FY20 full year results and outlook 31 August 2020 0
Highlights 1
FY20 an accretive but challenging year Strategic imperatives achieved during a challenging year with COVID-19 Lactoferrin Group Gross Net tangible Mozzarella production revenue margin assets production 9,128 T $103m 8.9% 1.4 T 15.7 cps +108% +21% +460 bp +398% 15% Building on our foundations…. ….and navigating challenges • ✓ Continued transition to higher-margin products Higher milk costs following two years of drought ✓ Lactoferrin production increased and capacity • COVID-19 pandemic impacts expansion underway ✓ • Sale of dairy farms to significantly reduce debt Underperformance of PFG (resulting in management and operational changes) ✓ Increased milk supply contracted for FY21 ✓ • Successful equity raise Non-cash impairments of non-core assets 2
FY21 step change Increased milk supply, with focus on higher-margin product mix and sustainable free cash flow FY20 FY21 Focused on increasing milk supply 111 ML 131-145 ML Improving utilisation of mozzarella facilities 46% ~70% 9.1 KT 12.6-14.7 KT Strong growth in mozzarella production 3 T 12 T Lactoferrin plant capacity step-change $103m $130-145m Revenue growth to drive profitability 49% 8-16% Low gearing to support growth objectives 3
Successfully transitioning to higher-margin production Step-change in mozzarella production following installation of state-of-the-art processing equipment in 2018 FY20 Cheese Production FY21 Production Mix FY18 Cheese Production 88% mozzarella 28% mozzarella ~95% mozzarella 9.1 KT 12.6-14.7 KT 1.2 KT Mozzarella Cheddar Mozzarella Cheddar Mozzarella Cheddar Clear benefits from strategy to focus on higher-margin mozzarella production 1 tonne of cheddar ➔ 1 tonne of mozzarella ➔ By products: • No production • 175 litres (+175 litres) Cream • 480 kg • 480 kg (n/c) Whey powder • 200 grams • 350 grams (+75%) 1 Lactoferrin 1. From existing whey-based extraction process 4
Lactoferrin plant expansion underway Conversion from whey input to skim milk input will deliver a step-change in lactoferrin production Current processing flow chart with whey input Milk processed Dairy facilities Lactoferrin Production from 100 ML milk supply facility 100 ML Mozzarella 10,200 T Cream 1.6 ML Mozzarella Whey powder 4,975 T Cream Lactoferrin 3 T Whey Lactoferrin Processing flow chart with skim milk input Milk processed Lactoferrin Dairy facilities Production from 100 ML milk supply facility 100 ML Mozzarella 10,200 T (n/c) Cream 1.6 ML (n/c) Lactoferrin Mozzarella Whey powder 4,975 T (n/c) Milk Cream Lactoferrin 12 T +300% Whey Annual lactoferrin production capacity of 12 tonnes post completion of expansion in Q3 FY21 5
Sale of dairy farms Strategic reallocation of capital to reduce debt and deliver on strategic imperatives Cash Drawn debt Undrawn debt $ million ✓ Sale completed on 31 August 2020 20 10 ✓ $40.4 million gross proceeds received 1.9 2.0 10.6 - (9.0) ✓ Cash proceeds reduce gearing to 9% (10) (18.0) (20) ✓ Milk supply from farms secured (~17 ML) for (41.3) (49.6) 10 years at arms’ length prices (30) (40) ✓ Redeployed capital enhances capacity (2.4) utilisation, cash flow and ability to secure (50) (1.2) additional milk (60) 30-Jun-19 30-Jun-20 Post farms sale ✓ Increases return on capital employed (ROCE) Liquidity: $4.3 million $11.8 million $20.0 million Gearing: 49% 49% 9% 6
FY20 provided confidence to issue FY21 forecast around key drivers Key risks Key drivers FY20 FY21 Contracts in place to 111 ML 131-145 ML Seasonal conditions MILK SUPPLY supply 138ML in FY21 MOZZARELLA 9,128 T 12,600-14,700 T COVID-19 impact on demand Milk supply PRODUCTION Timing delay on new facility LACTOFERRIN 1.4 T 4.0 - 6.0 T Process efficiency; milk supply completion PRODUCTION Mozzarella demand; timing delay on $103m $130-145m REVENUE Milk supply and pricing new facility completion GEARING AT Dairy farms sale 49% EBITDA and working capital changes 8-16% completed YEAR END CAPITAL Lactoferrin expansion $6.0m $17-22m COVID-19 impact on demand project ~$12m EXPENDITURE Notes: Provincial Food Group (Meat segment) FY21 result expected to be breakeven. Key Risks discussed on slide 23. 7
Operating and financial results 8
Dairy facilities Production and revenue increase driven by growing sales pipeline and modest uplift in milk supply Mozzarella production (KT) Milk supply (ML) ~50% ~25% +8% +108% 131 - 12.6 – 14.7 145 111 103 9.1 90 1.2 4.4 FY18 FY19 FY20 FY21G FY18 FY19 FY20 FY21G ✓ ✓ Contracts secured to supply 138 ML in FY21 Higher-margin mozzarella production driving growth Lactoferrin production (T) Dairy sales revenue ($ million) ~33% ~250% +20% 115 - 4.0 – 125 90 6.0 +398% 75 43 0.3 Nil 1.4 FY18 FY19 FY20 FY21G FY18 FY19 FY20 FY21G ✓ ✓ Step-change in lactoferrin production underway Volume growth and transition to higher value products 9
Provincial Food Group Positioning for a positive FY21 contribution Management and operational changes to • generate positive contribution in FY21 FY20 loss largely due to termination of significant • contract which became commercially unviable New contracts in place to drive higher revenue in • FY21 with focus on traditional meat processing PFG Revenue $ million 15 +89% 10 12.3 5 6.5 0 Beston acquired 100% of FY20 PFG on 19 August 2019 10
Financial results Transition to higher-margin products drives gross margin expansion • Sales revenue increased 22% despite milk FY19 FY20 Change supply increasing by only 8% as more milk Sales revenue 1 84.7 103.0 22% was processed to meet growing demand in Cost of sales 81.1 93.9 16% customer sales Gross profit 3.6 9.1 153% • Gross margin increasing, driven by Dairy Margin 4.3% 8.9% 460bp segment (gross margin 10.5% up from 6.9% ) Other income 0.4 0.1 (300%) • Other expenses 36.1 28.8 (20%) Underlying NPAT (loss) improved 28% as a result of increased revenue and margins EBITDA (30.4) (14.3) 47% Depreciation and amortisation 1.9 3.0 58% • Statutory loss includes reduced impairment Statutory NPAT (27.0) (11.6) 57% charges Operating cash flow (9.1) (13.7) (51%) • Operating cash flow lower but consistent Capital expenditure 12.3 5.7 (54%) with EBITDA due to working capital changes Net debt (30 June) 39.4 39.1 (1%) • Net Tangible Assets increased 15% to 15.7 Total Assets (30 June) 140.6 145.3 3% cents per share Equity (30 June) 80.1 80.0 (0%) NTA 2 - cents per share (30 June) 13.7 15.7 15% 1. Excludes other revenues 2. NTA is calculated on the book value of assets (i.e. historical cost less depreciation and impairments) and does not reflect the replacement value or the economic value of the assets 11
FY19 to FY20 NPAT bridge $ million 12
FY21 guidance and outlook 13
Five strategic imperatives underpin growth objectives Each additional 20 ML of milk supply expected to generate additional gross margin of ~$5 million 1 MILK SUPPLY SALES PIPELINE Security of raw material (contracts with dairy farms) • Expanding customer base • FY20 111 ML; FY21 contracted milk supply of • Diversifying product channels • 138 ML; targeting ~180 MLpa Driving revenue growth • Sourcing >20% of South Australian milk pool • Increasing returns per kg of milk solids CAPACITY UTILISATION DAIRY NUTRACEUTICALS Installed mozzarella production Valuable infrastructure acquired • • capacity of 20,000 Tpa in 2016 Currently 46% utilisation and Replacement cost well in excess • • increasing to ~70% in FY21 of acquisition cost Lactoferrin produced from skim • milk and whey by-product Current capacity 3 Tpa • Expansion to 12 Tpa • PRODUCT MIX Dairy, meat and value-added protein producer • Transitioning to higher-margin product mix • 1. Post Stage 1 skim milk lactoferrin facility construction 14
Driving growth through increased milk supply and plant utilisation Ramp-up of Mozzarella plant utilisation gaining momentum Incremental production output 1 Milk supply input / Jervois dairy plant utilisation 200 ML 10% Each additional 20 ML of milk Existing plant capacity processed yields: 180 ML Target FY23 90% +2,100 T mozzarella +320 KL cream 138 ML 70% Contracted FY21 +995 T whey powder 111 ML 103 ML FY20 +2.4 T lactoferrin FY19 90 ML FY18 and: 55% ~$21 million additional revenue 2 38 ML ~$5 million gross margin 2 FY17 1. Expected incremental production post completion of lactoferrin plant construction and expansions 2. Based on average FY20 product prices and lactoferrin estimated at $1,500/kg 15
Lactoferrin expansion a core strategic imperative for increasing returns Expansion of lactoferrin production to potentially capture ~5% of the growing global market in FY22 Lactoferrin plant 30 capacity (Tpa) 20 Completion of Stage 1 expected in Q3 FY21 10 0 Production metrics Current Stage 1 Stage 2 and 3 Production capacity 3 Tpa 12 Tpa >20 Tpa Production input Whey Skim milk Skim milk Milk supply 100 ML 100 ML 180 ML Expansion cost $3 million $12 million $9 million Revenue 1 $4.5 million $18 million >$30 million 1. Assumes full production capacity and lactoferrin price of $1,500/kg 16
Recommend
More recommend
