Oceana Group Limited · JSE:OCE
Oceana — FY2018 Earnings Presentation
62 slides from Oceana's earnings presentation, November 2018
Slide 1: Investor Presentation for the Year Ended 30 September
INVESTOR PRESENTATION FOR THE YEAR ENDED 30 SEPTEMBER 1
Slide 2: Legal Disclaimer and Basis of Preparation
LEGAL DISCLAIMER AND BASIS OF PREPARATION • For the purposes of this notice, the presentation (the “Presentation”) shall mean and include the slides that follow, the oral presentation of the slides by Oceana Group Limited (the “Company”) and/or its advisers, any question-and-answer session that foll
Slide 3: Agenda
AGENDA OPERATIONAL STRATEGIC GROUP FINANCIAL OVERVIEW & OVERVIEW & OVERVIEW PERFORMANCE OUTLOOK GUIDANCE 3
Slide 4: Oceana Centenary – The Milestones
OCEANA CENTENARY – THE MILESTONES 1947 1994 1998 2003 LISTED ON JSE FIRST EMPOWERMENT ACQUIRED ACQUIRED Remains Africa’s largest TRANSACTION INITIATED LUCKY STAR BRAND DESERT DIAMOND fishing company With Real Africa Investments Turnover exceeded R1bn R60m modification enabling at-sea factory facilit
Slide 5: Group Overview
GROUP OVERVIEW 55 15 12 12 VESSELS PRODUCTION STORAGE SPOTTER FACILITIES FACILITES PLANES CUSTOMERS INTERNATIONAL 5 255 IN 46 PROCUREMENT EMPLOYEES COUNTRIES FROM 6 COUNTRIES 5
Slide 6: 2018 Highlights
2018 HIGHLIGHTS TURNOVER PROFIT BEFORE TAX LEVERAGE RATIO HEPS 14% 32% 2.0x 86% R7.7bn (2017: R6.8bn) R883m (2017: R667m) 2017: 2.4x 727.1c (2017: 391.9c) GULF MENHADEN CANNED FISH VOLUMES CAUGHT SALES VOLUMES DIVIDEND PER SHARE 12% 803m 13% 362% 8.8m cartons (2017: 7.9m) 2017: 735m 276 000 tons 416
Slide 7: 2018 Performance Summary
2018 PERFORMANCE SUMMARY TAILWINDS HEADWINDS • Gulf Menhaden resource • Global fish oil prices • Canned fish volumes • Angola fish landings • Cannery production efficiencies • Namibian horse mackerel catch rates • Foreign exchange – forward cover and fish size policy • Lobster quota • SA horse macke
Slide 8: 5 Year Performance
5 YEAR PERFORMANCE 5 YEAR REVENUE (Rm)* CAGR 11.9% 4 542 4 244 3 667 3 478 2 548 3 465 3 141 3 489 2 222 2 437 2014 2015 2016 2017 2018 First half Second half 5 YEAR HEADLINE EARNINGS (Rm)* CAGR 11.3% 487 548 308 385 231 362 246 221 265 226 2014 2015 2016 2017 2018 First half Second half * Excludes
Slide 9: Agenda
AGENDA OPERATIONAL STRATEGIC GROUP FINANCIAL OVERVIEW & OVERVIEW & OVERVIEW PERFORMANCE OUTLOOK GUIDANCE 9
Slide 10: Income Statement
INCOME STATEMENT 2018 2017 R'000 SEPTEMBER VAR SEPTEMBER Revenue 7 732 692 14% 6 807 927 Gross profit 2 908 876 19% 2 447 914 GP margin 37.6% 36.0% Operating profit before forex movement 1 224 973 16% 1 057 766 Foreign exchange gain/(loss) 19 248 (60 940) Operating profit after forex movement 1 244
Slide 11: Foreign Exchange
FOREIGN EXCHANGE AVERAGE FEC RATES 16 15 14 13 12 11 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18 Current USD Rate 6 Month Ave FEC Rate 16 R/USD EXCHANGE RATE 15 14 13 12 11 Oct-16 Dec-16 Feb-17 Apri-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Au
Slide 12: Revenue
REVENUE ACTUAL VS PRIOR YEAR (R’m) 8 200 9 8 000 7 800 15 7 600 834 7 400 697 7 200 7 000 8 007 374 213 7 733 6 800 6 600 6 808 6 400 6 200 6 000 September Price Volume Exchange September Price Volume Exchange September 2016 effect rate 2017 effect rate 2018 Decrease Increase 12
Slide 13: Operating Profit
OPERATING PROFIT ACTUAL VS PRIOR YEAR (R’m) 1 300 27 5 59 1 200 20 1 100 201 1 000 900 1 244 800 997 700 600 September Lucky Star Daybrook Horse mackerel and Lobster and Commercial Cold September 2017 Hake Squid Storage and 2018 Logistics Decrease Increase 13
Slide 14: Financial Position (Key Items)
FINANCIAL POSITION (KEY ITEMS) 2018 2017 R'000 SEPTEMBER SEPTEMBER Property, plant and equipment 1 586 626 1 604 099 Intangible assets 4 617 278 4 434 878 2018 2017 Other assets 481 223 454,617 Africa R455m R473m Current assets 2 999 295 2 327 591 US $22m $55m Net cash 769 060* 1 222 040 Total asset
Slide 15: Working Capital
WORKING CAPITAL 100 120 90 99 100 80 70 75 80 60 72 50 99 60 86 40 81 40 30 45 48 20 39 38 38 34 20 10 - - 2016 2017 2018 Inventory days Debtors days Creditors days Net working capital days 15
Slide 16: Long Term Debt
LONG TERM DEBT • Refinanced R1.42bn SA debt and achieved improved pricing margins • Hedged 100% of US debt • Policy to hedge minimum 50% debt • Average interest rate 7.2% (2017: 7.3%) ‒ SA average interest rate 8.9% (2017:9.6%) ‒ US average interest rate 4.7% (2017: 4.1%) FIXED VS FLOATING SA VS US
Slide 17: Dividend
DIVIDEND DIVIDEND PER SHARE (CENTS) 500 450 400 350 300 357 304 250 271 259 200 150 100 50 106 106 112 112 90 0 2014 2015 2016 2017 2018 Interim Dividend Final Dividend 17
Slide 18: Agenda
AGENDA OPERATIONAL STRATEGIC GROUP FINANCIAL OVERVIEW & OVERVIEW & OVERVIEW PERFORMANCE OUTLOOK GUIDANCE 18
Slide 19: Canned Fish and Fishmeal Africa
CANNED FISH AND FISHMEAL AFRICA 19
Slide 20: 2018 Performance – Canned Fish Sales
2018 PERFORMANCE – CANNED FISH SALES CANNED FISH AND FISHMEAL 2017 2018 FINANCIAL OVERVIEW (R’000) SEPTEMBER SEPTEMBER VAR Revenue 3 768 707 4 054 601 8% Operating profit 282 497 483 645 71% Operating profit margin 7% 12% CANNED FISH SALES 2017 2018 2018 KEY PERFORMANCE INDICATORS SEPTEMBER SEPTEMBE
Slide 21: Sales Volumes
SALES VOLUMES SOUTH AFRICA SALES (CTNS’000) 10 000 1 400 1 200 8 000 1 000 6 000 800 600 4 000 400 2 000 200 - - Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 2017 Monthly 2018 Monthly 2017 Cumulative 2018 Cumulative 21
Slide 22: Total Sales Volumes
TOTAL SALES VOLUMES TOTAL CANNED FISH SALES VOLUMES TOTAL CANNED FISH SALES VOLUMES - NORMALISED (CTNS’000) (CTNS’000) 10 000 10 000 9 000 -16.1% 9 000 -5.8% 4.9% 11.5% 8 000 8 000 7 000 7 000 6 000 6 000 5 000 5 000 4 000 4 000 3 000 3 000 2 000 2 000 1 000 1 000 - - 2016 2017 2018 2016 2017 2018 2
Slide 23: Promotional and Merchandising Shift
PROMOTIONAL AND MERCHANDISING SHIFT • PROMOTIONAL FOCUS: COMBOS & MULTI-BUYS • IN-STORE FOCUS: CROSS-MERCHANDISING FORWARD SHARE 23
Slide 24: Strong Performance vs Total Food
STRONG PERFORMANCE VS TOTAL FOOD 12MM ROLLING PERCENTAGE VOLUME GROWTH LUCKY STAR VS BASKET 15% Lucky Star year end volume growth at 12.3% against a very sluggish food basket of 3.7% 10% 5% 0% Jan-2018 Oct-2017 Jul-2018 Nov-2017 Feb-2018 Sep-2018 Apr-2018 Dec-2017 May-2018 Mar-2018 Aug-2018 Jun-2018
Slide 25: 2018 Performance – Canned Fish Supply
2018 PERFORMANCE – CANNED FISH SUPPLY CANNED FISH SUPPLY 2017 2018 2018 KEY PERFORMANCE INDICATORS SEPTEMBER SEPTEMBER Cartons produced 14% 14% Daily throughput cartons/day 21% 10% Man hours/carton 10% 13% 25
Slide 26: Canned Fish Supply
CANNED FISH SUPPLY SUPPLY (CTNS’000) 10 000 9 000 8 000 48% 7 000 6 000 29% 34% 5 000 4 000 37% 3 000 40% 55% 2 000 1 000 34% 12% 11% - 2016 2017 2018 Fresh and locally canned Frozen and locally canned Frozen canned internationally 26
Slide 27: Outlook - Demand
OUTLOOK - DEMAND • Volume drivers ‒ Secure unconstrained pilchard supply ‒ Elevate brand and category status in protein segment ‒ Deliver consistent affordability • Optimise portfolio – sardines • New products 27
Slide 28: Outlook - Supply
OUTLOOK - SUPPLY SA LANDINGS • Pilchard TAC 65 000 tons; industry catch expected to be 50% - 60% of the TAC 30 000 25 000 25 300 20 000 15 322 15 000 10 000 8 646 5 000 2 404 - 17-Dec 05-Nov 12-Nov 19-Nov 26-Nov 03-Dec 10-Dec 24-Dec 31-Dec 07-Jan 14-Jan 21-Jan 28-Jan 04-Feb 11-Feb 18-Feb 25-Feb 04-M
Slide 29: Outlook - Supply
OUTLOOK - SUPPLY CANNERY EFFICIENCIES • Increase throughput by 20% ‒ Additional thawing capacity ‒ Onsite cold store to increase processing efficiency and reduce logistics costs 2017 2018 2019E Fresh and locally canned Frozen and locally canned Frozen canned internationally 29
Slide 30: 2018 Performance – FMO (Africa)
2018 PERFORMANCE – FMO (AFRICA) FISHMEAL AND FISH OIL (AFRICA) 2017 2018 2018 KEY PERFORMANCE INDICATORS SEPTEMBER SEPTEMBER Volumes sold (tons) 11% 19% Price (USD/mt) -9% 15% Average fishmeal price vs Peru Index 4% 3% Average Fish oil pricing vs Peru Index 10% 6% 30
Slide 31: Fishmeal and Fish Oil - Africa
FISHMEAL AND FISH OIL - AFRICA FISH LANDINGS - AFRICA (TONS) 200 000 180 709 180 000 160 000 148 523 140 000 SEP 16 SEP 17 SEP 18 135 861 120 000 Meal yield 24.1% 23.1% 22.3% 100 000 Oil yield 2.9% 4.9% 3.2% 80 000 Fishmeal 37,689 46,505 39,292 sales (tons) 60 000 Fish oil 3,750 9,158 6,293 (tons) 4
Slide 32: Fishmeal and Fish Oil Price - Africa
FISHMEAL AND FISH OIL PRICE - AFRICA FISHMEAL AND FISH OIL COMPARISON (USD/TON) 1 900 1 800 1 700 1 600 Increased supply created as a 1 500 result of reduced grading of human oil traded as feed grade oil 1 400 1 300 1 200 1 100 Reinstatement of Peru 1 000 volumes 900 May-18 Aug-17 Apr-17 May-17 Apr-
Slide 33: Outlook
OUTLOOK SOUTH AFRICA • Landings in October positive and well ahead of prior periods ANGOLA • Concern about ability to catch volumes in the short term, resulting from ‒ Later start to the fishing season; current fishing has yielded negative results ‒ Unfavourable environmental/oceanographic condition
Slide 34: Outlook
OUTLOOK PRODUCTION • Continued focus on improving throughput and reducing bottlenecks (SHB 25% increase, AP 33% increase) • Changes in anti-oxidant requirements in EU will influence geographic sales strategy • Continued to pursue cost efficiencies, particularly targeting 30% cost improvements on sup
Slide 35: Fishmeal and Fish Oil US
FISHMEAL AND FISH OIL US 35
Slide 36: 2018 Performance – FMO (US)
2018 PERFORMANCE – FMO (US) FISHMEAL AND FISH OIL (US) 2017 2018 FINANCIAL OVERVIEW (R’000) SEPTEMBER SEPTEMBER VAR Revenue 1 438 606 1 789 118 24% Operating profit 376 921 396 499 5% Operating profit margin 26% 22% FISHMEAL AND FISH OIL (US) 2017 2018 2018 KEY PERFORMANCE INDICATORS SEPTEMBER SEPTE
Slide 37: FMO (US) Landings and Yield
FMO (US) LANDINGS (‘000 FISH), FISHMEAL AND FISH OIL YIELD - 10 YEAR HISTORY 900 000 30% 800 000 25% 700 000 Ave 24.97% 600 000 20% 500 000 15% 400 000 300 000 Ave 11.09% 10% 200 000 5% 100 000 - 0% 2008 2009 2010 2011* 2012* 2013 2014 2015 2016 2017 2018 *BP oil spill Landings Fishmeal Fish oil 37
Slide 38: FMO (US) Fishmeal and Fish Oil Comparison
FMO (US) FISHMEAL AND FISH OIL COMPARISON (USD/TON) 1 900 1 800 1 700 1 600 1 500 1 400 1 300 Increased supply created as a result of reduced grading of 1 200 Reinstatement of Peru human oil traded as feed grade oil volumes 1 100 1 000 900 Apr-18 Mar-17 Apr-17 May-17 May-18 Dec-16 Dec-17 Oct-16 Jan-
Slide 39: Outlook - FMO
OUTLOOK - FMO BIOMASS/LANDINGS • Early assessment of biomass indicates a healthy resource • Westbank will target at a minimum similar landings to 2018 • Additional vessel being considered MARKET PLACE • Stock volumes lower than expectation due to poor catches in October 2018 (weather) • Contracted m
Slide 40: Global Outlook – FMO Supply
GLOBAL OUTLOOK – FMO SUPPLY WORLD FISHMEAL PRODUCTION X 1 000 TONS 6 000 5 000 4 000 3 000 2 000 1 000 - 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E Other China,PR Peru 1 200 WORLD FISH OIL PRODUCTION X 1 000 TONS 1 000 800 600 400 200 - 2008 2009 2010 2011 2012 2013 2014 2015 2016
Slide 41: Global Outlook – FMO Supply
GLOBAL OUTLOOK – FMO SUPPLY FISHMEAL PERU • Approximately 7% lower output expected for 2019 • 2nd Season quota 2018 anticipated between 2.0 to 2.5m MT (LY 1.4 million MT, 600 000 MT) EU • Scandinavian TAC’s for 2019 projected lower compared to 2018 CHINA AND ASIA • Expected marginal increase in loca
Slide 42: Global Outlook – FMO Demand
GLOBAL OUTLOOK – FMO DEMAND FISHMEAL CHINA • China expects 1.4m MT imports - similar to 2018 levels • 27% Tariffs on USA imports to continue for 2019, more US product directed to other geographies • Reduced demand from hog feed industry as a result of African swine fever (consumes 33% of imports) •
Slide 43: Horse Mackerel and Hake
Pepe i wn! t z y 6 Ve 4 ~ wi HORSE MACKEREL AND HAKE
Slide 44: 2018 Performance – Horse Mackerel and Hake
2018 PERFORMANCE – HORSE MACKEREL AND HAKE HORSE MACKEREL AND HAKE 2017 2018 FINANCIAL OVERVIEW (R’000) SEPTEMBER SEPTEMBER VAR Revenue 1 054 152 1 287 067 22% Operating profit 199 979 259 394 30% Operating profit margin 19% 20% HORSE MACKEREL 2017 2018 2018 KEY PERFORMANCE INDICATORS SEPTEMBER SEPT
Slide 45: Horse Mackerel
HORSE MACKEREL SOUTH AFRICA LANDINGS (TONS) 2010 2003 2004 2005 2006 2007 2008 2009 2011 2012 2013 2014 2015 2016 2017 2018 NAMIBIA LANDINGS (TONS) 2014 2015 2016 2017 2018 45
Slide 46: Horse Mackerel
HORSE MACKEREL NAMIBIAN HORSE MACKEREL QUOTA (TONS) 60 000 10% 0% 0% 50 000 -10% -20% 40 000 -20% -30% 30 000 -40% -50% 20 000 -60% -66% -70% 10 000 -80% - -90% 2016 2017 2018 Own quota Contracted quota Quota usage fees price index 46
Slide 47: Outlook – Horse Mackerel
OUTLOOK – HORSE MACKEREL SOUTH AFRICA • Positive landings continue • Demand remains strong for larger SA horse mackerel in traditional west African countries • Appeals on DAFF quota allocations still pending NAMIBIA • Sales prices are strong due to poor supply of horse mackerel by the entire Namibia
Slide 48: 2018 Performance – Hake
2018 PERFORMANCE – HAKE HAKE 2017 2018 2018 KEY PERFORMANCE INDICATORS SEPTEMBER SEPTEMBER Volumes sold (tons) 6% 5% Sales price (Euro per kg) 9% 1% Fleet catch costs (per kg) 6% 3% Fleet utilisation (%) 1% 7% 48
Slide 49: Pricing - Hake
Oct-16 Nov-16 Rand Dec-16 Jan-17 Euro PRICING - HAKE Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 RAND AND EURO PRICING (PER KG) Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 49
Slide 50: Outlook - Hake
OUTLOOK - HAKE • Improved size mix • European and local demand remains strong with a general shortage of white fish in the market 50
Slide 51: Lobster and Squid
Ses! aarti 3 LOBSTER AND SQUID
Slide 52: 2018 Performance – Lobster and Squid
2018 PERFORMANCE – LOBSTER AND SQUID LOBSTER AND SQUID 2017 2018 FINANCIAL OVERVIEW (R’000) SEPTEMBER SEPTEMBER VAR Revenue 144 907 180 510 24% Operating profit 38 160 32 871 5% Operating profit margin 26% 18% LOBSTER AND SQUID 2017 2018 2018 KEY PERFORMANCE INDICATORS SEPTEMBER SEPTEMBER LOBSTER Vo
Slide 53: Outlook – Lobster and Squid
OUTLOOK – LOBSTER AND SQUID SQUID • Supply outlook remains positive, demand strong LOBSTER • TAC 2018/2019 reduced by 43% • Rationalisation programme and alternatives being considered 53
Slide 54: Commercial Cold Storage
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Slide 55: 2018 Performance - CCS
2018 PERFORMANCE - CCS COMMERCIAL COLD STORAGE 2017 2018 FINANCIAL OVERVIEW (R’000) SEPTEMBER SEPTEMBER VAR Revenue 401 554 421 396 5% Operating profit 99 269 71 813 -28% Operating profit margin 25% 17% 2017 2018 2018 KEY PERFORMANCE INDICATORS SEPTEMBER SEPTEMBER Revenue occupancy 24% 3% Total
Slide 56: Commercial Cold Storage
COMMERCIAL COLD STORAGE OPERATING PROFT (R’000) 100 000 80 000 60 000 Midrand 1 vacant and loss of City Deep customer 40 000 20 000 - September Frozen fish Coastal Inland September 2017 2018 Increase Decrease 56
Slide 57: Outlook - Commercial Cold Storage
OUTLOOK - COMMERCIAL COLD STORAGE GAUTENG • Capacity reduction negotiation ongoing COASTAL • Evaluating expansion at flagship site • Demand strong ANGOLA / NAMIBIA • Challenging fishing conditions and increased competition in Walvis Bay impacting on occupancy levels • Lease expires in November 2018
Slide 58: Agenda
AGENDA OPERATIONAL STRATEGIC GROUP FINANCIAL OVERVIEW & OVERVIEW & OVERVIEW PERFORMANCE OUTLOOK GUIDANCE 58
Slide 59: Guidance H1
GUIDANCE H1 TAILWINDS HEADWINDS • Exchange rate - exports • Exchange rate - import frozen fish • Canned fish - volumes • Lobster TAC – 1 December price increase (talls) • Hake and horse mackerel refits • Cannery efficiencies • Angola fishmeal • US and South African fishmeal volumes • Firm pricing fo
Slide 60: Headline Earnings
HEADLINE EARNINGS 400 350 300 161 250 Targeting improvement on normalised earnings 200 150 269 226 100 202 50 - H1: 2016 H1: 2017 H1: 2018 Headline earnings Deferred tax and other 60
Slide 61: Strategic Drivers
STRATEGIC DRIVERS • Protecting and optimising the group’s existing African quota businesses • Delivering organic growth, by further growing the company’s core businesses • Increasing geographic and species diversification through acquisition • Energising the Oceana workforce, and developing the dept
Slide 62: Thank You
THANK YOU 62