RCL Foods Limited · JSE:RCL
RCL Foods — FY2011 Earnings Presentation
37 slides from RCL Foods's earnings presentation, May 24, 2011
Slide 1: Reviewed abridged interim results 12 Months Ended 31 March 2011
Reviewed abridged interim results 12 Months Ended 31 March 2011 24 Mayy 2011
Slide 2: 2011 Statutory Highlights
2011 Statutory Highlights Revenue + 0.1% Operating profit +2.8 % Rm Rm 6811,4 , 6952,8 6956,4 780,,0 780 5995,,0 5995 519,7 534,4 423,8 2008 2009 2010 2011 2008 2009 2010 2011 Operating margin + 0.2% Headline earnings + 5.9 % % Rm 13.0 528,1 351,5 372 2 372,2 7.7 318,,8 318 7.5 6.2 2008 2009 2010 20
Slide 3: Overview
Overview Market Conditions What has Rainbow done? • Consumer demand still under pressure despite lower • Delivered a stable margin g through g difficult market interest rates conditions which reinforces strategic focus as • Chicken imports up 26% appropriate • Rand remains strong • Increased focus o
Slide 4: Rainbow group strategy
Rainbow group strategy Vision Vi i Rainbow Chicken will be Vector will be Africa’s chosen at the heart of every meal. multi-temperature route to market solution. We will achieve this by creating Vector delivers supply chain excellence innovative solutions and strong brands. through innovative custom
Slide 5: 2011 highlights
2011 highlights Statutory 2010 2011 % Revenue Rm 6952,8 6956,4 +0.1 Headline EBITDA Rm 671,5 707,2 +5.3 Headline EBIT Rm 514,1 540,2 +5.1 Effective tax rate % 33,4 33,0 ‐0.4 Headline earnings Rm 351,5 372,2 +5.9 Cash generated by operations Rm 525,9 524,1 ‐0.3 Net cash Rm 539,1 502,7 ‐6.8 Dividend p
Slide 6: Sales realisation vs feed cost growth
Sales realisation vs feed cost growth • Sales realisation under pressure due to the impact of recession on demand and consumers consumers’ lower disposable income 42.0 % Growth • First feed cost decrease i 4 years in 34 0 34.0 Feed cost 15.0 14.0 Sales realisation 1.0 2010 2011 2008 2009 ‐2.0 ‐ 17.5
Slide 7: Added value
Added value • Focus on added value Contribution to total revenue has seen significant 2004 2011 growth • Purchase of new facility aligned to strategy 30% Added Value Added Value 48% 52% Mainstream Mainstream 70% Contribution to retail revenue 2004 2011 4% 27% Added Value Added Value Mainstream Mains
Slide 8: Yellow maize (SAFEX)
Yellow maize (SAFEX) • 2010 versus 2011: – Average market price for yellow maize declined R/ton 1.4% 2,500 • During 2011: ‐2.2% – The international maize 2,250 price doubled on expectations of a tighter 2,000 balance sheet in the USA USA. ‐24 1% ‐24.1% 1,750 ‐1.4% – Surplus local maize stocks combin
Slide 9: Soya (CBOT)
Soya (CBOT) • Prices bullish from July 2010, led by wheat rally US $ per ton on back of drought in Russia 450 0 450.0 • October rally sparked by 400.0 lower than expected yields i ld for f both b th soybeans b 350 0 350.0 and corn in USA with 300.0 projections of record p low Sep’11 carry‐out y 250
Slide 10: Exchange rate
Exchange rate • Rand remained strong due to weak dollar, debt concerns in European countries and unrest in 11 the Middle East +23.9% • Favourable impact on 10 f d costt as allll soya feed used is imported from 9 Argentina ‐11.6% 11 6% • Expected to remain 8 ‐8.2% volatile 7 2009 2009 2010 2010 2011
Slide 11: Financial review
Financial review • Chicken sales Revenue (Rm) + 0.1% – Volumes up 0.3% – Average price realisation decline of 0.9% 6956,4 6811,4 6952,8 • Other sales (feed, services) 5955,0 1497,1 1460,4 1458,6 – 13.0 % increase in external 1377,0 feed volumes offset by lower pricing because of lower feed input cos
Slide 12: Financial review
Financial review • Adverse impact of lower HEBITDA pre IAS39 realisations, labour and electricity rate increases, offset by lower feed cost 14,7% • Significant improvement in Margin agricultural performance, % particularly ti l l in i W Cape C 10.4% 876,0 • Other processing and milling Rm 9.3% costs
Slide 13: Financial review
Financial review • Inventories and Cash flow reflected receivables have been impacted by Vector’s 12 MONTHS TO MARCH 11 take on of new business 723 8 723.8 Rm 539.1 502.7 • Maize stock holdings were temporarily i increased d iin M March h 14.8 18.1 following issues with the reliability of rail suppl
Slide 14: Financial review
Financial review • Capex remains well managed in Capex spend current economic environment • 2011 spend excluding acquisition of Wolwehoek further processing plant is 157,4 167,0 R252.9m , 149,2 136,4 Dep Rm 315,5 308,,8 308 , 293,1 251,4 Capex Rm 2008 2009 2010 2011 14
Slide 15: Financial review
Financial review Underlying operating profit 12.8 12.3 Headline EBIT margin 8.5 7.8 (%) 7.4 764,6 730,2 69 6.9 Pre IAS39 6.2 578,4 6.7 Post IAS39 514,1 540,2 462,5 462 5 479,2 425,2 Headline EBIT (Rm) 2008 2009 2010 2011 15
Slide 16: 2011 Marketing and Sales highlights
2011 Marketing and Sales highlights 16
Slide 17: Mainstream Chicken
Mainstream Chicken R i b Rainbow and dFFarmer B Brown • Volume growth in South African grocery markets has remained under pressure throughout g the fiscal • Mainstream chicken (non added value) has had a year of two halves: ‐ the first half characterised by oversupply and low prices ‐ and the second
Slide 18: Added Value Chicken
Added Value Chicken Rainbow and Farmer Brown • The added Th dd d value l portfolio tf li performed f d strongly t l again, i growing at double digit levels • Rainbow polony remains the largest polony brand in South Africa with Rainbow viennas closing in on the market leader • The balance of the rang
Slide 19: Capacity
Capacity W l h k Wolwehoek • Growth in Chilled Processed Meats has been facilitated byy Wolwehoek acquisition q • A raft of innovation is planned out of Wolwehoek in July, this time aimed more at middle and lower income consumers • The plant positions us for substantial future growth 19
Slide 20: FoodSolutions
FoodSolutions • The Foodservice sector has returned modest, but positive growth over the 12 months with FoodSolutions markets faring better in the second 6 months of the period in review • However, as the economy recovers However recovers, this growth is anticipated to improve considerably as key pa
Slide 21: Injection Terminology
Injection Terminology Some useful definitions to ensure clarity Brine: A solution of water and functional ingredients, used to inject or soak meat to tenderize, flavor, enhance succulence, or improve yield. Injection: The process of injecting brine into chicken/ meat, during production. Drip Loss: B
Slide 22: Industry hot topic
Industry hot topic Why inject meat and does it add value for the consumer • Internationally the practice of injecting meat with liquid marinade and or brine started fifty years ago in the fish industry, y, injection j is now also applied pp in processed p meats such as bacon and ham and recentlyy al
Slide 23: Vector infrastructure
Vector infrastructure Key Figures Employees – 2865 16 distribution sites 3 Plant based cold storage facilities Northern Primary fleet – 122 (86 Own) Windhoek Province Secondary fleet – 267 (247 Own) Customer drop points – 7200 Cases delivered – 162000/day B t Botswana ISO 22000 accre
Slide 24: Introduction to the Vector business
Introduction to the Vector business Primary Principal Secondary Customer Secondary Credit & Information Manufacturers Primary Transport Sales Solutions Warehousing Distribution Distribution Management Primary Primary Transport Secondary Secondary Plant Based Call Sales & Debtors Information Warehous
Slide 25: Vector clients
Vector clients Customers Principals In Customer Secondary Distribution Vector is contracted by the customer ( eg. CLC, Nandos, Spur) to deliver their full basket of products directly to the outlets In Principal Secondary Distribution Vector is contracted by the principal e.g. Mc Cains to deliver to
Slide 26: Conclusion
Conclusion • Oil prices are trading at relatively high levels. This in turn impacts on related ethanol and maize markets • U Uncertainty t i t around d US maize i crop and d new season local l l planting l ti intentions i t ti • Maize and soya prices likely to remain volatile • Feed prices expected
Slide 27: Appendices
Appendices 27
Slide 28: Rainbow infrastructure
Rainbow infrastructure South Africa’s largest processor and marketer of chicken Northern Province Botswana p g Mpumalanga Pretoria Rustenburg Carolina North Gauteng Swaziland West KwaZulu Namibia Free Natal State Pietermaritzburg Hammarsdale Lesotho Northern N th Durban Cape Eastern Cape 7,845 emp
Slide 29: Complex business chain
Complex business chain Integrated supply chain from “farm farm to fork” 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
Slide 30: Rainbow's past
Rainbow’s past RAINBOW 1991 - 1998 Revenue (Rbn) -0OUR0TE 92 93 94 95 96 97 98 Statutory HEBIT (Rm) 76 5 76 30 Ss 41) (63) (11 Attributable (173) si Profit (229) (Rm) (268) 1999 - 2003 37 TL 99 00 01 02 03 260 HEBITMargin (%) 56 50 &9 a 1991 - 1998 Business in trouble «Revenue was growing, but so we
Slide 31: Rainbow's transformation
Rainbow’s transformation 31
Slide 32: Rainbow's future
Rainbow’s future RAINBOW 2011 - 201 Revenue Growth phase " ml 92 93 94 95 96 97 98/99 00 01 02 03/04 05 06 07 O8 09 41.12 13 14 15 765 = 2015 strategy is growth focused leveraging group’s brands and Statutory HEBIT services. (Rm) 260 303 290 = Key enabler a further es yr eqios restructure to create
Slide 33: Industry perspective
Industry perspective Estimated per capita consumption of broiler meat in Kilograms per capita 32,9 31,0 31,4 31,8 30,7 27,9 23,5 22,0 22,9 19 4 19,4 19 7 21,6 20 19,7 20,8 8 18,6 17,6 17,8 16,2 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Continues to reflect growing trend Source: SAPA 33
Slide 34: Industry perspective
Industry perspective Average broiler production per week (in millions) excluding imports 18,5 17,8 16,8 14,6 13 8 13,8 12,9 11,8 11,8 11,9 11,1 11,0 10,5 9,8 9,8 9,2 8,5 80 8,0 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Source: SAPA 34
Slide 35: Industry perspective
Industry perspective • 18.5m broilers produced per week 49 4.9 • 1,5m tons per annum 4,4 4,0 • Astral = Earlybird Farms + County Fair • Tydstroom acquisition of Tonko has placed them h as 4th largest l producer. • Others = Numerous smaller producers 1,3 1.2 producing less than 1,0 0,9 200k broilers
Slide 36: Industry perspective
Industry perspective Beef, lamb, pork and poultry prices (to April 2011) R/ kg 49 47 44 42 39 37 34 Series1 S i 1 Beef 32 Series2 Lamb 29 Pork Series3 27 Broiler Series4 24 22 19 17 14 12 9 Source: Red Meat 2008 2009 2010 2011 Abbitor Association 36
Slide 37: Industry perspective
Industry perspective 289 283 O i i off poultry Origin lt imports i t 279 84 97 251 Total Apr 2010 ‐ Mar 2011 98 97 Argentina 10.1% Mechanically 225 Deboned Australia 1.7% 69 206 198 Meat Canada 6.9% 81 35 Other 9.6% 60 25 Turkey Brazil 37 products 71.7% 156 169 161 47 24 26 Chicken 27 144 products 1