2016 SunRice Update Laurie Arthur, SunRice Chairman RGA Annual General Meeting 5 August 2016
Agenda • FY 16 Performance • Growth Strategy Update • Key Focus Areas in FY17 • FY17 Outlook & Global Market • Capital Restructure Update • Vesting/SEEL Review • Questions 2
Another Strong Performance in FY16 $1.27 1.9% REVENUE billion increase $52.0 5.8% NET PROFIT AFTER TAX million increase 33.0 6.5% DIVIDEND PER B CLASS SHARE cents increase $403.60 2.3% PADDY PRICE Medium Grain (Reiziq) increase 3
Strategy Continues to Deliver Results • FY16 result: - Demonstrated that increased revenue scale and profitability levels in FY15 have been maintained - In line with expectations: continued track record of keeping market accurately informed - $288 million paid to growers for C15 • Continued growth of branded sales and operational improvements • Middle East delivered ongoing market share, profit and volume growth • ANZ generated gains in retail consumer market share due to tactical marketing • Global sourcing initiatives intensified 4
Track Record of Delivery • Strong track record of accurate market guidance for A and B Class Shareholders • Demonstrated ability to balance the needs of both shareholder classes since converting to a company in 2005 • Between FY11-FY16, for B Class Shares: - 278% increase in earnings per share - 83% dividend appreciation • Between C11-C16 for Growers: - 47% increase in paddy price/tonne (Reiziq Medium Grain) • Board continues to pursue strategies to increase value to all shareholders 5
Growth Strategy has Delivered Results NSV (A$ Billion) NPAT (A$m) 52.00 1.40 55 49.20 50 1.27 1.25 1.30 45 1.15 1.20 40 36.00 1.07 35 1.10 1.00 30 3yr CAGR of 6% 33.50 1.00 3yr CAGR of 13% 25 22.70 0.90 20 APR 12 APR 13 APR 14 APR 15 APR 16 APR 12 APR 13 APR 14 APR 15 APR 16 Share Price ($) & TSR NTA per B class share 5.00 $6.84 7.00 Share Price $6.37 6.50 4.00 6.00 3.00 $5.51 5.50 $5.67 2.00 5.00 5yr TSR CAGR of 14% $5.12 4.50 1.00 APR 12 APR 13 APR 14 APR 15 APR 16 2011 2012 2013 2014 2015 2016 Gearing % Paddy Price (A$/tonne) 100% $403.60 420 $394.62 Debt / Equity Debt / Debt + Equity 80% 380 65.9% 340 $317.34 60% 46.6% 61.7% 43.6% 300 40% $293.61 43.9% 260 $275.00 39.7% 38.2% Reiziq Medium Grain 31.8% 30.5% 30.4% 20% 220 6 APR 12 APR 13 APR 14 APR 15 APR 16 APR 12 APR 13 APR 14 APR 15 APR 16
Key Focus Areas in FY17 • Pursue growth in Asian branded markets, including China market entry • Leverage identified global trends, especially those in emerging consumer markets Preference for ‘healthy’ (low GI) - - Meal convenience (microwave) - Sushi revolution • Working capital management - Manage ongoing PNG Kina illiquidity - Improve Accounts Payable/Receivable • Enhance grower support programs like GrowRice and PayRice • Proceed to shareholder vote on proposed Capital Restructure • Focus on ensuring renewal of vesting/SEEL arrangements NSW growers 7
FY17 (C16) Outlook • Challenging trading environment in world rice markets • Impacts in dairy industry affecting domestic sales for CopRice • Potential PNG issues being monitored: - Weakening economy, with poor outlook - Increasing in-market competition - Exchange rate movements (Kina has declined 20% against US$ since 2015) - Government policy changes & instability • Kina exchange rate and illiquidity are impacting SunRice’s business in PNG: - Sudden Kina devaluation is likely to considerably reduce trading margins and reduce the intercompany receivable from Trukai • FY17 profit guidance will be provided at the AGM (on 24 August) 8
• In June, FAO’s Japonica Rice C16 Global pricing – Price Index declined by 7 points to 223 points due to weakness in the Medium Grain short/medium grain market. California Between January – June, the FAO 21-Month Cash Paddy Prices Cash Rice Network / Cal Rice Exchange Index had declined by 13% y-o-y. 650 2014 Crop USA 2015 Crop USA • US MG prices declined another 600 $40/tonne over June-July. 550 $USD per tonne • 500 Spot paddy cash prices at lowest level of the US marketing year. 450 400 • US growers being required to 350 move or sell old stock by storage sheds and banks. 300 250 • April-May paddy sales pricing estimated $60-75/tonne under Californian cost of production. Cash Trading Date • USDA forecast planted area for Note: Cash price does not include storage and drying MG in California increased by 34% costs, which are deducted from this amount to 510,000 acres (206,477ha). Source: SunRice • Egypt switched from exporting to importing prior to Ramadan 9
• El Nino weather pattern has C16 Global pricing – Long Grain ended and there are predications of 60% likelihood of La Nina building over 2016, which will be associated with heavy rainfall benefitting both main and Thai Long Grain Pricing - US $ / mt secondary season crops this 700 year. 600 • FAO estimates the Philippines’ 500 2016 rice imports to decline 20% 400 to 1.6 million metric tonnes. 300 • Harvesting of Vietnamese 2016 200 main winter-spring paddy crop, 100 which accounts for about 45% of annual production, is complete. 0 The crop was significantly impacted by lower irrigation water Thai Long Grain availability and salt water intrusion into the Mekong Delta. *Creed Thai LG 100% B • FAO estimates Vietnam 2016 *Selling prices listed are in U.S. dollars per tonne and for Finished Product tonnes (includes costs for milling and yield rice exports to decline due to a losses, packing, distribution and administrative charges) combination of tighter export availability and reduced demand. 10
World Market Outlook • Overall, a more challenging trading environment, particularly for Medium Grain (MG) as prices come off • Conversely, Thailand’s drought is driving Long Grain (LG) prices up - Could benefit performance in markets where MG and LG are direct competitors • SunRice’s intensifying global sourcing activities will be impacted by these global factors • Riverina paddy pricing will also continue to be impacted by global supply and demand mechanics (note: C16 paddy price is $415 per tonne – Reiziq) 11
Capital Restructure Update • The Capital Restructure is designed to equip SunRice and all growers and shareholders for the future, enabling the company to: - Invest for growth; - Better manage business risk; and - Have greater resilience to benefit all growers and shareholders • Significant time and resources have been invested to develop a structure that enables SunRice to realise these outcomes while preserving both: - Existing grower shareholder control; and - Existing economic rights of SunRice B Class investor shareholders 12
Capital Restructure Update • Timing continues to be impacted by developments with a partner that is reviewing it all of its JV arrangements • We will be progressing with the Capital Restructure once the JV issue is resolved • Timetable for vote will also take into account the need to re-establish the strong support we have received over the past 12 months • The Board remains firmly committed to the success of the Capital Restructure and its ability to deliver a strong future for SunRice and all shareholders 13
Rice Vesting/SEEL Review • Fundamental to NSW rice industry success - Vesting and SEEL maintain a competitive advantage for NSW-grown rice • Allows consolidation of export channels, maximisation of sales and marketing scale and supply chain efficiencies - NSW rice growers compete in international markets without any export subsidies • Track record of price premiums for NSW growers: FY15 export price premium to growers was $82 million • DPI has publically stated quantity and quality of submissions will be important in helping them reach a decision on vesting/SEEL renewal Ensure you voice is heard and make a submission supporting the vesting/SEEL arrangements – for more information go to: http://www.dpi.nsw.gov.au/about-us/legislation/list/rice-marketing/review/info-paper 14
Summary • FY16 result underpinned by the continued growth of branded sales and operational improvements • Continue to deliver on our strategy for growth across several markets and to secure non-Australian sources of supply • FY17 will be challenging given several issues in PNG, current global market trends and CopRice headwinds • Board remains committed to progressing the Capital Restructure despite delay • Review of NSW Government’s vesting/ SEEL arrangements under way 15
Questions 16
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