Freedom Foods Group Limited FY 2015 Management Presentation August 2015 Rory J F Macleod Managing Director 1
Important Information This presentation is provided for information purposes only. The information contained in this presentation is not intended to be relied upon as advice to investors and does not take into account the investment objectives, financial situation or needs of any particular investor. Investors should assess their own individual financial circumstances and consider talking to a financial adviser or consultant before making any investment decision. Certain statements in this presentation constitute forward looking statements. Such forward looking statements involve known and unknown risks, uncertainties, assumptions and other important factors, many of which are beyond the control of the Company and which may cause actual results, performance or achievements to differ materially from those expressed or implied by such statements. While all reasonable care has been taken in relation to the preparation of this presentation, none of the Company, its subsidiaries, or their respective directors, officers, employees, contractors or agents accepts responsibility for any loss or damage resulting from the use of or reliance on the presentation by any person. Past performance is not indicative of future performance and no guarantee of future returns is implied or given. Some of the information in this presentation is based on unaudited financial data which may be subject to change. All values are expressed in Australian currency unless otherwise stated. All intellectual property, proprietary and other rights and interests in this presentation are owned by the Company. 2
MAKING FOOD BETTER We desire to be recognised as creators — creating on-trend, great-tasting, responsibly Australian produced food and beverages. Food and beverages that people enjoy and feel good about. We aim to continually innovate and reimagine what is possible, to change the way the world eats for the better. Through our brands and customers, we will leverage new categories and emerging consumer trends while also understanding our consumers’ needs, backed up by strong research and product development, marketing and commercial capabilities uniquely based on Australian source advantage. Strategic investments in our manufacturing footprint and supply chain will allow us to continue scaling and controlling our business into the future in both Australia and key Asia Pacific global markets . 3
Integration through Supply Chain A sustainable export model needs to be based on a Paddock to Plate Process Paddock to Plate, Quality Assurance Branding & Source Manufacturing Category Approach
FY 2015 Full Year Result Overview • Net Reported Profit of $56.7 million • Underlying Operating EBDITA ( before significant items ) of $16.4 million, an increase on FY 14. – Statutory reported EBDITA of $12.1 million impacted by a number of one off investment costs relating to snack bar commissioning and launch costs which impacted gross margin and operating expense in the Freedom Foods business unit by $2.8m (see page 7 for further detail) – The result included expensing of $1.2 million (gross margin impact) of increased Almond input costs (exchange rate and market price) • Significant investment in manufacturing capabilities, people, quality and systems • Sales growth achieved in core business of Freedom, Pactum and Pactum Dairy • Recognition of unrealised gain on a2 Milk Company investment of $53 million (pre tax) as a result of accounting policy requirements • An active year of corporate activity including acquisitions of: – Moxey Farms: completed – Ringwood Mill: completed An oat-based cereals and snacks manufacturer: exclusive term sheet signed – • Final dividend maintained at $0.015 per share ($0.03 per share Full Year) • The full benefits of our multi stage capital investment programme is expected to accelerate increase in group profits and returns from FY 2016 and beyond 5
% Group Sales Revenues ex Aust / NZ 20.0% 15.0% Sales Revenues Development 10.0% 5.0% Net Sales Development 0.0% 2011 2012 2013 2014 2015 Total Group WW / Coles % Total Group Revenues Pactum Dairy 80% Seafood 75% 74% Pactum Non Dairy 70% Freedom Foods 61% 61% 60% 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 50% Pactum Non Freedom Foods Seafood Pactum Dairy Total Group Dairy 43% 40% % Change 10.2% 21% -3% 635% 54% 2011 2012 2013 2014 2015 FY 14 43,582 40,033 13,239 6,801 103,655 FY 15 48,041 48,483 12,803 49,984 159,311 Freedom Brands % of Pactum Note: Freedom sales eliminates impact of discontinued biscuit business sales from FY 14 and FY 15 Non Dairy Sales 40.0% • Sales growth in Freedom notwithstanding major plant 30.0% capex in FY 15 • Group brands share of Pactum Non Dairy increasing 20.0% • Group sales exposure to WW / Coles reducing through 10.0% 2011 2012 2013 2014 2015 increased mix of domestic and international sales 6
Operating EBDITA (Underlying vs Statutory) Year ended 30th June (A$’000) 2015 2014 Underlying Operating EBDITA before significant items 16,420 15,289 Significant Items expensed to profit: Exchange and Market Demand Impact on Purchases of Almond inputs -1,183 - Underlying Operating EBDITA 15,237 15,289 Other costs not representing underlying performance One off Marketing and Promotional Costs for Mainstream Bar Launch -1,351 - One off Marketing Costs for Cereal Launch -550 - Bar Line Commissioning Impact on Gross Margin -890 - -2,791 - Total Other Costs Operating EBDITA 12,446 15,289 Employee Share Option Expense (non cash) 360 360 Statutory EBDITA 12,086 14,929 Once off investment costs relating to Bar Commissioning and Launches impacted • gross margin and operating expense in Freedom business unit by $2.8m • Almond input price increases and exchange rate impact (compared to prior year) impacted gross margin by $1.2m in FY 15 (85% of this in 2 nd half FY 15) • Business working to offset proportion in FY 16 through process, efficiency gains Note: Operating EBDITA is a non-IFRS measure as contemplated in ASIC Regulatory Guide 230 Disclosing non-IFRS financial information (RG230). Operating EBDITA is used by management and the directors as the primary measures of assessing the financial performance of the Group and individual segments 7
We aim to continually innovate and reimagine R&D Product Development what is possible, to change the way the world eats for the better 40 New Products for our brands and our customer brands being launched • With cycle of capital expenditure in key in 1 st half FY 16 locations substantively complete, the business is expanding its innovation capabilities and pipelines • Total R&D / Product Development team now includes 8 people comprising Beverages (Non Dairy and Dairy), Cereal and Snacks New product launches for own brand and 3 rd • party requirements • Business has invested in high calibre quality and regulatory affairs resources to improve the product development cycle and compliance regimes 8
• Company is investing in a dedicated sales and product capability to access food service and convenience channels Food Service & Convenience – Café, leisure, institutions, education and health • Objective is to build a significant sales base, Food Service and Convenience further reducing dependence on retail market in Australia valued at $45 grocery and accessing growth opportunities billion and growing faster than aligned to market trends traditional retail grocery • Immediate priority is building on success in non dairy beverages with Almond Milk On the go, portability, eating away from home are the key trends The Group has traditionally been a retail grocery orientated business We are investing in sales and product format capability to significantly diversify our customer base whilst leveraging our manufacturing assets 9
Beverage Group 10
FY 2015 Non Dairy • Growth in branded portfolio, led by Almond through Australia’s Own and Blue Diamond brands (accounting for +35% of non dairy production output) • Business provided production capability for private label Almond category at 33% of retail non dairy • category, Soy at 43.7% (PY + 50%) – Total business growth impacted by growth in demand for Almond Blends (i.e. Coconut) Retained leading share on UHT Almond category with 43.7% – (MAT Share to August) Growth in Food Service through Barista • formats (higher retail $ per SKU) • Growth in Liquid Stocks, through our own brand, retailer and other brands • Reduced portion pack volume • Financial returns in branded portfolio impacted by increased cost of Almond inputs (inc FX) 11
Non Dairy Outlook • Strong growth outlook led by innovation and category development through own brands • Increasing presence in branded non dairy category – All key retailers – Food service (convenience) • New segments including Almond blends, cashew and on the go formats • Increasing retailer and own brand development • New packaging formats being trialled ahead of internal capacity installation • New site (Ingleburn) to provide increased capacities and lower cost 12
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