2016 Annual Results.

Transcription

1 2016 Annual Results 1

2 Contents Poultry Industry Brining, imports, maize and soya, protein pricing, industry indicator Operational Overview KPI s, sales, feed and costs, Hartbeespoort Financial Overview Income statement, balance sheet, cash flow Summary 2

3 Brining DAFF promulgated amended brining regulations on Friday 11 April 2016 in the Government Gazette This include a maximum QUID of 85:15 for portions Implementation period of 6 months i.e. 11 October 2016 SAPA served papers on DAFF interdicting DAFF from implementing the new regulations on 23 May 2016 Assuming the new regulations stand, they would have an impact on poultry pricing 3

4 Import Volumes March 2016 was a big month with total imports at ± 57k tons and bone-in at ± 30k tons Bone-in represents ± 40% of import volumes (excl. March 2016) EU still remains dominant exporter of bone-in product to SA US imports were strong in March 2016 at ±7k tons Impact of US product still to be evaluated in terms of market acceptance 4

5 Import Pricing Bone-in Mar 16 Tons % FOB + MFN UK 4,887 16% R R Germany 702 2% R R Netherlands 6,775 23% R R Big 3 12,364 41% R R Spain 2,052 7% R R Belguim 2,796 9% R R France 25 0% R R Denmark 770 3% R R Hungary 625 2% R R Other 658 2% R R Other EU 6,926 23% R R Brazil 3,420 11% R R Argentina 256 1% R 7.99 R US 6,906 23% R 9.54 R Other 223 1% R R Non EU 10,805 36% R 9.75 R Total 30, % R R International prices in USD have stabilized SAPA average mixed portion price trading at parity to bone-in imports (FOB + MFN [where applicable] + freight/sa land side [± R2.00]) 5

6 Maize Effect of the SA drought is well known YM + 39% and WM +59% YoY USA corn down 8% YoY With the weaker Rand (24% weaker YoY) this increases implied import parity by 14% US December 2016 corn trading at $160/ton 6

7 Soya SA drought has halved the SA beans crop This caused a spike in SA prices; however, average price across the FY was flat with prior year US beans prices are 22% down YoY Implied import parity is therefore flat YoY 7

8 SA Protein Pricing Beef prices have increased as red meat producers cut into the herd in response to higher feed costs Prices have increased ±15% since January 2015 SAPA mixed portions prices are estimated to have declined ±10% over the same period 8

9 Industry Indicator High maize and soya prices coupled with decreasing poultry prices and the weak Rand have caused the indicator to deteriorate during FY16 9

10 Key Performance Indicators H116 performance impacted by higher mortalities and poor bird performance Strong recovery in H216 with lowest ever mortalities and good PEF Performance in H216 would have been better if not for throughput issues at the abattoir H216 throughput and yield negatively impacted by the automation implemented at the end of August 2015 Prior to that, throughput was improving primarily due to the weight grading and distribution infrastructure implemented earlier Automation issues now largely resolved; throughput and yield recovering strongly 10

11 Sales Performance Category FY15 H116 H216 Mixed portions 34% 32% 34% Single portions 18% 18% 14% Frozen retail/wb 6% 6% 6% Fillet/soup pack 20% 20% 16% Primary 14% 15% 14% Subtotal 93% 91% 85% Weight graded 0% 1% 1% Fresh 2% 2% 8% Value added 5% 6% 6% Subtotal 7% 9% 15% Total 100% 100% 100% Volume Sales volumes for H216 were up 11% over H215 but FY sales volume only increased by 2% At Uitenhage, FY sales volume was impacted by bird performance issue in H116 and yield issue in H216 with FY volume down 5% Hartbeespoort contributed 14% of H216 volume and 7% of FY volume Pricing and mix Pricing in H216 was weak with all categories except value added showing a decrease over H116 Fresh made up 8% of H216 and 10% of Q416 volume Fresh in H216 still included a large proportion of grillers which don t attract the pricing premium that fresh portions does; this mix will change as Hartbeespoort increases production of fresh portions Weight graded (MCP), fresh and value added made up 15% of sales in H216 Value added increased 25% YoY in volume terms 11

12 Sales: Region and Brands Region In Q416, 81% of sales volume was outside the Eastern Cape Gauteng now comprises 40% of sales volume with KZN being almost as big as the Eastern Cape Exports to Middle East, Namibia and other SADC countries comprises 1% of volume Brands In FY16, 64% of sales volume was through own brands with 32% through house brands 4% of sales was through brands co-owned with a major retailer 12

13 Feed and Costs Year on year, broiler feed cost at Uitenhage was flat and group agriculture cost per kg live mass delivered to the abattoirs was up 1% Group abattoir cost including packaging, brine, coated ingredients and overheads was up 2% per kg sold Group distribution, sales and marketing costs were up 7% per kg sold. These were impacted by higher levels of outside storage and higher advertising and marketing spend. Group services costs were down by R25m year on year Total group costs were impacted by the following: Electricity credit of R38m split R27m H116 and R11m H216 Once off costs incurred at Hartbeespoort including legal fees, IT equipment and additional engineering costs of R5m in H216 Transaction costs of R10m in H216 Additional legal and advisory fees in FY17 are expected to be c.r13m Cost saving measures implemented in FY16 at Uitenhage: Automation reduced abattoir headcount by 15% HFO heating converted to coal Rendering plant upgrade 13

14 Hartbeespoort Volumes and Efficiencies Took operational control on 19 October weeks results included in H216 Average BPW was 248k in CY15 and 262k in CY16 Total production volume of 7 500t in 19 weeks 14% of H216 volume and 7% of FY16 volume FY17 volume expected to be 280k BPW and 20% of group volumes Improved abattoir yield by 5% since take over and still have another 10% opportunity Product Mix Implemented additional packing lines in primary and tertiary as from early April 2016 Fresh portion orders increasing as SPAR DC s come online; projected to be 35% of sales at 280k BPW Costs Live bird costs have increased 18% since February 2015; feed 23% and other costs 5% In H216, operation was more cost effective than Uitenhage: abattoir costs 20% lower, distribution (including sales and marketing) 40% lower 14

15 Income Statement Rm FY16 FY15 % Revenue % Cash costs % EBITDA % Depreciation % EBIT % Finance charges % PBT % Taxation % PAT % HEPS % Revenue up 5%; 2% volume, 2% inflation and 1% mix Cash costs up 4% EBITDA up 10% Depreciation up 15% due to ongoing investment in equipment and the Hartbeespoort acquisition Finance charges up slightly due to inclusion of Hartbeespoort debt Taxation rate increased from 29% to 30% due to transaction costs not being tax deductible Weighted average number of shares down 2% HEPS up 5% 15

16 Balance Sheet Rm FY16 FY15 Assets PPE Investment in Associate 2 Inventories and Bio Assets Receivables Cash Total Assets Equity and liabilities Equity Interest bearing debt Deferred taxation Payables and provisions Total equity and liabilities Net asset value per share R10.18 R9.42 Net debt:equity 8% 2% PPE increased mainly due to the acquisition of Hartbeespoort Increase in inventories and biological assets is due to the higher value of feed in biological assets and higher quantities of finished goods in outside storage Receivables remain flat despite higher turnover Interest bearing debt increased due to the acquisition of Hartbeespoort Payables and provisions increased over year end as more assertive payment terms were implemented; these terms to be reviewed in the new financial year Net current assets decreased from 32 days in FY15 to 23 days in FY16 Tax shield of R264m available for set off against future taxable income Net debt:equity increased from 2% to 8% NAV increased by 8% to R10.18 per share 16

17 Cash Flow Rm FY16 FY15 Net cash from operations Net finance costs (4) (3) Acquisition of Hartbeespoort (120) Acquisition of contract grower farm (36) Capex net of asset sales (52) (53) Dividends (26) (11) ESOP/share repurchases (8) (5) Debt raised for Hartbeespoort 120 Normal debt repaid (27) (26) Net cash movement Cash generated from ops (per share) R2.56 R1.67 Net cash from operations increased by R65m, partly due to assertive working capital management Equates to R2.56 / share which is a 53% increase over FY15 R120m acquisition of Hartbeespoort offset by R120m new debt raised; Hartbeespoort debt to be repaid over 5 years Capex of R52m: Uitenhage abattoir automation R44m, other cost reduction and product mix projects R8m 17

18 Summary Industry The coming year will be impacted by high commodity prices, high levels of imports, possible implementation of the brining legislation and subdued consumer spending The current El Nino is strongly expected to be followed by a La Nina which will lead to good summer rainfall in SA (December 2016) and which will lead to a normalised harvest in May/June 2017 If brining regulation is implemented, this will lead to a higher price for those products affected (mainly IQF mixed portions) on a per kg basis Sovereign Continue to execute on product mix strategy by driving the growth in fully cooked products, exports, weight graded portions and fresh Additional volume from Hartbeespoort will enhance execution on this strategy, especially fresh production, and will also allow production and distribution to be optimized across both plants High margin, fully cooked value added production continues to grow into the HMR, food services and export channels Entry into the formal QSR market through the supply of product to Nandos Return to historical KPI efficiencies at Uitenhage in both agriculture and abattoir throughput and yield 18

19 Disclaimer Forward looking statements Certain statements in this presentation constitute forward-looking statements that are neither reported financial results nor other historical information. They include but are not limited to statements that are predictions of or indicate future earnings, savings, synergies, events, trends, plans or objectives. Such forward-looking statements may or may not take into account and may or may not be affected by known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Group to be materially different from the future results, performance or achievements expressed or implied by such forwardlooking statements. Such risks, uncertainties and other important factors include among others: economic, business and political conditions in South Africa; changes in the market price of commodities; labour disruptions; changes in government regulations, particularly environmental regulations; changes in exchange rates; currency devaluations; inflation and other macro-economic factors; and the impact of the HIV and Aids crisis in South Africa. These forward-looking statements speak only as of the date of publication of these pages. The Group undertakes no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date of publication of these pages or to reflect the occurrence of unanticipated events. 19

20 Partnership. Innovation. Profitability 20