HY13 Results and Strategy Update. 16 May 2013

Transcription

1 HY13 Results and Strategy Update 16 May 2013

2 Disclaimer This presentation includes both information that is historical in character and information that consists of forward looking statements. Forward looking statements are not based on historical facts, but are based on current expectations of future results or events. The forward looking statements are subject to risks, stakeholder engagement, uncertainties and assumptions which could cause actual results, timing, or events to differ materially from the expectations described in such forward looking statements. Those risks and uncertainties include factors and risks specific to the industry in which GrainCorp operates, any applicable legal requirements, as well as matters such as general economic conditions. While GrainCorp believes that the expectations reflected in the forward looking statements in this presentation are reasonable, neither GrainCorp nor its directors or any other person named in the presentation can assure you that such expectations will prove to be correct or that implied results will be achieved. These forward looking statements do not constitute any representation as to future performance and should not be relied upon as financial advice of any nature. Any forward looking statement contained in this document is qualified by this cautionary statement. 2

3 Agenda HY13 Results Highlights Segment Performance Balance Sheet and Capex Outlook Strategy Update Gamechangers Asset Optimisation Port Flexibility Recommended Offer Proposed Offer from Archer Daniels Midland Company ( ADM ) Next Steps 3

4 Strong earnings due to grain volumes and diversification strategy Strong earnings of $227M EBITDA (1) and $109M NPAT (2). Statutory NPAT of $88M after significant items (3). Storage & Logistics benefiting from higher than average carry-in, firm receivals market share and a significant grain export program. Marketing sustained performance with consistent sales. Malt continued strong capacity utilisation with margins in line with expectations. Oils performing in line with expectations with integration milestones being achieved. $110M strategic growth initiatives on track to deliver Gamechangers, Asset Optimisation and Port Flexibility initiatives by the end of FY16. Fully franked interim dividends totalling $0.25 (4) per share (comprising $0.20 Ordinary plus $0.05 Special). 1. Earnings before interest, tax, depreciation and amortisation and before significant items. 2. Net profit after tax and before significant items. 3. Significant items of $20M includes costs relating to acquisitions (eg stamp duty), Oils integration and proposed takeover responses. See appendix for further detail. 4. The interim dividends totalling $0.25 are included in the dividends totalling $1.00 under the proposed ADM Offer. Any full year dividend relating to the period ending 30 September 2013 would also be included in the dividends totalling $

5 Earnings profile delivering on corporate objectives EBITDA (1) NPAT (1) 500 Fiscal 1H Fiscal 2H 250 Fiscal 1H Fiscal 2H $M 0 $M 0 FY09 FY10 FY11 FY12 FY FY09 FY10 FY11 FY12 FY13 1H H H H Improving shareholder returns Delivered an average return on equity of 11.3% over the last three years (2) Achieved a total shareholder return of 36% in FY12 (2) Managing variability creation and development of GrainCorp Malt and GrainCorp Oils Delivering growth growth across all segments organically and acquisitively 1. Before significant items. EBITDA and NPAT reflect inclusion of Malt from FY10 and Oils from FY To 30 September

6 Diversified earnings supporting higher ordinary interim dividend 40 Dividends per share Interim DPS Interim Special DPS HY13 fully franked interim dividends totalling $0.25 per share comprising: $0.20 Ordinary dividend $0.05 Special dividend CPS CPS HY09 HY10 HY11 HY12 HY13 Ordinary DPS Special DPS FY09 FY10 FY11 FY12 HY13 HY13 dividend dates Ex-dividend date: 1 July 2013 Record date: 5 July 2013 Payment date: 19 July 2013 Dividends totalling $1.00 (1) permitted to be paid under the proposed ADM Offer, inclusive of the interim dividend 1. This amount includes the interim dividends totalling $0.25 announced on 16 May 2013 and would also include any full year dividend relating to the period ending 30 September

7 Driving change in safety culture Lost Time Injury Frequency Rate (1) FY09 FY10 FY11 FY12 HY13 Key focus in FY13: Reduce Fatal Level Risks through physical, system and process improvements Make significant progress towards OHS accreditation Drive a change in safety culture through rollout of Sentis Zero Incident Process ( ZIP ) training Rolling 12 month average LTIFR (1) higher Lead indicators improving in Storage & Logistics and Malt businesses Continue to rollout online safety modules Significant safety capex program being implemented in FY13 1. Lost Time Injury Frequency Rate calculated as the number of Lost Time Injuries per million hours worked. (Note: HY13 includes Oils for the first time.) 7

8 Diversified business and more normal receivals HY12 to HY13 Earnings Bridge (1) - $M More normal receivals Sustained performance, consistent sales 4 Strong capacity utilisation, lower barley procurement gains More diversified business with inclusion of Oils Oils inclusion and recent capex program Higher debt post Oils acquisition Lower earnings 109 EBITDA HY12 HY12 NPAT Storage Storage & Logistics & Marketing Malt (2) Oils Allied Allied Mills Corporate & D&A Net Net Interest Tax HY13 HY13 NPAT (3) NPAT Logistics Interest NPAT HY13 ($M) (12) (56) (20) (43) 109 HY12 ($M) (13) (43) (16) (54) Excludes significant items - see appendix for further information. 2. Includes Port of Vancouver compensation receipts of $4.0M in HY13 ($4.8M in HY12) % share of NPAT. 8

9 Portfolio of grain businesses capture value along the grain chain $M Revenue EBITDA (1) HY13 HY12 HY13 HY12 Storage & Logistics Marketing (2) 1, Malt (3) Oils (4) Allied Mills (5) Corporate Costs - - (12) (13) Eliminations and other (158) (158) - - Total 2,361 1, Excludes significant items of $20M see appendix for further detail. 2. Marketing EBITDA. 3. EBITDA includes Port of Vancouver compensation receipts of $4.0M in HY13 ($4.8M in HY12). 4. Oils HY12 Revenue of $538M and EBITDA of $33M. 5. Allied Mills 60% share of NPAT. 9

10 Segment Performance

11 Storage & Logistics strong earnings with return to more normal receivals $M HY13 HY12 Revenue EBITDA EBIT Capital Expenditure Storage & Logistics Throughput (4) 20 Earnings reflective of more normal Eastern Australian crop production and benefiting from carry-in of 4.3mmt (1) and 4.3mmt of grain exports Country receivals of 9.7mmt 9.5mmt winter crop, 0.2mmt summer crop ~56% share of winter crop production (2) Grain exports (3) of 4.3mmt and non-grain exports of 0.8mmt 15 Positive impacts from Gamechanger initiatives rail optimisation and strong customer service year long term agreements ( LTAs ) mmt 0 HY10 HY11 HY12 HY13 introduced in mmt under LTAs confirmed 1. mmt = million metric tonnes. 2. Based on Eastern Australia s wheat, barley and canola production estimates, using the average of Australian Crop Forecasters May 2013 report of 16.0mmt and ABARES February 2013 report of 16.3mmt. 3. Including containers. 4. Average of country grain inload (carry-in + receivals) and outload (carry-in + receivals carry-out) + ports grain and non-grain. exports handled. See appendix for further detail. 11

12 Marketing sustained performance and consistent sales $M HY13 HY12 Revenue 1, EBITDA Interest expense (2) (10) (11) PBTDA (2) Marketing inventory Earnings reflective of lower Eastern Australian grain production volumes 3.5mmt sales delivered (1) 1.3mmt domestic, 2.2mmt export and international ~60% of marketed grain acquired from growers and ~85% sold to end users mmt 0 Marketing Volumes (1) HY09 HY10 HY11 HY12 HY13 Increasing presence in Western Australia and South Australia Marketing inventory of $396M (2) Global trading and risk management platform on track for deployment in Delivered tonnes including bulk and container sales, Pools and UK s Saxon Agriculture. 2. Marketing s grain inventory predominantly funded via separate short-term debt facilities. Interest expense treated as part of cost of goods sold. Marketing s performance measured as PBTDA. 12

13 Malt continued high capacity utilisation $M HY13 HY12 Revenue EBITDA (1) EBIT (1) Capital Expenditure Malt Sales Earnings reflective of continued high capacity utilisation of 95% with margins in line with expectations Continued growth from malt portfolio position (eg distillers, craft) Effective margin management but lower barley procurement gains than FY12 Launch of Brewers Select in UK access to growing craft beer market Gamechanger initiatives on track 0.00 mmt HY10 HY11 HY12 HY13 1. Includes Port of Vancouver compensation receipts of $4.0M in HY13 ($4.8M in HY12). 13

14 Oils strong earnings across crushing, refining and terminals $M HY13 HY12 (1) Revenue EBITDA EBIT Capital Expenditure 9 8 Crushing & Refining Combined crushing and refining capacity of 0.60mmt Sales in line with expectations of 0.27mmt of crushed and refined products Pacific Terminals mmt 0.00 Oils Crushing & Refining Sales (2) FY09 FY10 FY11 FY12 HY13 ~230K m 3 of storage with high capacity utilisation Represents approximately one third of GrainCorp Oils combined EBITDA Integration Integration on track to deliver ~$4.0M (pre-tax) of synergies in FY13 and ~$7.0M of synergies p.a. ongoing 1. HY12 figures for Gardner Smith and Integro under different ownership. 2. Includes sales volumes for Riverland (oil and meal) for each 12 months ended 31 March and Integro for each 12 months ended 30 June. HY13 volumes for Riverland and Integro for six months ended 31 March

15 Allied Mills improved earnings and capacity replacement on track $M (60%) JV Share HY13 HY12 EBITDA Equity profit (1) 5 4 Shareholder loan interest received 1 1 Net Asset Value (2) Improved earnings from value add product initiatives (eg Par Baked Bread) New Tennyson mill expansion in Queensland due for completion in mid % Net Asset Value - $M Acquired Tullamarine bread facility in Melbourne to support value add product strategy Acquired Tamworth starch / food ingredients facility in New South 50 Wales $M 0 HY09 HY10 HY11 HY12 HY13 1. Allied Mills 60% share of NPAT. Excludes shareholder loan interest received. 2. HY13 includes 60% of Shareholders Equity ($145M) and Shareholder Loan ($19M). 15

16 Balance Sheet and Capex

17 Strong and flexible balance sheet Core Debt $M Creation of GrainCorp Oils HY13 Core Debt (1) at HY13 of $415M Schill Malz acquisition Short-term debt less Marketing and Oils inventories Long-term debt Increased short-term debt for Marketing and Oils inventories Flexible balance sheet HY13 Core Gearing of 20% (in line with strategic target of <25%) (312) (256) (350) (254) (222) Cash HY13 debt reflects seasonal nature of working capital management FY11 HY12 FY12 FY12 Pro forma (2) HY Core Debt (1) 1% 13% 1% 16% 20% 0.05x 0.53x 0.04x 0.67x 0.99x Core Gearing (1) Core Debt / EBITDA (3) 1. Core Debt = Total Debt less Cash less Marketing and Oils grain and oilseed inventory. Core Gearing = Core Debt / (Core Debt plus Equity). 2. FY12 Pro forma Core Debt / EBITDA includes Oils FY12 EBITDA as detailed in the ASX Announcement dated 28 August HY13 EBITDA based on last twelve months ( LTM ) as at Mar-13. Includes Oils LTM. 17

18 Commodities inventory funded with specific commodity inventory facilities Commodities inventory (1) $M Commodities inventory Short-term debt Supplemented short term debt with cash HY08 FY08 HY09 FY09 HY10 FY10 HY11 FY11 HY12 FY12 HY Marketing and Oilseed funding strategy Marketing s grain trading activities and Oil s oilseed and tallow positions are predominantly funded with specific short term commodity inventory debt facilities: Match debt with asset life Fluctuates with seasonal grain Treatment purchases and underlying soft commodity prices Marketing s performance measured as PBT interest treated as part of cost of goods sold Commodity inventory funding recognised as Operating Cash Flow match funding purpose 1. Commodities inventory excludes Malt barley and malt inventory held for processing activities. Variance between commodities inventory and Short-term debt reconciles with Short-term debt less Marketing and Oils inventories on prior slide. 18

19 Capex supporting safety, network efficiencies and strategic initiatives Capex $M Depreciation & Amortisation $M Stay-in-business Growth Depreciation Amortisation FY09 FY10 FY11 FY12 HY13 FY09 FY10 FY11 FY12 HY13 Stay-in-business capex has increased from FY12 due to inclusion of Oils Depreciation & amortisation higher in FY13 primarily due to inclusion of Oils 19

20 Outlook

21 FY13 Outlook Outlook Grains S&L Country & Logistics Country receivals (1) : 10.0mmt 10.5mmt Domestic outload: ~6.0mmt Carry-out: ~2.0mmt S&L Ports Direct to port receivals (2) : ~2.0mmt Grain exports (3) : 8.0mmt 8.5mmt Non-grain exports: ~2.0mmt Marketing Strong international grain demand Lower Australian volumes Increasing international presence Processing Oils Crushing & Refining Oil sales: ~0.53mmt Oils Bulk Liquid Terminals Continued high average capacity utilisation Malt Malt sales: ~1.30mmt EBITDA per tonne (4) : $75 $80 Variables Ex-farm post harvest receivals Central Queensland sorghum receivals Export program booking execution rate Level of AUD and CAD foreign exchange rates Domestic competition and demand for crushed and refined oil products 1. Winter and summer crop receivals. 2. Grain received at port ex-farm and from other bulk handlers. 3. Bulk and containers. 4. Excludes $4.0M Port of Vancouver compensation receipt. 21

22 Strategy Update

23 Earnings growth initiatives targeting ~$110M EBITDA by FY16 Gamechangers Storage & Logistics Asset Optimisation Oils Synergies & Optimisation Port Flexibility 3 Year Port Protocol Marketing Port Terminals Growth & Efficiencies Industry Code Malt Continuous Improvement ~$45M EBITDA ~$70M capex (1) ~$45M EBITDA ~$180M capex ~$20M EBITDA minimal capex Strong industry fundamentals will drive additional earnings growth 1. Excludes ~$20M capex spent in FY12 on Gamechangers. 23

24 Earnings growth initiatives and capex requirements Incremental underlying EBITDA and Capex ($M) from FY Oils 25 Malt Marketing (2) Storage & Logistics ~25 ~15 ~30 ~70 (1) ~115 ~65 - ~250 (1) Growth capex Gamechangers (1) Asset Optimisation Port Flexibility Total 1. Excludes ~$20M capex spent in FY12 on Gamechangers. 2. Marketing represents Profit Before Tax, Depreciation and Amortisation. 24

25 Gamechangers Storage & Logistics Improved customer service Invested in 24 new mobile grain handling stackers driving improved country site efficiency Improved market access for growers and buyers through smart phone app and enhanced transaction capability Rail optimisation Load optimisation driving increased train productivity Network review to improve train cycle times Marketing Global trading and risk management platform on track for deployment in 2013 Increasing contribution from Calgary and Hamburg offices Strengthening customer relationships through increased offering to customers globally Regional and global customer strategies further developed Malt Port of Vancouver project completed with new speciality capacity on line in 2013, servicing growing craft brewing sector Calgary water recycling facility on track for delivery in 2013, reducing effluent discharge costs Launched Brewers Select in April 2013 access to growing UK craft beer sector ~$20M EBITDA ~$25M capex (1) ~$12M EBITDA ~$15M capex (1) ~$14M EBITDA ~$30M capex (1) 1. Excludes ~$20M capex spent in FY12 on Gamechangers. 25

26 Asset Optimisation & Port Flexibility Oils Capture Synergies Integration on track to deliver $7M in synergies p.a. Corporate office co-location completed and IT and systems integration milestones achieved Strengthen and optimise capability Progressing optimisation of GrainCorp Oils capacity Ports & Country Bulk liquid terminals opportunities Imported fuels opportunity at Pinkenba development approval submitted Capacity expansion at Adelaide and Fremantle for other products under assessment Continuous improvement Rollout of process improvement plan in grain port terminals Process improvements in Country & Logistics under assessment Port Flexibility 3 Year Port Protocol New port protocol for bulk export grain agreed in November year long term agreements for grain exporters to be introduced in mmt under LTAs Industry Code Industry in consultation with Federal Government ~$25M EBITDA ~$115M capex ~$20M EBITDA ~$65M capex ~$20M EBITDA minimal capex 26

27 Recommended Offer

28 Recommended offer Recommended Offer Conditional Agreement & Due Diligence In April 2013 GrainCorp entered into a conditional agreement with ADM under which ADM would make a takeover offer, subject to satisfactory completion of confirmatory due diligence Confirmatory due diligence was completed in May 2013 Recommendation Each GrainCorp Director has indicated that they would recommend the ADM Offer (1) Offer Conditions (2) Minimum acceptance of 50.1% Regulatory approvals including FIRB and MOFCOM No prescribed occurrences Value and Premium Total value to shareholders of $13.20 comprising: $12.20 per share in cash Dividends totalling $1.00 per share (3) Additional Value Dividends expected to be fully franked (4) Additional 3.5 cents per share per month (5) Premium Represents 49% premium to the closing price before the initial proposal (6) Represents 15% (7) increase to initial proposal Next Steps Grant Samuel & Associates Pty Limited appointed Independent Expert ADM to progress regulatory approvals Bidder s Statement and Target s Statement expected to be sent to shareholders in June 1. Directors recommendation subject to the offer continuing to be in the best interests of shareholders and: there being no superior proposal; an independent expert determining that the offer is fair and reasonable; and certain regulatory conditions being satisfied or waived by 31 December Conditions are detailed in the Takeover Bid Implementation Deed available on the GrainCorp website (graincorp.com.au). 3. This amount includes the interim dividends totalling $0.25 announced on 16 May 2013 and would also include any full year dividend relating to the period ending 30 September Providing up to an additional $0.43 per share for those shareholders who can capture the full benefit from franking on the dividends. 5. For each full month between 1 October 2013 and the date the regulatory conditions have been satisfied or waived, subject to GrainCorp being profitable over that relevant period. Dividends expected to be fully franked. 6. GrainCorp closing price of $8.85 on 18 October Including FY12 final dividend. 28

29 Questions

30 Appendix

31 Significant items $M Segment EBITDA Net Interest D&A Tax NPAT Details Underlying 227 (20) (56) (43) 109 GrainCorp Oils acquisition and integration costs Corporate (12.9) (11.6) Stamp duty of $9.0 million and advisory and integration costs of $2.6 million in relation to the creation of GrainCorp Oils Corporate activity Corporate (9.0) (6.3) M&A costs in relation to responding to ADM s proposals GrainCorp Malt acquisition Malt (4.2) (2.4) Net trade tax expense triggered as part of a GrainCorp Malt acquisition Statutory 207 (20) (56) (43) 88 31

32 Grain volumes Volume driver (mmt) HY13 HY12 Comments Grain carry-in (1-Oct) Grain stored at start of period HY13 carry-in above average of 3mmt Higher HY12 carry-in due to larger FY11 crop Country network receivals ~56% share of winter crop production (1) Grain exports handled Strong export demand Lower receivals versus prior year due to smaller crop Non-grain exports Includes woodchips, cottonseed, orange juice, meals, mineral sands and fertiliser. Grain carry-out (31-Mar) Grain stored at period end FY13 carry-out expected to be ~2mmt Throughput (2) Average of country sites in and out, and ports grain and non-grain exports handled Domestic grain outload Higher share of supply to domestic grain market Grain received at port Grain received direct at port ex-farm and other bulk handlers 1. Eastern Australia s wheat, barley and canola production estimates, based on average of Australian Crop Forecasters May 2013 report of 16.0mmt and ABARES February 2013 Crop Report of 16.3mmt. 2. Average country grain inload (carry-in + receivals) and outload (carry-in + receivals carry-out) + ports grain and non-grain exports handled. 32

33 GrainCorp Oils key drivers Crushing Capacity utilisation Gross margin (oil seed cost) Crush process cost Refining Capacity utilisation Gross margin (oil cost) Refining process cost Product mix Combined sales volumes (crude oil, meal, refined products) Pacific Terminals Capacity utilisation Complementary businesses Tallow and vegetable oils marketing Liquid stock feeds (Australia & NZ) and blended feeds (NZ) Used edible oil collection and recycling ~One third of GrainCorp Oils EBITDA Included in Crushing & Refining 33

34 GrainCorp is Australia s leading agribusiness Integrated Business Model with an international end-to-end grain supply chain connecting consumers to growers Unique portfolio of local storage and logistics assets and local and international downstream processing assets linked by a global Marketing platform Global exposure to attractive grain industry fundamentals with strong demand growth for grain and processed grain coupled with origination advantages Confident in delivering growth from identified strategic initiatives targeting ~ $110M incremental underlying EBITDA (1) by end FY16 Track record delivering corporate objectives and strategy execution 1. Earnings before interest, tax, depreciation and amortisation. 34