Tiger Brands Limited · JSE:TBS
Tiger Brands — FY2014 Earnings Presentation
60 slides from Tiger Brands's earnings presentation, Nov 18, 2014
Slide 1: Tiger Brands Limited Results Presentation
TIGER BRANDS LIMITED RESULTS PRESENTATION for the year ended 30 September 2014 www.tigerbrands.com
Slide 2: Agenda
——— AGENDA way ¢ STRATEGIC FINANCIAL BUSINESS REVIEW ANALYSIS _ | PERFORMANCE Nigeria BUSINESS BUSINESS BUSINESS PERFORMANCE } PERFORMANCE ff PERFORMANCE Grains Consumer Brands International OUTLOOK
Slide 3: Peter Matlare, Chief Executive Officer
Peter Matlare Chief Executive Officer
Slide 4: A Credible Set of Results
Group Nigeria Grains Consumer Brands Exports and International A CREDIBLE SET OF RESULTS 4 • Results underpinned by solid fundamentals • Achieved despite challenging trading conditions • Dangote Flour Mills (Nigeria) – Results impacted by asset impairments – Challenges remain but encouraging signs o
Slide 5: A Solid Performance
Group Nigeria Grains Consumer Brands Exports and International A SOLID PERFORMANCE 5 • Group turnover 11% to R 30.1 billion • Operating profit 15% to R 3.6 billion • Operating margin to 11.8% • HEPS 15% to 1 804 cents • Total Dividend 9% to 940 cents
Slide 6: Good Turnover Growth
Group Nigeria Grains Consumer Brands Exports and International GOOD TURNOVER GROWTH 6 30,5 11% Organic Growth 2% 29,5 4% 28,5 27,5 5% R30.1 bn R'billion 26,5 Turnover Pricing Total Forex Growth inflation Volume 25,5 Domestic 10% 6% 4% - R27.0 bn Pricing inflation Volume Forex 24,5 Exports and 16% 1%
Slide 7: Economic Growth Prospects
Group Nigeria Grains Consumer Brands Exports and International ECONOMIC GROWTH PROSPECTS 7 Y-o-Y % change 2012 2013 2014 2015 Global Economic Growth • Global GDP growth – 3.3% Global 3.4 3.3 3.3 3.8 • Uneven economic performance Advanced markets 1.2 1.4 1.8 2.3 • Slowdown in emerging markets – Brazi
Slide 8: A Balanced Approach
Group Nigeria Grains Consumer Brands Exports and International A BALANCED APPROACH 8 Tight trading conditions required a balanced approach… a focus on market positioning, organisational agility and resilience • Harnessed brand equity – leveraged off the stable of iconic brands • Keen price managemen
Slide 9: A Platform for Growth
Group Nigeria Grains Consumer Brands Exports and International A PLATFORM FOR GROWTH 9 • Benefits of investments in brands • Drive for innovation bearing fruit • Cost management initiatives gaining traction • Established footprint on the African continent • Creating a platform for growth and new opp
Slide 10: Funke Ighodaro, Chief Financial Officer
Funke Ighodaro Chief Financial Officer
Slide 11: Income Statement for the Year Ended 30 September
Group Nigeria Grains Consumer Brands Exports and International INCOME STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 11 R’m 2014 2013 % Change Turnover 30 072.0 27 003.5 11% Operating income before IFRS 2 3 661.4 3 217.0 14% IFRS 2 Charges (105.4) (134.2) 21% Operating income 3 556.0 3 082.8 15% Operatin
Slide 12: Income Statement for the Year Ended 30 September
Group Nigeria Grains Consumer Brands Exports and International INCOME STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 12 R’m 2014 2013 % Change Income after tax before abnormal items 2 865.4 2 402.6 19% Abnormal items (net of taxation) (1 001.6) (5.5) Non-controlling interests 126.5 118.9 6% Profit from c
Slide 13: Turnover by Operating Segment
Group Nigeria Grains Consumer Brands Exports and International TURNOVER BY OPERATING SEGMENT 13 September September R’m % Change 2014 2013 Domestic operations 22 373.2 20 250.7 10% Grains 10 948.6 10 052.7 9% Milling and Baking 8 043.0 7 243.3 11% Other Grains 2 905.6 2 809.4 3% Consumer Brands 11 4
Slide 14: Contribution to Turnover
Group Nigeria Grains Consumer Brands Exports and International CONTRIBUTION TO TURNOVER 14 2014 2013 Nigeria Nigeria 10% Milling 10% Exports & and Baking Milling and International 27% Exports & Baking 15% International 28% 15% HPCB HPCB 7% 7% Other Other OOH OOH Grains Grains 1% 1% 10% 10% VAMP VAMP
Slide 15: Operating Income Before IFRS2 Charges
Group Nigeria Grains Consumer Brands Exports and International OPERATING INCOME BEFORE IFRS2 CHARGES 15 Operating Income % Operating Margins R’m 2014 2013 Change 2014 2013 Domestic operations 3 252.2 3 026.2 7% 14.5% 14.9% Grains 1 918.9 1 689.7 14% 17.5% 16.8% Milling and Baking 1 596.5 1 399.9 14%
Slide 16: Contribution to Operating Income Before IFRS2 and Other Charges
Group Nigeria Grains Consumer Brands Exports and International CONTRIBUTION TO OPERATING INCOME BEFORE IFRS2 AND OTHER OPERATING CHARGES 16 2014 2013 Nigeria ; Nigeria ; (8%) (12%) Milling and Milling and Exports & Baking ; 44% Baking Exports & International; 43% International; 19% 18% HPCB 11% HPCB
Slide 17: Reconciliation Between Profit for the Year and Headline Earnings
Group Nigeria Grains Consumer Brands Exports and International RECONCILIATION BETWEEN PROFIT FOR THE YEAR AND HEADLINE EARNINGS 17 2014 2013 % Change Continuing operations Net profit: 1 990.3 2 516.0 (21%) Non Gross Adjusting items controlling Tax amount interest Impairment- DFM 953.9 (46.1) (56.8)
Slide 18: Reconciliation Between Profit and Headline Earnings (continued)
Group Nigeria Grains Consumer Brands Exports and International RECONCILIATION BETWEEN PROFIT FOR THE YEAR AND HEADLINE EARNINGS (continued) 18 2014 2013 % Change Total Headline earnings 2 907.4 2 601.7 12% Weighted average number of shares 160 127 228 159 754 722 Headline earnings per share - Total
Slide 19: Group Balance Sheet as at 30 September
Group Nigeria Grains Consumer Brands Exports and International GROUP BALANCE SHEET AS AT 30 SEPTEMBER 19 R’m 2014 2013 Assets Property, plant and equipment 5 867.6 5 498.7 Goodwill and intangible assets 4 526.7 5 424.6 Investments 3 422.5 3 413.3 Net deferred tax asset 27.8 - Current Assets 9 568.0
Slide 20: Key Statistics
Group Nigeria Grains Consumer Brands Exports and International KEY STATISTICS 20 2014 2013 Net (Debt)/Cash (Rm) (3 489.2) (4 470.0) Net Debt/Equity % 25.0 32.4 Working capital per R1 turnover (cents) 22.1 23.2 Net interest cover (times) 9.0 8.0 Operating income margin % (after IFRS2 charges) 11.8 11
Slide 21: Cash Flow Statement for the Year Ended 30 September
Group Nigeria Grains Consumer Brands Exports and International CASH FLOW STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 21 R’m 2014 2013 Cash operating profit 4 541.2 4 311.3 Working Capital (348.0) (337.2) Cash generated from operations 4 193.2 3 974.1 Net Financing cost/Investment income (119.0) (108.6
Slide 22: Capital Expenditure and Commitments
Group Nigeria Grains Consumer Brands Exports and International CAPITAL EXPENDITURE AND COMMITMENTS 22 R’m 2014 2013 Capital expenditure 982.9 727.6 - Replacement 555.2 540.3 - Expansion 427.7 187.3 Capital commitment 978.0 780.3 - Contracted 244.5 372.2 - Approved 733.5 408.1
Slide 23: Noel Doyle, Business Executive
Noel Doyle Business Executive
Slide 24: Tiger Brands in Nigeria – Overview
Group Nigeria Grains Consumer Brands Exports and International TIGER BRANDS IN NIGERIA – OVERVIEW 24 • Whilst F2014 performance was disappointing, there has been significant progress at DFM ⁻ The execution of operational initiatives resulted in progressively reduced losses ⁻ Management transition st
Slide 25: DFM – Continued Improvements as Key Operational Initiatives Deliver
Group Nigeria Grains Consumer Brands Exports and International DFM – CONTINUED IMPROVEMENTS AS KEY OPERATIONAL INITIATIVES DELIVER 25 Operating losses before interest, non recurring items and forex gains N’billion - Q1 Q2 Q3 Q4 (0,2) (0,4) (0,6) (0,8) (0,7) (1,0) (0,9) (1,2) (1,1) (1,4) (1,4) (1,6)
Slide 26: DFM – Operational and Strategic Initiatives On Track
Group Nigeria Grains Consumer Brands Exports and International DFM - THE SIGNIFICANT OPERATIONAL AND STRATEGIC INITIATIVES COMMITTED TO ARE ALL ON TRACK 26 In progress for Completed completion in F2015 • Positive volume momentum • Achieved benchmark extraction rates • Mothballing of facilities
Slide 27: UAC Foods – Intense Competitive Landscape
Group Nigeria Grains Consumer Brands Exports and International UAC FOODS – INTENSE COMPETITIVE LANDSCAPE 27 • Pleasing progress in market penetration, particularly in the East region • Market pricing impacts ability to recover costs • New entrants intensified competitive offerings • Snacks capacity
Slide 28: Tiger Brands in Nigeria – Outlook
Group Nigeria Grains Consumer Brands Exports and International TIGER BRANDS IN NIGERIA - OUTLOOK 28 • Medium term outlook very positive • F2015 likely to be the most challenging of recent years in FMCG ⁻ Election year ⁻ Instability in the North ⁻ Potential pressure on the Naira due to falling oil re
Slide 29: Noel Doyle, Business Executive
Noel Doyle Business Executive
Slide 30: Overview – Strength of Brand Portfolio Reflected in Results
Group Nigeria Grains Consumer Brands Exports and International OVERVIEW – STRENGTH OF BRAND PORTFOLIO REFLECTED IN THE RESULTS 30 • Price increases slowed growth somewhat H1 H2 FY but balanced by margin enhancement % Change YOY % % % • Enhanced margin management enabled Volume (tons) 4 2 3 by lower
Slide 31: Judicious Pricing and Increased Brand Investment Drive Market Share Recoveries
Group Nigeria Grains Consumer Brands Exports and International JUDICIOUS PRICING AND INCREASED BRAND INVESTMENT DRIVE MARKET SHARE RECOVERIES 31 Volume Market Growth Tiger Growth Market Share Performance Bread HELD Buns & Rolls Rice Pasta Maize HELD Flour Consumer Premixes Breakfast - Oats (Jungle)
Slide 32: Milling and Baking – Wheat and Maize
Group Nigeria Grains Consumer Brands Exports and International MILLING AND BAKING – WHEAT AND MAIZE 32 • Categories remain challenging and growth in DOB’s and regional brands reflects consumer search for value • Good operating profit growth driven by wheat performance • Both categories focused on re
Slide 33: Milling and Baking – Bakeries
Group Nigeria Grains Consumer Brands Exports and International MILLING AND BAKING – BAKERIES 33 Solid volume performance in the Grains Engine room • Operating income growth pleasing despite significant cost push • Albany retains market leadership in an increasingly active and competitive market • In
Slide 34: Milling and Baking – Sorghum Cereals, Beverages and Ace Instant
Group Nigeria Grains Consumer Brands Exports and International MILLING AND BAKING – SORGHUM CEREALS, BEVERAGES AND ACE INSTANT 34 Double digit volume growth in Ace & Morvite drive Cereals performance • Porridge remains an area of focus with significant innovation in the category • Ace Instant and Mo
Slide 35: Other Grains – Rice, Pasta and Oats
Group Nigeria Grains Consumer Brands Exports and International OTHER GRAINS – RICE, PASTA AND OATS 35 • Rice market remains intensely competitive and margin pressures remain – Volume growth in H2 – Tastic & Aunt Caroline retain market leadership • Pasta – Pleasing growth in operating income – Positi
Slide 36: Conclusion
Group Nigeria Grains Consumer Brands Exports and International CONCLUSION 36 Summary • Results reflect strength of brands notwithstanding difficult consumer environment • Good success in F14 in balancing the volume vs margin levers for long term sustainability of the brands Outlook • Focus on in-mar
Slide 37: Grattan Kirk, Business Executive
Grattan Kirk Business Executive
Slide 38: Groceries
Group Nigeria Grains Consumer Brands Exports and International GROCERIES 38 Volume recovery strategy in H1 followed by margin improvement in H2 enhances profitability Sales R 3 968.7m +23% EBIT R 320.4m +9% • Strong volume growth of 15.4% • Raw material cost increases recovered in H2 • Market share
Slide 39: Snacks and Treats
Group Nigeria Grains Consumer Brands Exports and International SNACKS AND TREATS 39 Significant input cost pressure dampens growth Sales R 2 054.5m +7% EBIT R 309.4m +1% • Market leader in sugar confectionery (43%) • Number 2 position retained in total confectionery (25%) • Focus on core brands and
Slide 40: Beverages
Group Nigeria Grains Consumer Brands Exports and International BEVERAGES 40 Profitable volume growth supported by manufacturing efficiencies Sales R 1 107.9m +9% EBIT R 126.6m +19% • Market leadership positions retained in – Sports drinks (52.0%) – Liquid concentrates (31.5%) • 28% increase in marke
Slide 41: Value Added Meat Products and Canned Meats
Group Nigeria Grains Consumer Brands Exports and International VALUE ADDED MEAT PRODUCTS AND CANNED MEATS 41 Solid profit performance in a declining category Sales R 1 896.2m +9% EBIT R 130.8m +9% • Gains in market share • Robust rate of innovation delivers top-line growth • Material cost push ahead
Slide 42: Out of Home
Group Nigeria Grains Consumer Brands Exports and International OUT OF HOME 42 Strong profit performance with positive leverage Sales R 437.1m +9% EBIT R 90.1m +12% • New customer acquisition strategy pays dividends • Improved product and channel mix • Growth across food services and restaurants • Le
Slide 43: Outlook
Group Nigeria Grains Consumer Brands Exports and International OUTLOOK 43 • Consumer is likely to remain under pressure • We will continue to – Invest in our Brands and in our people – Supply chain optimisation remains a key focus area • Relentless focus on innovation • Fixation on cost control • Ju
Slide 44: Neil Brimacombe, Business Executive
Neil Brimacombe Business Executive
Slide 45: Home, Personal Care and Baby
Group Nigeria Grains Consumer Brands Exports and International HOME, PERSONAL CARE AND BABY 45 Tough trading conditions persist Net Sales R 1 960.2m +4% EBIT R 398.5m (9%) • Baby: JBF and Medicinal volumes marginal decline – Consumer down trading and product substitution – Market shares, however, re
Slide 46: Home, Personal Care and Baby – Home Care
Group Nigeria Grains Consumer Brands Exports and International HOME, PERSONAL CARE AND BABY 46 Home Care: Aggressive Competition Net Sales R 648.8m 12% EBIT R 75.5m (18%) • Top line Growth driven by Pest and Air Care – DOOM and Airoma relaunches see good traction – ATL support and optimised pricing
Slide 47: Home, Personal Care and Baby – Personal Care
Group Nigeria Grains Consumer Brands Exports and International HOME, PERSONAL CARE AND BABY 47 Personal Care: Categories under pressure Net Sales R 564.2m (3%) EBIT R 112.8m (20%) • Continued growth on key skin brands – Ingram's (Independents’ distribution) – Dolly Varden (price points) • Hair Care
Slide 48: Home, Personal Care and Baby – Baby Category
Group Nigeria Grains Consumer Brands Exports and International HOME, PERSONAL CARE AND BABY 48 Baby Category: Market Contracts Net Sales R 747.2m +4% EBIT R 210.2m +2% • Category inflation affecting Baby Nutrition market volumes – Down trading to home prepared meals – Purity Cereals continue to grow
Slide 49: Home, Personal Care and Baby – In Summary
Group Nigeria Grains Consumer Brands Exports and International HOME, PERSONAL CARE AND BABY 49 In Summary • Tough trading conditions • Product rationalisation • Emphasis on innovation execution • Management of critical price points Outlook • Highly competitive environment to persist • HPCB remains a
Slide 50: Neil Brimacombe, Business Executive
Neil Brimacombe Business Executive
Slide 51: Tiger Brands International (Excluding Nigeria)
Group Nigeria Grains Consumer Brands Exports and International TIGER BRANDS INTERNATIONAL (EXCLUDING NIGERIA) 51 Tiger Brands International (excluding Nigeria) Net Sales R 4 578.7m +16% EBIT R 691.1m +20% Mali Niger Chad • Exports Sudan Ghana Nigeria – Rest of Africa: Excellent performance Ethiopia
Slide 52: Tiger Brands International – Exports (Including Davita)
Group Nigeria Grains Consumer Brands Exports and International TIGER BRANDS INTERNATIONAL - EXPORTS (INCLUDING DAVITA) 52 Tiger Brands Exports: Excellent Growth Zimbabwe, Zambia, Mozambique Net Sales R 1 846.5m +21% EBIT R 423.6m +16% Rest of Africa Exports : Growth drivers • Exceptional growth in S
Slide 53: Tiger Brands International – Davita
Group Nigeria Grains Consumer Brands Exports and International TIGER BRANDS INTERNATIONAL - DAVITA 53 Good Performance Davita Growth drivers • Benny and Davita record strong performances • Strong performance from Mozambique and Nigeria • Strong growth from far West African countries up to quarter 3
Slide 54: Tiger Brands International – Langeberg & Ashton Foods
Group Nigeria Grains Consumer Brands Exports and International TIGER BRANDS INTERNATIONAL - LANGEBERG & ASHTON FOODS 54 Significantly Improved Performance Net Sales R 1 440.1m +9% EBIT R 60.4m +43% Key points • Overall slight volume decline • Significant improvements in manufacturing productivity •
Slide 55: Tiger Brands International – East Africa
Group Nigeria Grains Consumer Brands Exports and International TIGER BRANDS INTERNATIONAL - EAST AFRICA (HACO TB AND EATBI) 55 Very Good Performance Net Sales R 803.6m +11% EBIT R 103.6m +13% Kenya growth drivers • Strong export sales to Ethiopia and Uganda • Performance driven by strong BIC sales b
Slide 56: Tiger Brands International – EATBI, Ethiopia
Group Nigeria Grains Consumer Brands Exports and International TIGER BRANDS INTERNATIONAL - EATBI, ETHIOPIA 56 Tough trading conditions Ethiopia drivers/ challenges • Ethiopia trading challenges • Slower performance in Home/ Personal Care in H2 • Encouraging market penetration initiatives • Progress
Slide 57: Tiger Brands International – Central Africa
Group Nigeria Grains Consumer Brands Exports and International TIGER BRANDS INTERNATIONAL - CENTRAL AFRICA 57 Cameroon: Exceptional Performance Net Sales R 659.1m +28% EBIT R 103.5m +39% Growth drivers • Excellent volume and share growth in all core categories • Strong innovation pipeline – Hair car
Slide 58: Tiger Brands International
Group Nigeria Grains Consumer Brands Exports and International TIGER BRANDS INTERNATIONAL 58 Strong set of results • International expansion remains key growth vector • Continue to drive growth in core business: availability and visibility • Continued investment in facilities, people, brands • Acqui
Slide 59: Peter Matlare, Chief Executive Officer
Peter Matlare Chief Executive Officer
Slide 60: Looking Ahead… a Platform for Growth
Group Nigeria Grains Consumer Brands Exports and International Looking ahead…a platform for growth 60 • South African businesses – Investment in people and brands – A focus on innovation – Driving efficiencies – Prudent cost management • International businesses – DFM turnaround remains a key priori