RCL Foods Limited · JSE:RCL
RCL Foods — H1 2015 Earnings Presentation
64 slides from RCL Foods's earnings presentation, Feb 19, 2015
Slide 1: Results for the six months ended 31 December 2014
Results for the six months ended 31 December 2014 Investor Presentation: 19 February 2015
Slide 2: Salient features
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Salient features six months ended 31 December 2014 Actual Pro forma Actual 31 Dec ‘14 31 Dec ‘13 31 Dec ‘13 REVENUE REVENUE REVENUE R12.0bn R11.6bn R8.7bn HEBITDA HEBITDA HEBI
Slide 3: Salient features
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Salient features six months ended 31 December 2014 • New business model and better industry conditions delivered improved results for Rainbow • TSB results included for the fi
Slide 4: Strategic overview
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Strategic overview Operational restructure • RCL Foods was historically structured around its statutory companies, namely, Foodcorp, Rainbow, TSB and Vector • In line with the
Slide 5: Recap of our strategy
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Recap of our strategy RCL Foods’ ambition is to build an African food business of scale with compelling brands and a sustainable value chain that delivers to consumer and cust
Slide 6: Progress against 5 year goals
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Progress against 5 year goals Strategic thrusts Strategic goals 2015-2020 Category and Accelerate South Africa (SA): Maximise (profit) in core categories; Accelerate (growth &
Slide 7: Key focus areas in H1 F2015
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects 3 key focus areas in H1 F2015 Strategic thrusts Current focus Highlight Progress Category and New business model for 7.6% Chicken pre IAS39 EBITDA margin improved from 3.6% ma
Slide 8: Financial review
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Financial review six months ended 31 December 2014 31 Dec '14 31 Dec '13 31 Dec '13 Statutory Actual Pro forma % var Restated Revenue Rm 12 029.3 11 595.2 3.7 8 669.5 Headline
Slide 9: Key financial issues
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Key financial issues Replacement of bridging loan subsequent to reporting period • In November 2014, RCL Foods commenced a process to replace the R4.5 billion bridging loan fa
Slide 10: Key financial issues
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Key financial issues Headline earnings from continuing operations – reconciliation between actual and pro forma results for the six months ended 31 December 2013 450 14.8 -19.
Slide 11: Financial review
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Financial review General operating environment • General economic environment in South Africa remains challenged – Labour unrest – High unemployment – Depreciating currency –
Slide 12: Financial review summary
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Financial review summary Reconciliation of HEBITDA to headline earnings for the six months ended December 2014 R million 1 195.5 601.6 123.2 11.9 -171.4 -222.0 -335.6 HEBITDA
Slide 13: Financial review: operating results summary
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Financial review: operating results summary Segmental analysis – Revenue 6 months 6 months 6 months 31 Dec '14 31 Dec '13 31 Dec '13 Revenue (Rm) Actual Pro forma % var Restat
Slide 14: Financial review: operating results summary
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Financial review: operating results summary Segmental contribution to revenue 2014 - R12.0 billion 2013 - R8.7 billion 0% 8% 9% 30% 25% 43% 48% 37% Foodcorp Rainbow TSB Vector
Slide 15: Financial review: operating results summary
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Financial review: operating results summary Segmental analysis – EBITDA 6 months 6 months 6 months 31 Dec '14 31 Dec '13 31 Dec '13 EBITDA (Rm) Actual Pro forma % var Restated
Slide 16: Financial review: operating results summary
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Financial review: operating results summary Segmental contribution to EBITDA 2014 - R1206.1 million 2013 – R688.3 million 9% 18% 29% 0% 24% 54% 28% 38% Foodcorp Rainbow TSB Ve
Slide 17: Financial review: operating results summary
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Financial review: operating results summary Segmental contribution to EBITDA improvement 1 400 110.6 1 206.1 1 200 86.8 -12.9 -1.3 1 095.5 197.0 1 000 854.9 -29.0 800 600 400
Slide 18: Financial review: cash flow summary
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Financial review: cash flow summary 6 months 6 months 31 Dec '14 31 Dec '13 Actual Restated Opening balance (including money market investment and net of overdraft) 1 472.7 2
Slide 19: Financial review
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Financial review Working capital movement (Rm) 31 Dec '14 31 Dec '13 Actual Restated Net (695.0) 166.9 Trade payables 256.8 706.8 Inventory and biological assets (620.7) (81.2
Slide 20: Financial review
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Financial review RCL Foods’ capital expenditure programme directed at Foodcorp and TSB Rm 31 Dec '14 31 Dec '13 Total expenditure 345.5 184.0 • Foodcorp expenditure amounts to
Slide 21: Operational review – Foodcorp
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – Foodcorp 6 months 6 months 6 months 31 Dec ‘14 31 Dec ‘13 31 Dec ‘13 Revenue (Rm) Actual Pro forma % var Restated Foodcorp 3 786.5 3 862.9 (2.0) 3 862.9 R
Slide 22: Operational review – Foodcorp
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – Foodcorp Foodcorp has had a disappointing trading performance, albeit in tough trading conditions and industrial action • Net revenue from continuing oper
Slide 23: Operational review – Foodcorp
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – Foodcorp Grocery division performed well despite a very competitive environment Category Category position share Food Brands 2014 2014 Peanut butter 1 43.
Slide 24: Operational review – Foodcorp
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – Foodcorp Beverage division continues to perform well especially in the recently launched Smooth range Category Category position share Food Brands 2014 20
Slide 25: Operational review – Foodcorp
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – Foodcorp Pie division has been under volume pressure, much of it self inflicted Category Category position share Food Brands 2014 2014 Pies 1 30.0% • The
Slide 26: Operational review – Foodcorp
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – Foodcorp Speciality, the division supplying Woolworths, performance was severely impacted by a seven week strike costing R21m • Performance was significan
Slide 27: Operational review – Foodcorp
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – Foodcorp Milling and Baking Category Category position share Food Brands 2014 2014 Flour 4 14.0% Bread 4 6.0% Maize 5 2.8% Milling • Flour sales volumes w
Slide 28: Operational review – Rainbow
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – Rainbow 6 months 6 months 6 months 31 Dec ‘14 31 Dec ‘13 31 Dec ‘13 Revenue (Rm) Actual Pro forma % var Restated Foodcorp 3 786.5 3 862.9 (2.0) 3 862.9 Ra
Slide 29: Rainbow's new business model is delivering more profitable results
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – Rainbow Rainbow’s new business model is delivering more profitable, consistent results • Rainbow’s pre-IAS 39 EBITDA, at R352.5m, is significantly up on t
Slide 30: Rainbow's new business model is delivering more profitable results
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – Rainbow Rainbow’s new business model is delivering more profitable, consistent results • Changes effected by the new business model | Continued 2. Outputs
Slide 31: Operational review – Rainbow
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – Rainbow Despite record crops both locally and internationally, commodity prices were volatile and remained high, with Rainbow’s total feed cost (R/ton) in
Slide 32: Operational review – Rainbow: Food Solutions
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – Rainbow Food Solutions • Rainbow has won a greater share of QSR business and has delivered strong growth across the QSR customer base, generating a signif
Slide 33: Operational review – Rainbow: Retail
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – Rainbow Retail • Simply Chicken added value ranges, on the back of processed meat industry scares in South Africa and the EU, have grown strongly in profi
Slide 34: Rainbow – Market changing factors update
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Rainbow – Market changing factors update Trade remedies • Dti implemented a tariff on bone-in portions in August 2013, which affected Imports - Total Chicken (Excl MDM) - Tons
Slide 35: Rainbow – Market changing factors update
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Rainbow – Market changing factors update Injection cap • Rainbow remains supportive of Government’s intended 15% cap on injection although no updates on the scheduled implemen
Slide 36: Operational review – TSB
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – TSB 6 months 6 months 6 months 31 Dec ‘14 31 Dec ‘13 31 Dec ‘13 Revenue (Rm) Actual Pro forma % var Restated Foodcorp 3 786.5 3 862.9 (2.0) 3 862.9 Rainbo
Slide 37: Operational review – TSB
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – TSB Results for the six months ended 31 December 2014 • EBITDA of R290.7 million which translates into a margin of 9.0% (31 Dec ‘13 PF: 6.9%) • Sugar tari
Slide 38: Operational review – TSB: Massingir
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – TSB Massingir • Massingir is TSB’s proposed greenfield expansion in Mozambique. Feasibility studies are substantially completed. • A final decision on the
Slide 39: Sugar imports – F2014 vs F2015
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – TSB Tons Sugar imports – F2014 vs F2015 100 000 81 619 80 888 90 000 80 000 70 000 51 371 60 000 43 346 50 000 34 119 31 205 30 678 28 854 28 932 40 000 2
Slide 40: TSB Agronomic Dashboard
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – TSB TSB Agronomic Dashboard Tons raw sugar produced Sucrose % 700 000 15.0% 600 000 500 000 14.5% 400 000 14.0% 300 000 200 000 13.5% 100 000 0 13.0% F201
Slide 41: Operational review – Vector
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – Vector Optimisation of outbound supply chain 6 months 6 months 6 months 31 Dec ‘14 31 Dec ‘13 31 Dec ‘13 Revenue (Rm) Actual Pro forma % var Restated Food
Slide 42: Operational review – Vector: Pleasing growth in revenue
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – Vector Pleasing growth in revenue Revenue growth up 14.6% to R986.7m • Second sales and merchandising structure operational • Sea Harvest not in the Good
Slide 43: Operational review – Vector: Expansion and industrial action impact cost
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – Vector Expansion and industrial action impact cost • EBITDA decreased by 11.0% to R110.5 million largely due to the industrial action at the Midrand campu
Slide 44: Operational review – Vector: Operational efficiency
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – Vector Operational efficiency Operational 11.0% 4.4% efficiency -2.5% • Year on year volume growth increased by 4.4% whilst average inventory levels incre
Slide 45: Prospects
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Prospects • Operational improvements implemented across different businesses should continue to contribute positively • Second half of the financial year is a seasonally lower
Slide 46: Appendices
Appendices
Slide 47: RCL Foods in context
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Strategic overview RCL Foods in context Rupert Family Food, Liquor & Home care Banking Healthcare Insurance Industrial Infrastructure Media & Sport RESULTS FOR THE SIX MONTHS
Slide 48: Africa opportunity – 2050
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Strategic overview Africa opportunity – 2050 1 in every 4 people in sub-Saharan Africa lacks adequate food Population will more for a healthy life style than double to 2 billi
Slide 49: What differentiates us?
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Strategic overview What differentiates us? Portfolio of leading • Leading market position in many categories consumer brands • Best known brands that span staples to top-end,
Slide 50: Foodcorp overview
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Foodcorp overview Foodcorp is a leading manufacturer of quality branded and private label food products • Product range includes – Peanut butter, pet food, mayonnaise, edible
Slide 51: Foodcorp brand market positions
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – Foodcorp Brand investment results in Foodcorp’s core brands enjoying leading market positions Category Category Foodcorp Market Food Brands position share
Slide 52: Foodcorp: Grocery and Pie Divisions
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Foodcorp: Grocery and Pie Divisions Grocery Pie The Grocery Division consists of a portfolio of well The Pie Division produces a range of high quality, recognised brands with
Slide 53: Foodcorp: Beverage and Milling divisions
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Foodcorp: Beverage and Milling divisions Beverage Milling The Beverage Division produces a maize-based health The Milling Division operates the largest single site flour drink
Slide 54: Foodcorp: Baking and Speciality divisions
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Foodcorp: Baking and Speciality divisions Baking Speciality The Baking Division is the fourth largest bakery group in The Speciality Division produces a range of superior the
Slide 55: Rainbow: Complex business chain
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Rainbow: Complex business chain Integrated supply chain from “farm to fork” GP operation Agriculture Processing Grandparent Broiler chicks Grandparent farms Parent farms farms
Slide 56: Rainbow – Infrastructure
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Rainbow – Infrastructure Limpopo Province Tzaneen Polokwane Botswana Mpumalanga Windhoek Rustenburg North Nelspruit Roodepoort West Midrand Swaziland Klerksdorp Carolina Namib
Slide 57: Operational review – TSB mills
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – TSB Mill Mill Established Tons sugar produced Notes Nkomazi Malalane 1968 189 000 Nkomazi produces approximately 490 000 tons of sugar per year Komati 199
Slide 58: How Selati sugar is made
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – TSB How Selati sugar is made HOW SELATI SUGAR IS MADE Foodcorp | Rainbow | TSB | Vector RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2014 58
Slide 59: RSA Mills 2015 Summary
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – TSB Bagasse to RSA Mills 2015 Other raw Molatek Molatek Summary 139 000t materials Molasses 243 000t Cane Raw house Molasses sold Animal feed Extraction 5
Slide 60: RSSC Mills 2015 Summary
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – TSB RSSC Mills 2015 Distillery Summary Molasses 137 000t Cane Raw house Extraction 3.51 mtc crystallisation Total Bagasse Refinery production 910 000t 30.
Slide 61: Royal Swaziland Corporation – 27.42% Shareholding
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – TSB Royal Swaziland Corporation | 27.42% Shareholding 2014/15 RSSC Key Parameters Metric season Area harvested Ha 19 566 Cane – Estate Tons 2 115 390 Cane
Slide 62: Vector Infrastructure
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – Vector Infrastructure Limpopo Province Vector infrastructure Tzaneen • National footprint Polokwane including Windhoek – 5 plant-based cold stores Botswan
Slide 63: Vector Services
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – Vector Services Manufacturers Primary Primary Principal Customer Trade Credit & (PBCS) Warehousing Transport Secondary Secondary Solutions Information (VC
Slide 64: Vector Customers and Principals
Salient features and results summary | Strategic overview | Key issues and financial review | Operational reviews| Prospects Operational review – Vector Customers Principals Customer Secondary Distribution (CSD) Principal Secondary Distribution (PSD) • Vector is contracted by the customer to • Vecto