RCL Foods Limited · JSE:RCL
RCL Foods — FY2015 Earnings Presentation
64 slides from RCL Foods's earnings presentation, Sep 2, 2015
Slide 1: Results for the Year Ended 30 June 2015
RESULTS FOR THE YEAR ENDED 30 JUNE 2015 Investor Presentation: 2 September 2015
Slide 2: Highlights Year Ended 30 June 2015
Salient features | Strategic overview | Financial review | Operational reviews | Prospects HIGHLIGHTS YEAR ENDED 30 JUNE 2015 Financial Up Up Up Up Highlights 20.1% 98.2% 335.2% 76.0% REVENUE EBITDA HEADLINE CASH R23.4bn R2 224.0m EARNINGS GENERATED PER SHARE R 2 066.1m 112.2c Full year of TSB ver
Slide 3: Our Journey So Far
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OUR JOURNEY SO FAR… Platform for Growth Integrated Organisation Sharper Strategy RESULTS FOR THE YEAR ENDED 30 JUNE 2015 3
Slide 4: Platform for Growth
Salient features | Strategic overview | Financial review | Operational reviews | Prospects PLATFORM FOR GROWTH Revenue (R billion) R22.4 R 23.4 R 19.5 R 10.1 2013 2014 2014 2014 2015 2013 2014 proforma* 2015 proforma* EBITDA (R million) (continuing operations) R2 224.0 R1 434.6 R1 122.2 R 445.3 2015
Slide 5: Integrated Organisation
Salient features | Strategic overview | Financial review | Operational reviews | Prospects INTEGRATED ORGANISATION RCL FOODS Consumer Sugar & Milling Vector Division Division Logistics BUSINESS UNITS BUSINESS UNITS BUSINESS UNITS Chicken, Speciality, Sugar, Milling and Baking, Logistics business Gro
Slide 6: Sharper Strategy
Salient features | Strategic overview | Financial review | Operational reviews | Prospects SHARPER STRATEGY Passion, Ambition, Strategic Business Model Thrusts and Values RESULTS FOR THE YEAR ENDED 30 JUNE 2015 6
Slide 7: Strategic Thrusts
Salient features | Strategic overview | Financial review | Operational reviews | Prospects STRATEGIC THRUSTS Grow through Strong Brands Partner with Strategic Customers Extend our Leading Value Chain Inspire Great People Expand into Africa Drive Sustainable Business RESULTS FOR THE YEAR ENDED 30 JUN
Slide 8: 01 - Grow Through Strong Brands
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 01 - GROW THROUGH STRONG BRANDS STRONG SHARE 2015 TURNAROUND Achievements Nola Mayonnaise Volume Share 34.8 Rainbow’s new business model is delivering more 30.9 profitable, consistent results TSB productio
Slide 9: 02 - Partner with Strategic Customers
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 02 - PARTNER WITH STRATEGIC CUSTOMERS R30 MILLON INVESTMENT INTO NEW SPECIALITY PLANT 2015 FOR WOOLWORTHS Achievements Rainbow’s strong growth in QSR Introduced new categories into the QSR network Commis
Slide 10: 03 - Extend Our Leading Value Chain
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 03 - EXTEND OUR LEADING VALUE CHAIN R115 MILLION SAVINGS FROM 2015 SOURCING IN 2015 Achievements Established Transformation Management Office (TMO) 2015 R115m Achieved Group sourcing savings of R115 millio
Slide 11: 04 - Inspire Great People
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 04 - INSPIRE GREAT PEOPLE 4 STANDARDS 2015 OF LEADERSHIP Achievements New structure with three logical divisions New Standards of Leadership New Leadership Development Programmes New Performance Manage
Slide 12: 05 - Expand into Africa
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 05 - EXPAND INTO AFRICA A DEAL FOR A R50 MILLION INVESTMENT IN UGANDAN 2015 POULTRY PRODUCTION Achievements Acquired 33.5% of HMH, Uganda (post year-end) Senn Foods Logistics (Botswana) delivered solid res
Slide 13: 06 - Drive Sustainable Business
Salient features | Strategic overview | Financial review | Operational reviews | Prospects 06 - DRIVE SUSTAINABLE BUSINESS 37.7 GWh OF CO-GENERATED 2015 ELECTRICITY SUPPLIED TO GRID Achievements • Generated 223.8 GWh electricity – a 10% increase over last year. Exported 37.7 Gwh electricity into gri
Slide 14: Key Deliverables for 2016
Salient features | Strategic overview | Financial review | Operational reviews | Prospects KEY DELIVERABLES FOR 2016 1. Drive the new business model in Chicken 2. Drive Group synergies in Sugar, e.g. Sourcing, Route to Market 3. Implement turnaround plans for Milling & Baking, Pies and Speciality 4.
Slide 15: Financial Summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects FINANCIAL SUMMARY YEAR ENDED 30 JUNE 2015 Restated Pro forma Restated Year ended Year ended Year ended Statutory 30 June ’15 30 June ’14 % var 30 June ’14 Revenue Rm 23 428.2 22 426.6 4.5 19 500.8 EBITDA Rm 2
Slide 16: Operating Environment
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING ENVIRONMENT General economic environment in South Africa remains challenged – Labour unrest – High unemployment is a risk to growth objectives and economic stability – Depreciating currency (R/US$
Slide 17: Results Waterfall
Salient features | Strategic overview | Financial review | Operational reviews | Prospects RESULTS WATERFALL Reconciliation waterfall of EBITDA to headline earnings for year ended 30 June 2015 R million 2 224.0 964.5 122.2 89.3 -13.8 -4.8 -321.6 -359.2 -771.7 EBITDA Depreciation, Net finance Taxatio
Slide 18: Key Financial Issues
Salient features | Strategic overview | Financial review | Operational reviews | Prospects KEY FINANCIAL ISSUES Details of term-funded debt package During the year under review the R4.5 billion bridging loan was replaced with a longer term funding structure across 3, 4 and 5 year terms Given the
Slide 19: Key Financial Issues
Salient features | Strategic overview | Financial review | Operational reviews | Prospects KEY FINANCIAL ISSUES Segmental reporting Whilst the restructure was effective 1 January 2015, the management accounting systems required to enable this reporting will only be implemented for the 2016 financi
Slide 20: Operating Results Summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY Segmental analysis – Revenue Restated Pro forma Restated * Year ended Year ended Year ended Revenue (Rm) 30 June ‘15 30 June ’14 % var 30 June ’14 Foodcorp 7 519.6 7 548.9 (0.4) 7 548
Slide 21: Operating Results Summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY Segmental contribution to revenue 2015 – R23.4 billion 2014 (PF) – R22.4 billion 8% 7% 31% 33% 23% 25% 37% 37% Foodcorp Rainbow TSB Vector * Based on revenue before inter-segment sale
Slide 22: Operating Results Summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY Segmental analysis – EBITDA Restated Pro forma Restated Year ended Year ended Year ended EBITDA (Rm) 30 June ’15 30 June ’14 % var 30 June ’14 Foodcorp 743.3 715.6 3.9 721.0 Rainbow 7
Slide 23: Operating Results Summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY Segmental contribution to EBITDA (Rm) 2015 – R2 224.0 million 2014 (PF) – R1 434.6 million 9% 14% 33% 23% 49% 24% 35% 14% Foodcorp Rainbow TSB Vector RESULTS FOR THE YEAR ENDED 30 JUN
Slide 24: Operating Results Summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATING RESULTS SUMMARY Segmental contribution to EBITDA improvement (Rm) 2 500 106.2 2 224.0 155.7 8.5 24.2 2 117.8 2 000 368.4 1533.4 27.6 1 500 1 000 500 0 Pro forma Foodcorp Rainbow TSB Vector Group 30 J
Slide 25: Cash Flow Summary
Salient features | Strategic overview | Financial review | Operational reviews | Prospects CASH FLOW SUMMARY Year ended Year ended Rm 30 June ‘15 30 June ’14 Opening balance (including money market investment and net of overdraft) 1 472.7 2 763.2 Operating profit adjusted for non-cash flow items 1 9
Slide 26: Working Capital Movement
Salient features | Strategic overview | Financial review | Operational reviews | Prospects WORKING CAPITAL MOVEMENT Year ended Year ended Rm 30 June ‘15 30 June ’14 Net 151.4 73.2 Trade payables 555.9 141.1 Inventory and biological assets (336.5) 269.7 Trade receivables (68.0) (337.6) Net working
Slide 27: Capital Expenditure
Salient features | Strategic overview | Financial review | Operational reviews | Prospects CAPITAL EXPENDITURE Largely directed at Foodcorp and Vector in 2015 Year ended Year ended Rm 30 June ‘15 30 June ‘14 Total expenditure (excluding intangibles) 756.6 654.0 Foodcorp expenditure amounts to R233
Slide 28: Operational Review – Foodcorp
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – FOODCORP Restated Pro forma Restated Year ended Year ended Year ended Revenue (Rm) 30 June ‘15 30 June ’14 % var 30 June ‘14 Foodcorp 7 519.6 7 548.9 (0.4) 7 548.9 Rainbow 9 077.5 8 732.9
Slide 29: Operational Review – Foodcorp
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – FOODCORP Foodcorp experienced subdued growth driven by a slow first half in a competitive market, and industrial action in Speciality EBITDA grew at 3.9% to R743.3m (30 June ’14 PF: R715
Slide 30: Operational Review – Foodcorp
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – FOODCORP The new Consumer Executive has been in place since January 2015: driving a clear, strong plan Brilliant basics have been put in place including: strict pricing compliance shel
Slide 31: Operational Review – Foodcorp
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – FOODCORP Consequential market shares, which started the year poorly, have shown strong recoveries in the final three months, in many cases to three year highs Brand Share Brand Share 12MM
Slide 32: Operational Review – Foodcorp
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – FOODCORP Noteworthy category performance As mentioned, Nola mayonnaise, Yum Yum peanut butter, Ouma rusks and Pet food brands have had a strong last quarter, soundly beating EBIT targets
Slide 33: Operational Review – Foodcorp
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – FOODCORP Milling and Baking Milling and Baking divisions merged into single operational structure (Millbake) Positive revenue growth in Milling offset by increases in raw materials and
Slide 34: Operational Review – Foodcorp
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – FOODCORP Milling and Baking – Market review Competitive intensity in the grains industry increases, impacting margins – Declining wheat consumption (1.77%) – Change in consumption patter
Slide 35: Operational Review – Foodcorp
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – FOODCORP Millling and Baking initiatives Foodcorp | Rainbow | TSB | Vector RESULTS FOR THE YEAR ENDED 30 JUNE 2015 35
Slide 36: Operational Review – Rainbow
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – RAINBOW Restated Pro forma Restated Year ended Year ended Year ended Revenue (Rm) 30 June ‘15 30 June ’14 % var 30 June ‘14 Foodcorp 7 519.6 7 548.9 (0.4) 7 548.9 Rainbow 9 077.5 8 732.9 3
Slide 37: Operational Review – Rainbow
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – RAINBOW Rainbow’s new business model is performing and delivering more profitable, consistent results Rainbow Pre IAS 39 EBITDA, at R667.6m, is significantly up on the R299.2m for the comp
Slide 38: Operational Review – Rainbow
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – RAINBOW 1. Bell curve success • Historically 28% of Rainbow birds grown met the QSR weight spec. This has now been increased through new, innovative agriculture practices to 42% (a 50% inc
Slide 39: Operational Review – Rainbow
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – RAINBOW 2. Reduction of IQF • Rainbow, with lower injection than competitors, makes lower margin on the large IQF market category…usually at a loss • The extra QSR birds available in the b
Slide 40: Operational Review – Rainbow
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – RAINBOW 3. Taking cost out and step changing efficiency A number of targeted savings have come to fruition in agriculture, processing and sourcing – these have contributed significantly
Slide 41: Operational Review – Rainbow
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – RAINBOW Industry issues update Injection DAFF called a meeting of stakeholders last month, to announce that they have heard all input and will make an announcement on their decision soon
Slide 42: Operational Review – TSB
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – TSB Restated Pro forma Restated Year ended Year ended Year ended Revenue (Rm) 30 June ‘15 30 June ’14 % var 30 June ‘14 Foodcorp 7 519.6 7 548.9 (0.4) 7 548.9 Rainbow 9 077.5 8 732.9 3.9 8
Slide 43: Operational Review – TSB
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – TSB Performance at a glance EBITDA of R505.1 million (44.6% up on prior year pro forma) and an EBITDA margin of 8.2% Total Revenue of R6.1 billion increased by 13.2% from prior year of
Slide 44: Operational Review – TSB
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – TSB Performance at a glance – Feed Integration of Epol and Molatek into a single Feed business unit is going well with all structure changes implemented – system changes will follow Fi
Slide 45: Operational Review – TSB
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – TSB TSB Agronomic Dashboard Cane is provided per season June 2015 June 2014 Cane crushed (000) 5 730 4 928 Raw sugar produced (000) 702 598 Cane : Sugar ratio 8.2 8.2 Sucrose % 14.4% 14.2%
Slide 46: Operational Review – TSB
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – TSB Brand share summary TSB packed Market brands TSB Share TSB Share Category Brands position value (Incl HB'S) volume value SELATI 29.2% 30.3% House SUGAR 2 16.5% 15.2% Brands TOTAL TSB 4
Slide 47: Operational Review – TSB
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – TSB Sugar Marketing initiatives Foodcorp | Rainbow | TSB | Vector RESULTS FOR THE YEAR ENDED 30 JUNE 2015 47
Slide 48: Operational Review – Vector
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – VECTOR Restated Pro forma Restated Year ended Year ended Year ended Revenue (Rm) 30 June ‘15 30 June ’14 % var 30 June ‘14 Foodcorp 7 519.6 7 548.9 (0.4) 7 548.9 Rainbow 9 077.5 8 732.9 3.
Slide 49: Operational Review – Vector
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – VECTOR Revenue growth of 10.8%, driven largely by take on of 4 new customers Revenue growth 10.8% to R1 883.7m Four new customers joined the network, namely Sea Harvest, Vector welcomes
Slide 50: Operational Review – Vector
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – VECTOR Expansion and industrial action impact cost EBITDA grew at a muted 4.4% to R206.2 million, largely due to the industrial action at the Midrand campus, R20m incurred to maintain se
Slide 51: Operational Review – Vector
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – VECTOR Operational efficiency Operational efficiency 9.0% 1.1% -0.5% Year on year volume growth increased by 1.1% Average inventory levels increased by Volume Inventory Service Level 9
Slide 52: Prospects
Salient features | Strategic overview | Financial review | Operational reviews | Prospects PROSPECTS Sustainable improvement in consumer spending is unlikely: the impact of this is pervasive across all RCL Foods’ segments The Consumer division’s new management structure and focused investment be
Slide 53: Appendices
APPENDICES
Slide 54: Strategic Overview
Salient features | Strategic overview | Financial review | Operational reviews | Prospects STRATEGIC OVERVIEW RCL Foods in context Rupert Family Food, Liquor & Home care Banking Healthcare Insurance Industrial Infrastructure Media & Sport RESULTS FOR THE YEAR ENDED 30 JUNE 2015 54
Slide 55: Foodcorp: Grocery and Pie Divisions
Salient features | Strategic overview | Financial review | Operational reviews | Prospects FOODCORP: GROCERY AND PIE DIVISIONS Grocery Pie The Grocery Division consists of a portfolio of well The Pie Division produces a range of high quality, recognised brands with market leading positions predomina
Slide 56: Foodcorp: Beverage and Speciality Divisions
Salient features | Strategic overview | Financial review | Operational reviews | Prospects FOODCORP: BEVERAGE AND SPECIALITY DIVISIONS Beverage Speciality The Beverage Division produces a maize-based health The Speciality Division produces a range of superior ready to drink under the Mageu No 1, Smo
Slide 57: Foodcorp: Baking and Milling Divisions
Salient features | Strategic overview | Financial review | Operational reviews | Prospects FOODCORP: BAKING AND MILLING DIVISIONS Baking Milling The Baking Division is the fourth largest bakery group in The Milling Division operates the largest single site flour the country, operating seven bakeries
Slide 58: Rainbow: Complex Business Chain
Salient features | Strategic overview | Financial review | Operational reviews | Prospects RAINBOW: COMPLEX BUSINESS CHAIN Integrated supply chain from “farm to fork” GP operation Agriculture Processing Grandparent Broiler chicks Grandparent farms Parent farms farms Processing Rearing Laying Hatchin
Slide 59: Rainbow – Infrastructure
Salient features | Strategic overview | Financial review | Operational reviews | Prospects RAINBOW – INFRASTRUCTURE Limpopo Province Tzaneen Polokwane Botswana Mpumalanga Windhoek Rustenburg North Nelspruit Roodepoort West Midrand Swaziland Klerksdorp Carolina Namibia Wolwehoek KwaZulu Natal Newcast
Slide 60: How Selati Sugar Is Made
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – TSB How Selati sugar is made HOW SELATI SUGAR IS MADE Foodcorp | Rainbow | TSB | Vector RESULTS FOR THE YEAR ENDED 30 JUNE 2015 60
Slide 61: Operational Review – TSB Mills
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – TSB TSB Mills Mill Mill Established Tons sugar produced Notes Nkomazi Malalane 1968 226 000 Nkomazi produces approximately 560 000 tons of sugar per year Komati 1993 333 000 Pongola Pongol
Slide 62: Operational Review – Vector Services
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – VECTOR Services Manufacturers Vector Cold Vector Primary Principal Customer Vector Trade Credit & Plant Based Storage Transport Secondary Secondary Marketing Information Cold Stores (VCS)
Slide 63: Operational Review – Vector
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – VECTOR Customers Principals Customer Secondary Distribution (CSD) Principal Secondary Distribution (PSD) Vector is contracted by the customer to Vector is contracted by the principal t
Slide 64: Operational Review – Vector Infrastructure
Salient features | Strategic overview | Financial review | Operational reviews | Prospects OPERATIONAL REVIEW – VECTOR Infrastructure Limpopo Province Tzaneen Vector infrastructure Polokwane National footprint including Windhoek Botswana Mpumalanga Windhoek Rustenburg – 5 plant-based cold stores N