RCL Foods Limited · JSE:RCL
RCL Foods — Investor Presentation (May 2007)
31 slides from RCL Foods's investor presentation, May 2007
Slide 1: Investor presentation May 2007
Investor presentation May 2007
Slide 2: Salient features
Salient features ¾ Revenue R 4 730,4m + 15,3% ¾ Operating profit R 654,1m + 13,2% (pre IAS39 + 29,9%) ¾ Headline earnings R 477,0m + 19,2% (pre IAS39 + 37,1%) ¾ Cash generated by operations R 821,5m + 20,8% ¾ Dividends per share 68,0 cents + 19,3% Investor presentation May 2007
Slide 3: Agenda
Agenda ¾ About Rainbow ¾ Industry perspective ¾ Strategy update ¾ Market conditions ¾ 2007 highlights ¾ Financial review ¾ General ¾ Prospects ¾ Questions and answers Investor presentation May 2007
Slide 4: About Rainbow
About Rainbow Facts Facts Our Our common common purpose purpose ¾ South Africa’s largest processor and marketer of chicken “Rainbow at the heart ¾ Listed on the JSE Securities Exchange of every meal” ¾ Founded in 1955 ¾ Headquartered in KwaZulu-Natal, South Africa ¾ Revenue R4,7 bn ¾ 7,223 employees
Slide 5: About Rainbow - major facilities
About Rainbow Major 4 processing plants Major facilities facilities 5 feed mills 22 distribution facilities Northern 190 farms / hatcheries Windhoek Province Botswana Mpumalanga Pretoria Feed mills Rustenburg Carolina Gauteng Swaziland North West Processing plants KwaZulu Namibia Free Natal
Slide 6: About Rainbow - distribution channels
About Rainbow Distribution Distribution channels channels Foodservice Foodservice Quick Service Full Service Contract Restaurants Restaurants Caterers Wholesale Wholesale & & Independents Independents Retail Retail Cash & Carry Independents Hyper stores Supermarkets Chains Independents Sub-Distribut
Slide 7: Industry perspective: per capita poultry consumption
Industry perspective Estimated Estimated per per capita capita consumption consumption of of poultry poultry meat meat Kilograms per capita 24,6 24,6 22,4 22,4 21,1 21,1 20,5 20,5 19,7 20,1 20,1 19,4 19,7 19,7 19,7 19,4 18,9 18,6 18,6 18,9 17,6 17,8 17,8 17,6 16,2 16,2 15,5 15,5 14,5 14,5 14,5 14,5
Slide 8: Industry perspective: local broiler consumption growth
Industry perspective Estimated Estimated local local broiler broiler consumption consumption growth growth 12,6 10,5 Growth 8,5 % 5,9 5,8 3,6 3,2 (1,9) 1,225 1,225 1,088 1,088 954 985 985 954 901 901 815 844 844 828 828 815 Tons 751 751 ‘000 98 99 00 01 02 03 04 05 06 Source: SAPA Investor presentat
Slide 9: Industry perspective: average broiler production per week
Industry perspective Average Average broiler broiler production production per per week week Million broilers (Excludes imports) 13,8 13,8 12,9 12,9 11,8 11,8 11,8 11,8 11,9 11,9 11,1 11,1 11,0 11,0 10,5 10,5 9,8 9,8 9,8 9,8 9,2 9,2 8,5 8,5 8,0 8,0 7,6 7,6 7,5 7,5 7,1 7,1 7,1 7,1 90 91 92 93 94 95 9
Slide 10: Industry perspective: broiler production by producer
Industry perspective Average Average broiler broiler production production per per week week by by producer producer ¾ 13,8m broilers produced per week Million broilers per week as at March 2007 ¾ 1,2m tons per annum 4,1 4,1 ¾ Astral = Earlybird Farms + County Fair 3,4 3,4 ¾ Others = approximately 5
Slide 11: Industry perspective: beef, pork and poultry prices
Industry perspective Beef, Beef, Pork Pork and and Poultry Poultry prices prices R / kg 18 17 16 15 Beef abattoir 14 selling prices 13 12 11 10 Broiler Pork abattoir 9 producer price contract prices 8 7 2002 2003 2004 2005 2006 ¾ Poultry prices becoming less volatile ¾ Beef prices increased signific
Slide 12: Industry perspective: total poultry imports
Industry perspective Total Total poultry poultry imports imports (‘000 (‘000 tons) tons) Financial year ended 31 March 289 Total 84 Mechanically ¾ Imports increased substantially over past few years Deboned Meat ¾ Chicken products focused mainly on small range of products 225 (dark meat and offal).
Slide 13: Strategy update
Strategy update 1 Maximised Key Performance Indicators in Agriculture Improved processing yields 33 Fixed the basics Enhanced animal husbandry practices and bio-security Managed costs out of the business 33 Yielded improved earnings but the business was still at risk as earnings were low-margin, vol
Slide 14: Strategy update: 5 key initiatives
Strategy update 3 Redefined our broader business strategy within a framework of 5 key initiatives Developing an Creating Managing Investing Creating a intimate mutually complexity, continually in winning understanding of beneficial leveraging inspirational community and our consumers’ relationships
Slide 15: Strategy update: poultry market by channel
Strategy update Poultry Poultry market market by by channel channel (Including (Including imports) imports) Rainbow Rainbow focus focus 2007 vs 2004 2004 Contribution 2007 13,6 ¾ Good growth Retail Retail Total market Foodservice 25% Foodservice 28% Rbn ¾ Strategic customer 29% 36% 11,6 focus Wholes
Slide 16: Strategy update: FP products update
Strategy update FP FP products products update update ¾ First full year of production ¾ Investment has supported customer strategy in providing growth and innovation for FoodSolutions and Retail customers ¾ All 3 technologies (Freezer-To-Fryer, Chilled Processed Meats and Fully Cooked) successfully
Slide 17: Strategy update: IQF update
Strategy update IQF IQF update update (4+4+4 (4+4+4 and and Flavoured) Flavoured) ¾ Further example of consumer innovation ¾ Recently launched products performing well Mild ild P Peerri- Peerrii ii--P M &H moonn & LLeem Heerrbb cuee Baarrbbeecu B Investor presentation May 2007
Slide 18: Strategy update - Creating Win-win Partnerships
Strategy update - Creating Win-win Partnerships KFC KFC ¾ On 26 April 2007 Rainbow received the prestigious Yum! Restaurants International (holding company of KFC) “International Food Supplier of the year” award. ¾ First South African company to do so. ¾ KFC has experienced significant growth in the
Slide 19: Market conditions
Market conditions ¾ Economy grown by 4% ¾ Positive macro-economic environment, despite increasing inflation and interest rates ¾ Local chicken market estimated to have grown by 11,1% to R13,6bn ¾ Local drought conditions with estimated maize crop of only 6,9m tons, global stocks very low and increas
Slide 20: 2007 highlights
2007 highlights 2006 2007 Revenue Rm 4 101,5 4 730,4 + 15,3% Headline EBITDA Rm 688,1 775,1 + 12,6% Effective tax rate % 31,9 29,9 + 2,0% Headline earnings Rm 400,3 477,0 + 19,2% HEPS - fully diluted cents 140,2 164,4 + 17,3% Cash generated by ops Rm 680,1 821,5 + 20,8% Net cash Rm 394,4 590,3 + 49,
Slide 21: 2007 highlights
2007 highlights Revenue Revenue (Rm) (Rm) ++ 15,3% 15,3% Headline Headline EBITDA EBITDA (Rm) (Rm) ++ 12,6% 12,6% 4,730 4,730 775,1 775,1 4,104 4,104 688,1 688,1 4,027 4,027 3,830 3,830 367,0 367,0 368,2 368,2 2004 2005 2006 2007 2004 2005 2006 2007 Cash Cash generated generated (Rm) (Rm) ++ 20,8% 2
Slide 22: Financial review: revenue
Financial review Revenue Revenue (Rm) (Rm) ++ 15,3% 15,3% Chicken Chicken sales sales ++ 13,0% 13,0% 4730,4 ¾ Volumes up 5,0%. Sales to QSR sector, targeted customers and branded products 963,2 963,2 (including new Further Processed products) Total 4027,0 4101,5 all showing pleasing growth 859,4 766
Slide 23: Financial review: EBITDA margin and headline earnings
Financial review Headline Headline EBITDA EBITDA margin margin -- 0,4% 0,4% Headline Headline earnings earnings ++ 19,2% 19,2% 16,8% 16,4% 33,1 Effective 32,7 Tax rate 31,9 % 29,9 Headline 775,1 775,1 EBITDA 9,6% Margin 477,0 % 688,1 688,1 9,1% 400,3 21,8 21,8 455,2 455,2 227,5 211,0 367,0 368,2 368
Slide 24: Financial review: cash generated and capex
Financial review Cash Cash generated generated by by ops ops ++ 20,8% 20,8% Capex Capex spend spend -- 8,7% 8,7% 118,2 109,7 821,5 821,5 Depreciation & 680,1 680,1 Amortisation 78,0 Rm 63,7 234,4 214,1 200,0 65,0 65,0 402,2 402,2 86,0 86,0 169,4 169,4 Cash 309,8 309,8 Rm 86,9 114,0 114,0 Capex Spend
Slide 25: Financial review: dividends per share
Financial review Dividends Dividends per per share share ++ 19,3% 19,3% 2,8 Dividend 2,5 2,5 2,4 cover (times) 68,0 48,0 48,0 57,0 Dividend 40,0 40,0 per share (cents) 29,0 30,5 ¾ Dividend a function of: 21,0 Final 21,0 21,0 21,0 Performance Cash flow 20,0 20,0 17,0 17,0 Future prospects 9,5 I
Slide 26: Financial review - Raw material procurement
Financial review - Raw material procurement Yellow Yellow maize maize spot spot prices prices Rainbow Rainbow policy policy R/ton 1,800 1,700 1,600 1,500 Forward Options purchase and 1,400 contracts futures 1,300 +- 30% +- 30% 1,200 1,100 1,000 Over the counter 900 and spot purchases 800 +- 40% 700
Slide 27: Financial review: pre and post IAS39
Financial review Pre Pre IAS39 IAS39 ¾ As noted previously, reporting the financial effects of only certain procurement Post IAS39 14,1 14,2 instruments in terms of IAS39 introduces volatility to statutory results. 13,9 ¾ Underlying (Pre IAS39) profitability and margins improving. 12,6 7,9 7,9 Headl
Slide 28: General
General ¾ AI SA status unchanged Local industry remains on high alert International outbreaks reported in Asia, Europe and Africa Focus on prevention through increased bio-security and stepped-up surveillance and monitoring of flock health Good co-operation between Government and Industry ¾
Slide 29: Strategy delivers significantly improved results
Strategy delivers significantly improved results Pre IAS39 14,1 ¾ Good growth in Earnings. 12,5 ¾ 2005 compromised by feed contamination impact. ¾ Past 4 years focus on improving quality of earnings. ¾ Significant investment in last 2 years. 668,3 668,3 ¾ 4 year Compound Annual Growth Rate to 2007:
Slide 30: Prospects
Prospects ¾ Consumer spending is expected to remain positive with demand for chicken specifically as an affordable protein source also expected to remain strong. ¾ Maize and soya prices are likely to remain at the current high levels, and it is expected that feed input costs will be significantly hi
Slide 31: Questions and answers
Investor presentation May 2007 Questions and answers Investor presentation May 2007