice, Sir Juice and Quali Juice brands • De
Slide 8: Five Year Financial Review
AVI FIVE YEAR FINANCIAL REVIEW
Slide 9: Turnover
TURNOVER 9 10 8 8 6 5 6 Rbn 6 % 4 7.0 6.6 5.7 5.0 2 4.6 3 0 2000 2001 2002 2003 2004 Turnover (Rbn) Volume Growth
Slide 10: Operating Profit
OPERATING PROFIT 14.2 16 13.5 12.5 1000 12 9.3 7.3 Rm 8 % 600 933 947 706 4 466 334 200 0 2000 2001 2002 2003 2004 Operating profit Operating profit margin
Slide 11: Headline Earnings
HEADLINE EARNINGS 750 627 588 496 500 345 Rm 258 250 0 2000 2001 2002 2003 2004
Slide 12: HEPS vs DPS
HEPS VS DPS 300 80 80 80 200 53 60 cps cps 38 30 40 100 195.2 184.1 153.9 20 94.5 66.4 0 0 2000 2001 2002 2003 2004 HEPS DPS
Slide 13: HEPS vs FCF
HEPS vs FCF 400.0 284.5 300.0 300.0 193.3 194.5 162.6 200.0 cps cps 200.0 152.2 100.0 195.2 100.0 184.1 153.9 94.5 66.4 0.0 0.0 2000 2001 2002 2003 2004 HEPS FCF
Slide 14: ROE vs ROCE
ROE VS ROCE 25.0 19.7 24.0 18.5 17.0 20.0 14.4 12.2 15.0 % % 16.0 10.0 21.6 19.3 19.0 14.9 5.0 12.9 8.0 0.0 2000 2001 2002 2003 2004 ROE ROCE
Slide 15: Share Price Data
SHARE PRICE DATA Free float (%) 100 Largest shareholder PIC – 11.2% Share price performance - 12 month high (cps) 2 545 - 12 month low (cps) 1 600 Volumes - 12 month (millions) 197.9 - Average monthly trade (millions) 16.5 Market capitalisation (Rm) 7 922 JSE sector Food producers & processors
Slide 16: Focus on Core Strategies
AVI FOCUS ON CORE STRATEGIES
Slide 17: Reasons for Restructuring
REASONS FOR RESTRUCTURING • AVI’s strategy is to focus on branded consumer products and services • Historic assets that are not directly aligned to strategy – Vector – Consol • Consol and Vector now have sound fiscal and market positions • Opportune time to align Group’s portfolio
Slide 18: Restructuring of Business
RESTRUCTURING OF BUSINESS • Vector disposal – Proposed 100% sale to Vector’s largest principal, Rainbow Chicken • Consol unbundling and relisting – Acquired 19.3% minority stake from Owens Illinois Inc for R525m • Cum dividend • Long-standing technical agreement extended until 2016 – Listing of 100%
Slide 19: Pro Forma FY04 Results Post Unbundling & Vector Sale
PRO FORMA FY04 RESULTS POST UNBUNDLING & VECTOR SALE Pre Post Rm Rm %Δ TURNOVER 7 028 4 481 (36) EBITDA 1 262 535 (58) EBIT 947 394 (58) TOTAL ASSETS 5 904 2 856 (52) NO. OF EMPLOYEES 11 761 7 875 (33)
Slide 20: Overview of the SA Consumer
AVI #7. OVERVIEW OF THE SA CONSUMER
Slide 21: Changing Face of SA Upper/Middle Class
CHANGING FACE OF SA UPPER/MIDDLE CLASS • Steady improvement in SA’s LSM profile – % population in LSM 6-7 grown by 1.2% in the last two years • The emerging black consumer is a major contributor to increased spending and demand for credit – 23% of SA’s upper income group now black – Earning power of
Slide 22: Consumer Confidence
CONSUMER CONFIDENCE • All time high in 2QCY04 according to Bureau of Economic Research • Black consumer confidence showed largest single quarter increase ever recorded (23 years) • Greater access to credit increased spending • Lending volumes buoyant but defaults fallen to lowest levels in two yea
Slide 23: Drivers of Consumer Confidence
DRIVERS OF CONSUMER CONFIDENCE • Strong real wage growth – Low inflation – High wage settlements • Tax cuts • SA economy has seen 20 consecutive quarters of positive economic growth • Lower interest rates
Slide 24: Consumer Outlook Remains Positive
CONSUMER OUTLOOK REMAINS POSITIVE • Slower positive growth expected – around 3.5% • Recent interest rate cut of 50bp will mitigate any slowdown • Extension of current economic cycle • Interest rate volatility expected to continue – Strength of Rand – Oil price • Increased government spending – R165b
Slide 25: Summary
SUMMARY • General consumer environment expected to remain buoyant in the short/medium term • Food inflation set to increase pressure on middle to lower consumer bracket • Much depends on the Rand and global growth • Good government fiscal discipline enables significant GDFI • Brands generally homo
Slide 26: Prospects
PROSPECTS • AVI – Positive outlook for domestic consumer demand – Continued innovation drive – Strong Rand net negative factor for our business – Cost management remains a key focus – Impact of acquisitions
Slide 27: Prospects
PROSPECTS • NBL – New biscuit innovation capability – Benefit of lower input costs – Growth of exports into Africa off new base – House Of Coffees rationalisation benefits • Willards – Management responsibilities moved to AVI – Jul 04 – Development of new business model aimed at yielding profitabili
Slide 28: Prospects
PROSPECTS • I&J – Capability to process smaller catch sizes – Focus on cost reduction – Rand impact – 1% movement in currency basket – R3.5m EBIT – Alpesca • Potential for greater hake tonnage – Revised licenses for 24 000 tons from 16 000 tons • Additional shrimp vessels • Shrimp catches volatile
Slide 29: Prospects
PROSPECTS • Indigo – Lenthéric launch – Australiasia & UK – Innovation remains key – Benefit of lower input costs • RBC – Innovation drive – Critical mass – Profitable in FY05 – Sir Juice impact
Slide 30: Prospects
PROSPECTS • Denny – Acquisition effective Aug 2004 – Denny • Premium fresh-to-market brand – over 50% market share • Focus on growth of fresh market and increasing market share – Dining-In – innovation engine • Split out of Denny • Premium sauces and soups – three packaging formats • Own brand initi
Slide 31: Summary
SUMMARY • Strong heritage brands • World class facilities • Focus on BCP acquisition • Cash-generative • Depth of operational management • Corporate governance standards well respected • BEE initiatives • Well positioned for future growth
Slide 32: Slide 32
Slide 33: Unbundling process
• Unbundling process – 1 for 1 share split – 100% free float • 19.3% O-I minority stake acquired in Oct 04 – Independent from AVI • Board • Management – Relisted by March 05
Slide 34: Vision
VISION To be an admired globally competitive glass packaging solutions provider committed to promoting glass as the pack of choice for customers and consumers
Slide 35: Consol Ltd structure
Consol Ltd Consol Glass Plastics Glass CSG XPRS Flexibles Plastform Rigids Operating Industrial Minerals Cullet
Slide 36: Financial Summary
FINANCIAL SUMMARY FY04 FY03 Rm Rm %∆ Turnover 2 117 1 937 9 Operating profit 484 422 14 Operating margin - % 22.8 21.8 - Capex 499 307 63 Working capital to sales - % 27.1 27.3 -
Slide 37: Leading South African glass container manufacturer
• Leading South African manufacturer and marketer of glass containers – Four glass plants with 12 furnaces – Current capacity – 600 000 tons – 75% market share • Largest competitor – Nampak • Limited competition from imports • Niche plastic packaging company – Three plastics operations – 2% market s
Slide 38: Consol Glass sales
Consol Glass sales MT ('000) 600 300 0 1999 2000 2001 2002 2003 2004
Slide 39: Consol Glass sales by category
Consol Glass sales by category 6% 24% 60% 10% Beverages Food Wine Other
Slide 40: Consol Glass – Sales vs capacity
Consol Glass – Sales vs capacity 700 600 Total sales ('000 tons) Capacity ('000 tons) 350 300 0 0 2000 2001 2002 2003 2004 Sales Capacity
Slide 41: Consol Glass – Capex vs capacity
Consol Glass – Capex vs capacity 600 700 Capacity ('000 tons) Total capex (Rm) 400 350 200 0 0 2000 2001 2002 2003 2004 Total capex Capacity
Slide 42: Prospects
• Prospects – Demand growth in line with GDP and In addition – Conversion of food and beverage containers to glass • Pack share gains – Import replacement – Continued growth from wine – Consumer driving growth in non-returnable beer (NRB) – medium term trend
Slide 43: Wine exports
Wine exports Domestic and international demand for bottled wine 600 500 Litres ('million) 400 300 200 100 - 1999 2000 2001 2002 2003* 2004* 2005* 2006* 2007* 2008* Domestic Export * Forecast figure
Slide 44: Migration from RB to NRB
Migration from RB to NRB NRB versus RB 90% 250,000 80% 70% 200,000 60% Pack Share RB 150,000 New NRB 50% 40% 100,000 30% 20% 50,000 10% 0% 0 Quart Share Additional NRB
Slide 45: Investment Case
• Investment Case – Installed capacity – Blue chip clients – Strong economics • Well capitalised market leader • Substantial barriers to entry – Operational excellence – Advanced technology platforms and long-term technical agreement with O-I
Slide 46: Investment Case (cont.)
• Investment Case (cont.) – Strong financial performance • Operating profit leverage factor – 3:1 – Opportunities in Africa – Plastics – increased profitability following restructuring Substantial & focused packaging company