Rainbow Chicken Limited · JSE:RBO
Rainbow Chicken — H1 2011 Earnings Presentation
32 slides from Rainbow Chicken's earnings presentation, Nov 24, 2010
Slide 1: Interim results 6 Months Ended 30 September 2010
RAINBOW Interim results 6 Months Ended 30 September 2010 24 November 2010
Slide 2: Revenue, operating profit, headline earnings and interim dividend
Revenue + 0.7% Operating profit – 4.5 % Rm 3384,4 Rm 3360,5 3326,7 315,7 2871,4 248,7 237,4 174,8 2007 2008 2009 2010 2007 2008 2009 2010 Headline earnings – 4.8 % Interim dividend Rm Cents per share 28,0 28,0 208,3 24,0 24,0 169,8 161,7 125,8 2007 2008 2009 2010 2007 2008 2009 2010 2
Slide 3: Market Conditions / What has Rainbow done?
Market Conditions What has Rainbow done? • Consumer demand under pressure despite lower • Rainbow’s performance through difficult market interest rates conditions reinforces strategic focus as appropriate • Local production oversupply and imports up 14% • Strategy detail with specific plans to 2015
Slide 4: Statutory results summary
Statutory 2009 2010 % Revenue Rm 3360,5 3384,4 +0.7 Headline EBITDA Rm 320,3 316,0 -1.3 Headline EBIT Rm 243,7 236,3 -3.0 Effective tax rate % 32,4 33,6 -1.2 Headline earnings Rm 169,8 161,7 -4.8 Cash generated by operations Rm 108,7 117,3 +7.9 Net cash Rm 343,9 347,1 +0.9 Interim dividend per share
Slide 5: Realisations and feed cost impact
• Realisations under pressure because of the recession, additional local capacity and higher level of imports % Growth 37.9 35.7 • First feed cost decrease in 4 years Feed cost 18.9 Rm Impact Sales 14.9 - R270m Feed cost realisation - R175m Sales realisation 5.4 4.3 2010 2007 2008 2009 - 19.6 - 6.1
Slide 6: Contribution to total revenue and retail revenue
• Focus on added value Contribution to total revenue has seen significant growth • Purchase of new facility aligned to strategy Contribution to retail revenue 6
Slide 7: Operating profit and feed cost movement
• Operational efficiencies insufficient to offset significant electricity rate increase and above inflation wage settlement +85.1 +336.8 1384,6 1299,5 -270.9 1113,7 Rm 962,7 Feed cost +52.3 344,7 -115.9 +5.0 Headline 292,4 EBIT 233,8 228,8 (preIAS39) 2007 2008 2009 2010 7
Slide 8: Local maize prices
• Traded close to export parity for most of the period R/ton • 3 million ton surplus 2,500 locally 2,250 32.4% Increase • Recent upward 2,000 movement in line with 1,750 international prices 1,500 2.5% • Uncertainty around both 1,250 Decrease current USA crops and 24.1% 1,000 Decrease 9.9% new seaso
Slide 9: Soya prices
• Recently CBOT prices following corn prices upwards US $ per ton • Trading at historically 450.0 high levels 400.0 50.6% Increase 8.9% 350.0 Decrease 300.0 1.3% 250.0 Increase 14.5% 200.0 Increase 150.0 100.0 50.0 FY2008 FY2009 FY2010 FY2011 0.0 9
Slide 10: Rand exchange rate
• Rand remains strong • Favourable impact on feed cost as all soya used is imported from R/$ Argentina 11 +23.9% 10 -11.6% 9 + 0.8% 8 -6.1% 7 FY2008 FY2009 FY2010 FY2011 6 10
Slide 11: Revenue (Rm) +0.7%
• Chicken sales Revenue (Rm) + 0.7% – Volumes up 6.6% (2.5% of the increase relates to 3 additional trading days) – Average price realisation 3326,7 decline of 6.1% 3384,4 696,3 3360,5 658,0 • Other sales (feed, services) 2871,4 626,0 – 12.8 % increase in external 596,0 2734,5 2726,4 feed volumes of
Slide 12: HEBITDA pre IAS39
• Adverse impact of lower HEBITDA pre IAS39 realisations, labour and electricity rate increases, offset by lower feed cost • Significant improvement in 14,3% agricultural performance, Margin particularly in W Cape % • Other processing and milling 9.3% 9,0% 9.1% costs well managed • IAS 39 (impact of
Slide 13: Dividends per share
• Dividends per share unchanged Dividends per share 76,0 Dividend 68,0 68,0 44,0 per share (cents) 44,0 44,0 Final 28,0 28,0 24,0 24,0 Interim 2008 2009 2010 2010 13
Slide 14: Cash flow
• Increase in trade and Cash flow reflected other receivables is mostly cut-off related, 6 months to September 2010 Rm underlying aging has 539.1 actually improved 347.1 marginally 321.6 7.3 5.1 OB WC Tax Int CAPEX Other OP Div CB (51.0) (130.2) (140.5) (204.3) Rm 6 months to September 2009 528.1 OB
Slide 15: Capex spend
• Capex remains well managed in Capex spend current economic environment • Depreciation increase largely a consequence of prior years capital investment • Capital commitments increase 75,2 79,9 relates to acquisition of further 72,3 processed facility Dep 65,2 Rm 139,6 133,3 130,1 Capex Rm 116,4 200
Slide 16: Underlying operating profit
Underlying operating profit 12.0 Headline EBIT margin 10.9 (%) 7.3 344,7 7.0 6.9 313,2 Pre IAS39 6.9 5.3 6.8 Post IAS39 243,7 233,8 236,3 228,1 228,9 175,2 Headline EBIT (Rm) 2007 2008 2009 2010 16
Slide 17: 2010 Marketing highlights
RAINBOW 2010 Marketing highlights
Slide 18: Rainbow and Farmer Brown
Rainbow and Farmer Brown • It has been tough times in grocery markets in South Africa for the period under review • Nielsen reflects a 1% decline in total South African grocery categories excluding chicken • Rainbow’s Added Value retail/wholesale volumes grew by 32% however, reflecting the continued
Slide 19: Capacity
Capacity • Due to continued strong volume growth of Added Value, capacity has been exhausted at the Hammersdale Added Value plant • In September 2010 Rainbow purchased another further processing plant in Sasolburg, previously known as Midland Meat • This gives us capacity for substantial further gro
Slide 20: Innovation success
Innovation success • In the last 12 months……. Rainbow Family Polony has established a meaningful market share, and is a clear success • Rainbow Spice Flavas has shown early promise • Farmer Brown spatches have doubled their volume • and Rainbows new crumbed variants have contributed to good volume g
Slide 21: FoodSolutions
FoodSolutions • The recession has cramped growth in the food service markets • However, Rainbow FoodSolutions saw acceptable volume growth in the period under review • Better growth has returned in the last few months, and this is expected to continue into 2011 21
Slide 22: Outlook
• Maize and soya prices likely to remain volatile • Uncertainty around US maize crop and new season local planting intentions • Feed prices expected to be marginally higher in second six months with recent firming of market prices, but lower than the prior year • Despite chicken realisations showing
Slide 23: Appendices
RAINBOW Appendices
Slide 24: Vision
Vision Rainbow Chicken will be at the heart of every meal. We will achieve this by creating innovative solutions and strong brands. Key to our success is consistent, profitable, sustainable demand. The single reason Our partners in Excellence gives us Investing The right team we exist reaching our f
Slide 25: South Africa's largest processor and marketer of chicken
South Africa’s largest processor and marketer of chicken Windhoek Northern Province Botswana Mpumalanga Pretoria Rustenburg Carolina North Gauteng Swaziland West KwaZulu Namibia Free Natal State Pietermaritzburg Hammarsdale Lesotho Northern Durban Cape Eastern Cape 7,653 employees Western 5 proc
Slide 26: Integrated supply chain from farm to fork
Integrated supply chain from “farm to fork” GP OPERATION AGRICULTURE PROCESSING Grandparent Grandparent farms Parent Parent farms Broiler Broiler farms chicks chicks Broilers chicks Processing Rearing Laying Hatching Rearing Laying Hatching Growing 3 plants + 2 FP 22 wks 40 wks 3 wks 21 wks 40 wks 3
Slide 27: Rainbow's past
Rainbow’s past RAINBOW 1991 - 1998 Revenue (Rbn) RTL 91 92 93 94 95 96 97 98 Statutory HEBIT (Rm) 76 76 30 o "at (147; Attributable (173) Profit (Rm) 1999 - 2003 37 aul 99 00 01 02 03 HEBITMargin (%) ; 56 5.0 &9 8) Pd 1991 - 1998 Business in trouble «Revenue was growing, but so were losses. * The bu
Slide 28: Rainbow's past
Rainbow’s past RAINBOW 1991 - 1998 Revenue (Rbn) 24) 22 15) 15 yyy S| 91 92 93 94 95 96 97 98 Statutory HEBIT (Rm) : "s ee (115} (147] 29) Attributable (173) Profit (Rm) 1999 - 2003 37 3. 99 00 01 02 03 HEBITMargin (%) 56 5,0 &9 was | 38) 40 41 04 05 06 07 O08 09 303 290 2004 - 2010 6.0 68) 7 47 10
Slide 29: Per capita consumption of broiler meat
Estimated per capita consumption of broiler meat in Kilograms per capita 30,0 30,8 29,6 25,8 23,1 21,7 21,1 19,7 20,1 19,4 19,7 18,6 18,9 17,6 17,8 16,2 14,4 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 Continues to reflect growing trend Source: SAPA 29
Slide 30: Broilers produced per week by producer
• 16,9m broilers produced per week • 1,4m tons per annum 4,4 4,1 • Astral = Earlybird Farms + County Fair 3,5 • Others = approximately 44 smaller producers producing less than 200k broilers per week 1,3 1,0 0,9 0,9 0,8 Rainbow Astral Country Daybreak Rocklands Tydstroom Fouries Others Bird Source: M
Slide 31: Beef, lamb, pork and poultry prices
R / kg Beef, lamb, pork and poultry prices (to July 2010) 39 38 37 36 35 34 33 32 31 30 29 28 27 26 Beef 25 Lamb 24 23 Pork 22 Broiler 21 20 19 18 17 16 15 14 13 12 11 10 9 2006 2007 2008 2009 2010 31
Slide 32: Origin of poultry imports
289 Origin of poultry imports 279 84 Apr 2010 - Sep 2010 98 251 97 Other Argentina 7% 10% 225 Canada 206 69 9% 198 81 35 60 156 37 169 23 127 126 Total 47 24 51 47 Mechanically 27 144 131 Deboned Brazil 112 132 29 75% Meat 39 29 111 96 11 Turkey 15 80 68 products 16 61 57 Chicken products 03 04 05 0