RCL Foods Limited · JSE:RCL
RCL Foods — H1 2017 Earnings Presentation
41 slides from RCL Foods's earnings presentation, Feb 24, 2017
Slide 1: Results for the Six Months Ended 31 December 2016
RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2016 INVESTOR PRESENTATION 24 FEBRUARY 2017
Slide 2: Miles Dally, CEO
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Slide 3: Headlines – Results for the Six Months
Salient features | Strategic overview | Financial review | Operational reviews | Prospects HEADLINES – RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2016 PERFORMANCE HEADLINES FINANCIAL HIGHLIGHTS Continue to move towards a more balanced portfolio EBITDA REVENUE pre-IAS 39 8.4% pre-IAS 39 EBITDA grow
Slide 4: Moving Towards a More Balanced Portfolio
Salient features | Strategic overview | Financial review | Operational reviews | Prospects MOVING TOWARDS A MORE BALANCED PORTFOLIO Significant progress against strategic thrusts are moving us closer to a stronger, more diversified business that is geared for growth RELATIVE SHARE OF EBITDA 6 MONTHS
Slide 5: 6 Months to December 2016 Results
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 6 MONTHS TO DECEMBER 2016 RESULTS EBITDA GROWTH EBITDA MARGIN 8.4% pre-IAS 39 EBITDA growth excluding Chicken (pre-IAS 39) (pre-IAS 39) Excl Chicken Sugar is recovering well largely due to more favourable Excl
Slide 6: Progress Against Deliverables for 2017
Salient features | Strategic overview | Financial review | Operational reviews | Prospects PROGRESS AGAINST DELIVERABLES FOR 2017 Revised business model for Chicken Group route-to-market opportunities Millbake turnaround and future Sharper strategic customer focus per category Continuous investment
Slide 7: Rob Field, CFO
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Slide 8: Financial Summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects FINANCIAL SUMMARY 6 MONTHS ENDED 31 DECEMBER 2016 31 DECEMBER 2015 STATUTORY 31 DECEMBER 2016 % VAR Restated Revenue Rm 13 085.5 12 875.30 1.60 EBITDA Rm 900.4 1 152.20 (21.9) EBITDA margin % 6.9 8.90 (2.0) EB
Slide 9: Operating Environment
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING ENVIRONMENT Drought impact continues into F17 with sustained high soft commodity prices General inflation reached 6.8% in December 2016 which together with high interest rates and steady increases in
Slide 10: Results Waterfall (Rm)
Salient features | Strategic overview | Financial review | Operational reviews | Prospects RESULTS WATERFALL (Rm) 973.6 35.3 37.9 900.4 545 2016 973.6 35.3 37.8 900.4 142.2 Chicken Impairment 402.8 102.7 13.3 411 181.2 163.7 70.4 102.7 13.3 54.1 411.0 181.2 163.7 70.4 54.1 EBITDA EBITDA Pre-IAS39 (E
Slide 11: Key Financial Issues
Salient features | Strategic overview | Financial review | Operational reviews | Prospects KEY FINANCIAL ISSUES Downsizing of Chicken business unit resulted in the following financial impacts: • R142.2 million impairment of plant and equipment • R42.9 million provision for restructuring costs • R9.0
Slide 12: Operating Results Summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY SEGMENTAL ANALYSIS REVENUE (Rm) 31 DECEMBER 2016 31 DECEMBER 2015 % VAR Consumer 7 072.80 6 708.60 5.40 Sugar & Milling 7 613.00 7 612.10 0.00 Logistics 1 056.30 994.50 6.20 Sales bet
Slide 13: Operating Results Summary – Segmental EBITDA
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY SEGMENTAL ANALYSIS - EBITDA 31 DECEMBER 2015 EBITDA (Rm) – pre-IAS 39 31 DECEMBER 2016 % VAR Restated Consumer 224.90 501.60 (55.2) Sugar & Milling 578.20 479.30 20.70 Logistics 145.2
Slide 14: Operating Results Summary – EBITDA Reconciliation
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY EBITDA (pre-IAS 39) reconciliation of 6 months December 2015 to 2016 -15.6% 1 109.1 210.9 +8.4% 10.4 6.0 99.0 973.6 37.8 935.7 898.2 28.0 2015 2015 December EBITDA EBITDA Chicken 2015
Slide 15: Cash Flow Summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects CASH FLOW SUMMARY Rm 31 DECEMBER 2016 31 DECEMBER 2015 % VAR Restated Opening balance* 363.20 870.50 (58.3) Operating profit adjusted for non-cash flow items 1 160.70 1 187.10 (2.2) Working capital changes (1
Slide 16: Working Capital
Salient features | Strategic overview | Financial review | Operational reviews | Prospects WORKING CAPITAL WORKING CAPITAL MOVEMENT (Rm) 31 DECEMBER 2016 31 DECEMBER 2015 Net (1 057.5) (801.8) Trade receivables (615.9) (616.4) Inventories (350.8) (108.5) Biological assets 35.50 49.10 Trade payables
Slide 17: Debt Package
Salient features | Strategic overview | Financial review | Operational reviews | Prospects DEBT PACKAGE TERM VALUE (Rm) YEAR 1 YEAR 2 YEAR 3 (FEB 18) YEAR 4 (FEB 19) 1 355 5 year 400 847 4 year 250 3 year – RCF 498 Total 3 350 Hedged % 77% 77% 53% 53% FINANCE COSTS (Rm) Hedged (fixed rate) 177.5 181
Slide 18: Debt Covenants
Salient features | Strategic overview | Financial review | Operational reviews | Prospects DEBT COVENANTS COVENANT REQUIRED DEC 2016 JUN 2016 DEC 2015 Senior leverage ratio (Net senior debt*/pre-IAS 39 HEBITDA) <3.0 2.2 1.8 1.6 Repricing (a step-up margin of 0.25% is triggered if the senior leverage
Slide 19: Capital Expenditure
Salient features | Strategic overview | Financial review | Operational reviews | Prospects CAPITAL EXPENDITURE Capital expenditure was R403.5m (2015: R544.4m) Significant spend includes further investment in the Grocery pet food plant and the Logistics divisions Thekwini site as well as spend on the
Slide 20: Scott Pitman, MD – Consumer Division
SCOTT PITMAN MD CONSUMER DIVISION
Slide 21: Operational Review: Consumer
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CONSUMER REVENUE (Rm) 31 DECEMBER 2016 31 DECEMBER 2015 % VAR HEADLINES Restated • The oversupplied retail Consumer 7 072.80 6 708.60 5.40 chicken market due to Sugar & Milling 7 613.00 7 6
Slide 22: Operational Review: Consumer
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CONSUMER REVENUE (Rm) 31 DECEMBER 2016 31 DECEMBER 2015 % VAR Chicken 4 024.80 3 990.00 0.90 Groceries 2 595.80 2 323.10 11.70 HEADLINES Sales between business units (37.0) (35.2) 5.10 • Ch
Slide 23: Operational Review: Chicken
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CHICKEN CHICKEN - MAINSTREAM TOTAL CHICKEN (EXCL MDM) Import levels remain high at an average of 28 000 tons for IMPORTS TONS PER MONTH the last 12 months, 3 times higher than 7 years ago,
Slide 24: Operational Review: Chicken
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: CHICKEN FREEZER TO FRYER VOLUME SHARE CHICKEN – ADDED-VALUE 28.5% 26.0% RETAIL 24.8% • The Rainbow added-value portfolio generated an acceptable performance with the Rainbow Freezer to Frye
Slide 25: Operational Review: Groceries
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES YUM YUM PEANUT BUTTER VOLUME SHARE GROCERY 31.1% 31.3% 29.8% Another very good 6 months for Grocery 12MMA DEC ‘15 12MMA DEC ‘16 6MMA DEC ’16 Source: Aztec Yum Yum Peanut Butter, N
Slide 26: Operational Review: Groceries – Pies
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES PIES Core Pieman’s volumes have started to recover as we reap the rewards of quality investments, innovation and a new strategy to customers The launch of our Mighty Fine affordab
Slide 27: Operational Review: Groceries – Beverages
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES BEVERAGES After a great start our Beverages business unit faced a number of challenges in the second quarter which severely impacted their underlying result The UHT long life No.1
Slide 28: Operational Review: Groceries – Speciality
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: GROCERIES SPECIALITY Lower than expected orders from our key customer and substantial cream supply issues placed Speciality under pressure Albeit still small in our basket, the QSR arena re
Slide 29: John du Plessis, MD – Sugar & Milling Division
JOHN DU PLESSIS MD SUGAR & MILLING DIVISION
Slide 30: Operational Review: Sugar & Milling
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR & MILLING 31 DECEMBER 2015 HEADLINES REVENUE (Rm) 31 DECEMBER 2016 % VAR Restated • Sugar recovery Consumer 7 072.80 6 708.60 5.40 Sugar & Milling 7 613.00 7 612.10 0.00 • Gauteng bak
Slide 31: Operational Review: Sugar & Milling
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR & MILLING HEADLINES REVENUE (Rm) 31 DECEMBER 2016 31 DECEMBER 2015 % VAR Restated • Animal feed result adversely Animal Feed 3 057.80 2 818.10 8.50 impacted by commodity position Mill
Slide 32: Operational Review: Animal Feed
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: ANIMAL FEED YELLOW MAIZE PRICE EBITDA decline by R35.5m (20.9%) to R134.4m as a 4500 7.4% H1 F16 H1 F17 result of pressure on both volume and margin 4000 AVG Price AVG Price (6m) (6m) 3500
Slide 33: Operational Review: Millbake
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: MILLBAKE SAFEX WHEAT PRICE A long position on wheat put margin under pressure in a declining market EBITDA increase by R16.0m (11.5%) to R155.4m 5300 2.8% 5100 H1 F16 H1 F17 4900 AVG Price
Slide 34: Operational Review: Sugar
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR EBITDA of R288.4m was up 69.6% on the comparative period, with the associated margin increasing from 5.6% to 11.0% Impacts of the drought are expected to continue in F18 due to delaye
Slide 35: Operational Review: Sugar
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: SUGAR MANUFACTURERS SHARE Due to the drought, the cane harvest was down on the prior year and this resulted in volumes declining by 33.5% to 248,777 tons for the period 57.5% 55.2% Lower vo
Slide 36: Chris Creed, MD – Logistics Division
CHRIS CREED MD LOGISTICS DIVISION
Slide 37: Operational Review: Logistics
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: LOGISTICS REVENUE (Rm) 31 DECEMBER 2016 31 DECEMBER 2015 % VAR Restated Consumer 7 072.80 6 708.60 5.40 Sugar & Milling 7 613.00 7 612.10 0.00 Logistics 1 056.30 994.50 6.20 HEADLINES Sales
Slide 38: Operational Review: Logistics
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: LOGISTICS Fair first half performance off the back of continuing retail volume pressure RETAIL VOLUMES UNDER PRESSURE Volumes in the retail industry are under pressure, with continued decli
Slide 39: Operational Review: Logistics
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: LOGISTICS Capital expansion programme completed, operational performance sound THEKWINI EXPANSION FULLY OPERATIONAL Coega and Peninsula operating well post commissioning in prior period Maj
Slide 40: Operational Review: Logistics – Group Projects
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW: LOGISTICS Group projects progressing RANDFONTEIN AMBIENT DISTRIBUTION To customer DC Groceries Outlying regions Ambient distribution for Grocery business unit at Randfontein successfully im
Slide 41: Prospects
Salient features | Strategic overview | Financial review | Operational reviews | Prospects PROSPECTS Chicken industry in crisis however the business has taken substantial corrective action to safeguard the business Sugar recovery promising, but imports, sugar prices and drought impact remain a threa