Astral Foods Limited · JSE:ARL
Astral Foods — FY2018 Earnings Presentation
70 slides from Astral Foods's earnings presentation, 2018
Slide 1: Annual Results Presentation
Annual Results Presentation for the 12 months ended 30 September 2018
Slide 2: Agenda
AGENDA Business Overview Page 3 / Slide 3 Operational Overview Page 5 / Slide 8 Industry Trends Page 12 / Slide 21 “ Financial Overview Page 16 / Slide 29 Outlook Page 22 / Slide 42 Additional Information Page 24 / Slide 46 ” 2
Slide 3: Business Overview
BUSINESS OVERVIEW
Slide 4: Highlights
Business Operational Financial Industry Trends Outlook Overview Overview Overview HIGHLIGHTS A majority of the key drivers of profitability were in Astral’s favour – “stars were aligned” Feed input costs reduced notably due to lower maize prices on the back of a bumper maize crop for 2017 Supp
Slide 5: Key Financial Indicators
Business Operational Financial Industry Trends Outlook Overview Overview Overview KEY FINANCIAL INDICATORS Revenue 5% Profit before interest and tax 79% Earnings per share @ 3 691 cps 88% Headline earnings per share @ 3 712 cps 94% Total dividend for the year @ 2 050 cps 94% 5
Slide 6: Divisional Highlights
Business Operational Financial Industry Trends Outlook Overview Overview Overview DIVISIONAL HIGHLIGHTS Poultry Feed Feeding cost decreased Maize prices notably down Bird performance improvement General market improvement Sales volumes flat Higher internal feed required Sales realisati
Slide 7: The Year in Perspective
Business Operational Financial Industry Trends Outlook Overview Overview Overview THE YEAR IN PERSPECTIVE (R million) 2 500 93 356 2 000 519 116 18 1 500 465 1 000 1 942 500 1 087 R855 million - conversion Raw material Other Broiler selling PBIT F2017 Broiler sales PBIT F2018 Bird flu cost efficienc
Slide 8: “ ”
“ ” 8
Slide 9: Poultry Division
Business Operational Financial Industry Trends Outlook Overview Overview Overview POULTRY DIVISION Revenue - R million Operating profit - R million 11 000 1 500 10 000 10 604 1 400 1 453 9 916 1 300 9 000 1 200 8 000 1 100 1 000 7 000 900 6 000 800 5 000 700 600 4 000 638 500 3 000 400 2 000 300 200
Slide 10: Poultry Division
Business Operational Financial Industry Trends Outlook Overview Overview Overview POULTRY DIVISION Results for the year ended September 2018 are a significant improvement on the comparable period Feed input costs reduced due to lower maize prices on the back of a record maize crop for 2017 and a
Slide 11: Poultry Division – Product Mix
Business Operational Financial Industry Trends Outlook Overview Overview Overview POULTRY DIVISION – PRODUCT MIX 22% 23% F2017 F2018 7% 436 695 Tons 49% 437 506 Tons 49% 7% Volume increase ≈ 0,2% 14% 14% 4% 4% 4% 3% 11
Slide 12: Broiler Production Performance
Business Operational Financial Industry Trends Outlook Overview Overview Overview BROILER PRODUCTION PERFORMANCE 108% 106% 104% 102% 100% 98% 96% 94% Key indicators base-lined to 100% in F2013 92% F2013 F2014 F2015 F2016 F2017 F2018 Slaughter age Live weight Average daily gain 12
Slide 13: Broiler Production Performance
Business Operational Financial Industry Trends Outlook Overview Overview Overview BROILER PRODUCTION PERFORMANCE 130% 125% 120% 115% 110% 105% 100% 95% 90% 85% 80% 75% 70% Key indicators base-lined to 100% in F2013 65% F2013 F2014 F2015 F2016 F2017 F2018 Mortality rate Feed conversion rate Efficienc
Slide 14: Broiler Production Performance
Business Operational Financial Industry Trends Outlook Overview Overview Overview BROILER PRODUCTION PERFORMANCE 125% 120% 115% 110% 105% 100% 95% 90% Key indicators base-lined to 100% in F2013 85% F2013 F2014 F2015 F2016 F2017 F2018 Broiler feed price index Feed conversion index Feeding cost index
Slide 15: Feed Division
(Astral Astral_is aleading Southern African integrated poultry producer FEED DIVISION
Slide 16: Feed Division
Business Operational Financial Industry Trends Outlook Overview Overview Overview FEED DIVISION Revenue - R million Operating profit - R million 7 000 500 6 583 457 6 000 6 198 400 5 000 391 300 4 000 3 000 200 2 000 100 1 000 - - F2017 F2018 F2017 F2018 Revenue down 5.8% Operating profit up 16.
Slide 17: Feed Division
Business Operational Financial Industry Trends Outlook Overview Overview Overview FEED DIVISION SAFEX yellow maize prices decreased notably for the period under review F2018 avg. R2 098 per ton (F2017: R2 464) down R366 per ton year-on-year Internal feed sales increased by 6.0% due to an increas
Slide 18: Feed Division – Sales Mix
Business Operational Financial Industry Trends Outlook Overview Overview Overview FEED DIVISION – SALES MIX 12% 13% 21% F2017 22% F2018 1 329 771 Tons 1 410 283 Tons Volume increase ≈ 6.1% 60% 60% 6% 6% 18
Slide 19: Other Africa Division
OTHER AFRICA DIVISION
Slide 20: Other Africa Division (Zambia, Mozambique & Swaziland)
Business Operational Financial Industry Trends Outlook Overview Overview Overview OTHER AFRICA DIVISION (Zambia, Mozambique & Swaziland) Revenue - R million Operating profit - R million 450 35 400 427 411 30 32 350 25 27 300 250 20 200 15 150 10 100 5 50 - - F2017 F2018 F2017 F2018 Revenue down 3.
Slide 21: Industry Trends
INDUSTRY TRENDS
Slide 22: SAFEX Yellow Maize Price
Business Operational Financial Industry Trends Outlook Overview Overview Overview SAFEX YELLOW MAIZE PRICE Source: CJA Strategic Risk Brokers 22
Slide 23: SAFEX Yellow Maize Price vs. CBOT in Rand Terms
Business Operational Financial Industry Trends Outlook Overview Overview Overview SAFEX YELLOW MAIZE PRICE vs. CBOT IN RAND TERMS Source: CJA Strategic Risk Brokers 23
Slide 24: Durban Soya Meal Price
Business Operational Financial Industry Trends Outlook Overview Overview Overview DURBAN SOYA MEAL PRICE Source: CJA Strategic Risk Brokers 24
Slide 25: Poultry Imports per Month
Business Operational Financial Industry Trends Outlook Overview Overview Overview POULTRY IMPORTS PER MONTH Tons 70 000 65 000 60 000 55 000 50 000 45 000 40 000 35 000 30 000 25 000 20 000 15 000 10 000 5 000 0 Aug-14 Aug-15 Aug-16 Aug-17 Aug-18 Oct-13 Oct-14 Oct-15 Oct-16 Oct-17 Feb-14 Jun-14 Feb-
Slide 26: Broiler Selling Prices
80% 90% 110% 120% 130% 140% 160% 100% 150% Oct-12 Dec-12 Feb-13 Business Overview Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Overview Operational Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Broiler selling price index Aug-15 Oct-15 Source: Own Data Dec-15 Industry Trends Feb-16 Apr-16 Jun
Slide 27: Broiler Price vs. Food Price Inflation
Business Operational Financial Industry Trends Outlook Overview Overview Overview BROILER PRICE vs. FOOD PRICE INFLATION 170% 170% 160% 160% 150% 150% 140% 140% 130% 130% 120% 120% 110% 110% 100% 100% 90% 90% 80% 80% Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16
Slide 28: Change in Poultry Selling Price vs. Feed Price
Business Operational Financial Industry Trends Outlook Overview Overview Overview CHANGE IN POULTRY SELLING PRICE vs. FEED PRICE 40% 30% 20% 10% 0% Feb-13 Jun-13 Feb-14 Jun-14 Feb-15 Jun-15 Feb-16 Jun-16 Feb-17 Jun-17 Feb-18 Jun-18 Oct-12 Dec-12 Oct-13 Oct-16 Oct-17 Aug-13 Dec-13 Oct-14 Oct-15 Aug-1
Slide 29: Financial Overview
FINANCIAL OVERVIEW
Slide 30: Income Statement
Business Operational Financial Industry Trends Outlook Overview Overview Overview INCOME STATEMENT 2018 2017 2017 Year ended 30 September R million R million R million % change Restated Revenue 12 979 12 417 12 351 5% Operating profit 1 942 1 056 1 048 84% Operating profit margin 15.0% 8.5% 8.5% Pro
Slide 31: Group Annual Revenue
Business Operational Financial Industry Trends Outlook Overview Overview Overview GROUP ANNUAL REVENUE 18,000 (R billion) 16,000 13,0 14,000 12,4 12,0 12,000 11,3 6,2 9,6 6,6 7,2 10,000 8,5 6,2 8,2 7,4 7,2 7,0 8,000 6,9 5,5 6,3 4,3 4,9 6,000 5,2 4,0 3,5 4,8 3,6 3,5 5,1 10,6 3,9 4,1 9,9 3,7 2,7 8,7 9
Slide 32: Group Annual Operating Profit
Business Operational Financial Industry Trends Outlook Overview Overview Overview GROUP ANNUAL OPERATING PROFIT 1942 (R million) 14,8% 0,16 1880 15,0% 0,14 12,8% 12,3% 457 0,12 1380 9,8% 8,7% 9,6% 9,3% 1101 1086 0,1 8,3% 8,4% 7,3% 6,7%6,6% 0,08 880 766 809 674 597 5,8% 423 391 581 585 5,1% 549 0,06
Slide 33: Group Six Monthly Operating Profit
Business Operational Financial Industry Trends Outlook Overview Overview Overview GROUP SIX MONTHLY OPERATING PROFIT (R million) 1044 875 898 191 550 207 266 551 429 324 186 280 237 120 203 213 212 153 233 154 59 157 197 140 135 156 173 351 310 194 252 184 616 836 617 45 59 -3 -117 5 -135 22 1H12 2H
Slide 34: Balance Sheet
Business Operational Financial Industry Trends Outlook Overview Overview Overview BALANCE SHEET September 2017 September 2018 R million R million % change Restated Non-current assets 2 409 2 228 8% Net working capital 1 189 869 37% Current assets (excl. cash) 2 943 2 468 19% Current liabilities (exc
Slide 35: Capital Expenditure
Business Operational Financial Industry Trends Outlook Overview Overview Overview CAPITAL EXPENDITURE 2018 2017 Twelve months ended 30 September R million R million Depreciation 152 149 Total capex spend 356 150 Commitments 1 401 148 Total spend and committed 1 757 298 35
Slide 36: Capital Expenditure F2018
Business Operational Financial Industry Trends Outlook Overview Overview Overview CAPITAL EXPENDITURE F2018 2018 R million Processing plant equipment 113 Breeder farm refurbishment 22 Water augmentation project Western Cape 16 HPAI mitigation project 42 Listeria mitigation project 17 Sub-Total 210 O
Slide 37: Capital Expenditure Commitments
Business Operational Financial Industry Trends Outlook Overview Overview Overview CAPITAL EXPENDITURE COMMITMENTS R million Total commitments 1 401 Major projects: 1 271 Festive expansion (Phase 1 & 2 – 800 000 bpw) 875 Mountain Valley expansion (200 000 bpw) 203 Meadow Feeds Standerton silo complex
Slide 38: Working Capital
Business Operational Financial Industry Trends Outlook Overview Overview Overview WORKING CAPITAL 2018 2017 Variance For the twelve months ended 30 September R million R million R million Current assets 2 943 2 468 475 Biological assets 770 658 112 Inventory - Poultry 532 258 274 - Feed 255 185 70 -
Slide 39: Statement of Cash Flows
Business Operational Financial Industry Trends Outlook Overview Overview Overview STATEMENT OF CASH FLOWS 2018 2017 For the twelve months ended 30 September R million R million Cash operating profit 2 156 1 436 Working capital movement (425) (71) 1 731 1 365 Tax paid (516) (310) Net interest receive
Slide 40: Headline Earnings & Dividend per Share
Business Operational Financial Industry Trends Outlook Overview Overview Overview HEADLINE EARNINGS & DIVIDEND PER SHARE (cents per share) 3712 2016 1914 1381 1286 1148 958 890 960 965 840 787 864 631 487 434 272 326 90 108 168 230 380 585 700 700 700 760 810 656 222 440 1150 490 1055 2050 F2001 F20
Slide 41: In Summary
Business Operational Financial Industry Trends Outlook Overview Overview Overview IN SUMMARY Record profits in F2018 with profit margin at 15.0% (F2017: 8.7%) Cash flow generated from operations R1 731 million in F2018 Net surplus cash at year-end of R789 million Final dividend of 1 050 cps
Slide 42: Outlook
OUTLOOK
Slide 43: Potential Negative Influences
Business Operational Financial Industry Trends Outlook Overview Overview Overview POTENTIAL NEGATIVE INFLUENCES Raw material prices are on an upward trend and will impact Astral‟s largest input cost, namely feed making up 67% of broiler live cost The impact of international trade wars and geopol
Slide 44: Potential Positive Influences
Business Operational Financial Industry Trends Outlook Overview Overview Overview POTENTIAL POSITIVE INFLUENCES Improved political situation in South Africa and the region Indications of a more “business friendly” environment in South Africa, with key government departments engaging with the pou
Slide 45: Astral's strategy
“ astral’s strategy is to be the best cost integrated poultry producer in, selected African — countries ”
Slide 46: Additional Information
ADDITIONAL INFORMATION
Slide 47: What We Said in May 2018
WHAT WE SAID IN MAY 2018 General business confidence improved as well as the prospect for foreign direct investment following the election of a new President for the country A bumper maize crop in 2017 and the country set to harvest an above average maize crop in 2018 will stand us in good ste
Slide 48: Key Financial Ratios
KEY FINANCIAL RATIOS 70 30,0 65 61 60 55 25,0 51 48 48 49 50 46 45 20,0 41 42 39 39 16,5 40 37 36 16,1 36 13,9 14,5 34 36 33 31 15,0 31 31 30 14,8 29 15,0 30 28 11,4 26 26 11,0 11,1 12,8 25 10,0 12,3 9,9 23 9,9 9,3 19 8,9 21 20 10,0 19 20 7,5 9,6 7,4 9,3 6,5 9,8 8,3 8,4 13 8,7 8,0 7,8 12 7,3 6,1 5,8
Slide 49: Key Financial Indicators
KEY FINANCIAL INDICATORS 100 96,06 90 80 78,15 70 61,05 61,07 60 49,95 50 44,16 41,36 41,65 40 37,43 35,38 33,47 34,24 34 34 29 28,28 30 26 23,83 24 24 22 21 21 21 19 17,36 18 20 23 14,34 17 15 16 20 14 10,79 11 10 8,53 9 10 14 15 12 12 9 9 10 0 7 0 0 3 Sep-11 2 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Se
Slide 50: World Corn Ending Stocks
WORLD CORN ENDING STOCKS Million Tons 375 30% 28,73% 350 27,80% 27,61% 325 300 25,00% 23,85% 25% 275 250 225 19,86% 200 19,82% 20% 175 150 125 14,81% 100 15% 75 12,30% 50 25 0 10% 2012 2013 2014 2015 2016 2017 2018 2019E 2020F End Stock Maize stock to use ratio Source: CJA Strategic Risk Brokers 50
Slide 51: South Africa – Total Maize Supply & Demand
SOUTH AFRICA – TOTAL MAIZE SUPPLY & DEMAND Marketing year (May to April) 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19E 2019/20F '000 tons Actual Actual Actual Actual Estimate Estimate Forecast Carry In (1 May) 1 414 589 2 074 2 471 1 093 3 689 2 326 Crop Estimate 11 811 14 250 9 955 7 779 16 744
Slide 52: South Africa – Total Maize Supply & Demand
SOUTH AFRICA – TOTAL MAIZE SUPPLY & DEMAND „000 Tons 4 000 30% 28,31% 3 500 25% 3 000 21,75% 20% 2 500 17,41% 16,62% 2 000 15% 12,23% 1 500 9,87% 10% 9,16% 1 000 4,96% 5% 500 1414 590 2062 2471 1093 3689 2326 1156 0 0% 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19E 2019/20F Carry out Maize
Slide 53: El Niño Southern Oscillation - Forecast
EL NIÑO SOUTHERN OSCILLATION - FORECAST Source: International Research Institute for Climate and Society (IRI) – Columbia University 53
Slide 54: Southern Africa - Vegetative Health Index
SOUTHERN AFRICA - VEGETATIVE HEALTH INDEX VHI of previous year VHI of current year Source: NOAA - National Environmental Satellite, Data, and Information Service (VHI) 54
Slide 55: Broiler Feed – Ingredient Inclusion & Cost Contribution
BROILER FEED – INGREDIENT INCLUSION & COST CONTRIBUTION 0,3 0,3 0,4 0,5 0,5 0,4 100% 5,0 4,7 4,7 7,3 6,6 5,4 6,0 5,4 7,5 9,9 0,2 0,4 0,5 9,1 14,6 16,6 90% 10,3 10,3 0,4 6,4 6,7 7,3 13,8 1,7 0,9 1,2 7,8 0,5 19,8 22,2 6,4 6,9 0,7 80% 9,1 1,5 8,6 6,2 9,1 14,9 14,0 6,1 1,7 70% 17,2 5,7 2,3 11,4 15,6 5,6
Slide 56: Brazil, EU & USA Product Cost Benchmark
BRAZIL, EU & USA PRODUCT COST BENCHMARK Ex BRAZIL – December 2018 FROZEN LEG QUARTERS BULK PACKED CIF DBN US$ per ton TON 1 050.00 1 050.00 1 050.00 SA COST R/$ exchange rate R$ 14.20 14.40 14.60 Rand per ton TON 14 910.00 15 120.00 15 330.00 21 100.00 Rand per kg KG 14.91 15.12 15.33 21.10 Duty per
Slide 57: Brazil, EU & USA Product Cost Benchmark
BRAZIL, EU & USA PRODUCT COST BENCHMARK EUROPE Ex Belgium, Ireland, Spain, Poland with Safeguard Duty @ 35,3% – December 2018 FROZEN LEG QUARTERS BULK PACKED CIF DBN € per ton TON 900.00 900.00 900.00 SA COST R/€ exchange rate R$ 16.20 16.40 16.60 Rand per ton TON 14 580.00 14 760.00 14 940.00 21 10
Slide 58: Local Broiler Production & Market Share
LOCAL BROILER PRODUCTION & MARKET SHARE 23% 27% 4% 4% 8% 19% 7% 8% Astral RCL Country Bird Daybreak Sovereign Grainfields Chubby Chick Other Local broiler production ≈ 19.1 million birds per week Source: Own Estimates 58
Slide 59: Local Broiler Production & Market Share
LOCAL BROILER PRODUCTION & MARKET SHARE 18% 31% 13% 6% 16% 5% 2% 6% 3% Astral RCL Country Bird Daybreak Sovereign Grainfields Chubby Chick Other Imports Avg. poultry imports ≈ 8.6 million birds per week (12 months ending September 2018) Source: SAPA & Own Estimates 59
Slide 60: Total Poultry Imports (Chicken, MDM, Turkey)
TOTAL POULTRY IMPORTS (CHICKEN, MDM, TURKEY) Tons 600 000 500 000 400 000 300 000 200 000 100 000 F2015 F2016 F2017 F2018 0 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep F2015 42 363 81 170 108 674 137 660 168 965 209 337 247 672 285 532 327 180 375 717 417 427 460 255 F2016 37 789 83 258 126 866
Slide 61: Total Poultry Imports – Country of Origin
TOTAL POULTRY IMPORTS – COUNTRY OF ORIGIN Country of origin for poultry Country of origin for poultry imports - 2017 imports - September 2018 YTD Other 3,9% Other 3,6% US 15,6% US 16,8% Argentina 5,9% Brazil Argentina 60,6% 6,5% Brazil 62,1% EU 11,0% EU 14,0% 551 867 tons 579 661 tons Source: SAPA 6
Slide 62: Total Poultry Imports – Country of Origin
TOTAL POULTRY IMPORTS – COUNTRY OF ORIGIN Country Imports (tonnes) 2015 2016 2017 2018 YTD Brazil 241 180 233 787 337 476 272 451 Netherlands 61 995 110 344 112 170 United Kingdom 15 985 45 647 1 366 206 Spain 27 090 39 620 11 138 258 United States 331 26 573 87 059 73 837 Belgium 35 613 24 256 23 4
Slide 63: South African Protein Price Comparison
SOUTH AFRICAN PROTEIN PRICE COMPARISON cents / kg 9 000 8 000 7 000 6 000 5 000 4 000 3 000 2 000 1 000 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 May-13 Sep-13 May-14 Sep-14 May-15
Slide 64: Industry Matters
INDUSTRY MATTERS
Slide 65: Poultry Imports
POULTRY IMPORTS The EPA (SADC-EU Economic Partnership Agreement) safeguard for poultry imports from the EU was published on 28 September 2018 Under the provision the safeguard duty on EU frozen bone-in portions will be as follows: 35.3% from 28 September 2018 up to and including 11 March 2019
Slide 66: Highly Pathogenic Avian Influenza (HPAI)
HIGHLY PATHOGENIC AVIAN INFLUENZA (HPAI) HPAI remains a global challenge, however, world-wide cases of HPAI in 2018 were much lower when compared to 2017 In South Africa, 193 cases of HPAI H5N8 have officially been reported across 8 provinces (Mpumalanga, Limpopo, Gauteng, KwaZulu Natal, Free St
Slide 67: Listeriosis
LISTERIOSIS On 5 December 2017 the Minister of Health announced a Listeriosis outbreak in South Africa. This was ultimately declared the worlds worst Listeriosis outbreak on record with the death toll exceeding 200 people. Through SAPA the poultry industry engaged with the DOH, NICD, DAFF and DO
Slide 68: Listeriosis
LISTERIOSIS Astral was not implicated with the outbreak at any stage. Review of the company’s food safety management system, the internationally benchmarked FSSC 22 000 accreditation, proved that the Astral’s management of the risk of food borne pathogens is both world class, and robust in executi
Slide 69: South African Poultry Association (SAPA)
SOUTH AFRICAN POULTRY ASSOCIATION (SAPA) SAPA has over the past year undergone a restructuring exercise reflecting a better organised association more reflective of the industry Both the broiler and layer organisations in this structure will be independently headed up by newly appointed General
Slide 70: www.astralfoods.com
Chris Schutte Chief Executive Officer Tel : +27 (0) 12 667 5468 Fax : +27 (0) 86 504 2002 email: [email protected] www.astralfoods.com Daan Ferreira Chief Financial Officer Tel : +27 (0) 12 667 5468 Fax : +27 (0) 86 504 1602 email: [email protected]