Results presentation for the year ended 30 September 2018
AGENDA Operational Business Financial Outlook and Overview: Overview: Overview: management focus: H Lourens H Lourens A Muller H Lourens Adel vd Merwe Results presentation 2018 2
BUSINESS OVERVIEW: H LOURENS Results presentation 2018 3
BUSINESS OVERVIEW › Lower raw material input costs Operating Revenue profit › Stable exchange rate 2% 178% › Tailwinds due to lower egg supply › South African economy remains muted Cash › Good recovery in industry dynamics in rest of HEPS generated Africa 234% R448m Total Total dividend dividend 2018 2017 90 c 34c Results presentation 2018 4
FINANCIAL OVERVIEW: A MULLER Results presentation 2018 5
STATEMENT OF INCOME 2018 2017 % For the year ended 30 September 2018 Rm Rm change 4 121.9 Revenue 4 051.9 2 Operating profit* 473.3 170.1 178 Income from associates 0.7 1.1 23.8 Net finance income 6.4 Profit before tax 497.8 177.6 Tax (135.6) (50.0) 362.2 Profit for the period 127.6 0.9 * Operating profit includes capital items 20.6 Adjusted operating profit 472.4 149.5 216 Adjusted operating margin 11.5% 3.7% 164.3 EPS - cents 55.7 195 HEPS - cents 163.9 49.0 234 Results presentation 2018 6
DIVIDENDS AND SHARE REPURCHASES › For 2018 • Dividend at a HEPS cover of 4 times 41 cents • Special dividend due to 2018 cash generation 49 cents • Interim dividend paid (20 cents) • Final dividend 70 cents › 11 784 941 shares repurchased in 2018 at average R4.45 per share › Total amount of R244.1 million returned to shareholders › Board intends to continue to repurchase shares Results presentation 2018 7
REVENUE ANALYSIS Total R4 122 million (2017: R4 052 million) ANIMAL FEEDS EGGS FARMING AFRICA 2017 : R1 485m | 37% 2017 : R1 052m | 26% 2017 : R1 311m | 32% 2017 : R204m | 5 % Results presentation 2018 8
SEGMENT RESULTS 2018 2017 Adjusted operating profit Rm Rm Eggs 286.7 46.5 Farming 98.5 47.3 69.4 Animal Feeds 77.8 Other African countries 31.0 (9.7) Head Office costs (13.2) (12.4) 472.4 149.5 Results presentation 2018 9
STATEMENT OF FINANCIAL POSITION 2018 2017 At year end Rm Rm Non-current assets 1 091.9 1 076.8 Net working capital 574.6 590.4 (228.3) Non-current liabilities (230.8) Cash 422.5 261.5 Total net assets 1 860.6 1 697.9 (6.2) Borrowings (6.3) Equity 1 854.4 1 691.6 Results presentation 2018 10
STATEMENT OF CASH FLOW 2018 2017 For the year ended 30 September 2018 Rm Rm Cash operating profit 547.8 200.4 Working capital inflow 12.9 115.2 (7.9) Change in exchange rate 0.7 Cash effect of hedging activities 8.9 3.4 Tax paid (138.0) (61.3) 24.4 Net finance income 6.9 Cash generated by operations 448.0 265.3 Shares repurchased (52.4) (28.7) (119.7) Dividends paid (13.8) Treasury shares acquired by subsidiary (2.5) - Capital expenditure (116.0) (73.0) 3.8 Proceeds from sale of assets 32.2 Net cash increase 161.0 182.0 Results presentation 2018 11
CAPITAL EXPENDITURE 2018 Future R’m R’m Maintenance capex – SA 27.9 44.9 – Africa 13.1 15.2 18.4 Farms: capacity and efficiency 1.2 Energy efficiency 5.4 3.1 Hartbeespoort broiler hatchery expansion 6.6 1.2 9.5 Zambia feed mill 0.9 Uganda layer farm expansion 17.3 0.4 Layer hatchery expansion 6.0 6.2 11.4 Feed mills expansion 31.1 Zambia layer farm expansion - 27.2 Packstation grader 0.5 13.9 116.0 145.3 Results presentation 2018 12
SENSITIVITIES: EGGS Effect of movement in: Rand value EBIT/annum Selling prices 17c Eggs (R/doz) 1% R13m Raw material costs Maize R/ton R100 R6m Soya bean meal R/ton R100 R2m Assumption: Egg volume of 6.4 million dozen per month Results presentation 2018 13
OPERATIONAL OVERVIEW: H LOURENS / ADEL VD MERWE Results presentation 2018 14
NULAID EGGS › Realisation increased by 24% • AI outbreak • Improved product mix EGGS Less Liquid Egg Increased sales of Higher Value Eggs › Volumes declined by 7% Good utilisation of supply dynamics supported by excellent operational performance Results presentation 2018 15
NULAID EGGS Results presentation 2018 16
NULAID EGGS Realisation Movement 150.00 Flock 140.00 AI replacement Effect 130.00 Normal 120.00 cycle Index 110.00 100.00 90.00 80.00 Month Results presentation 2018 17
NULAID EGGS › Strengthened management team › Successful cost control • Nominal Increase of 3.5% • Additional AI Costs • Per unit increase higher due to lower volumes › Operational efficiency improvements • Returns • Stock Variances • Equipment Efficiency Results presentation 2018 18
NULAID EGGS › Progress with 3 rd party distribution model • Nominal decrease of 0.5% • Per unit increase higher › Successful execution of direct farm sales strategy › Successful execution of retail customer service • Nulaid awarded best Egg Brand for sixth consecutive year • Nulaid won the 2018 Shoprite Perishable supplier of the year award › Successful implementation of 18-egg carton Results presentation 2018 19
NULAID EGGS EXPECTATIONS › Expected Higher Feed Costs › Increased National Egg Supply › Increased Nulaid volume due to placements › Continued equipment efficiency improvements › Continued investment in Green projects Results presentation 2018 20
NOVA FEEDS › Continued external volume growth › Margin declined due to competitive dynamics › Excellent feed performance across all species ANIMAL FEED › Cost push well managed › AI effect • Loss of internal volumes and contribution • Additional bio-security costs › Approved investments for • Future growth • Improved efficiencies Stable performance in difficult conditions Results presentation 2018 21
FARMING OPERATIONS LAYER FARMING › Satisfactory breeder performance › Commercial farm performance continue to improve › AI effect FARMING • Increased day old pullet sales • Decline in point of lay sales • Sharp increase in unit cost of production › Successful mitigation of flock decline due to AI • Flock decrease 19% Continued improvement • Production decrease 7% in challenging industry conditions › Capex programme to upgrade layer houses commenced › Layer productivity index developed Results presentation 2018 22
FARMING OPERATIONS BROILER FARMING › Day old chick volumes now exceed that of old model › Increased hatchery capacity projects completed FARMING › Day old chick volumes increased by 6% › Decline of 1.2% in live bird weight sold › Record performance on commercial broiler level Genetic impact › Broiler breeders less productive Positive momentum continues › AI effect • No volume impact • Additional bio-security costs Results presentation 2018 23
OTHER AFRICA SEGMENT ZAMBIA › Disease challenges on breeder farm › Very good commercial layer farm performance › Prices and volumes increased in all sales categories › New feed mill commissioned AFRICA UGANDA › Excellent maize crop › Very good commercial layer performance Good economic recovery in all three countries › Strong demand for day old broilers and layers › Disease challenges at breeder farms Pleasing profit growth from other Africa segment › Volume and price increase in egg segment › Capacity increase of 65% for egg farm approved MOZAMBIQUE › Egg industry dynamics similar to South Africa › Improved layer farm performances but › Farm efficiencies remain unsatisfactory Results presentation 2018 24
OUTLOOK AND MANAGEMENT FOCUS: H LOURENS Results presentation 2018 25
PROSPECTS 2019 Quantum Foods Expectations response • Judicious customer and channel • Significant drop in egg prices management • Increase in raw material costs • Continued focus on efficiencies through all • Increased competition in feed sector our segments • Opportunities in day old chick market • Review of hatchery capacity • Low level of GDP growth • Cost containment initiatives implemented Results presentation 2018 26
Results presentation 2018 27
APPENDIX Results presentation 2018 28
SAFEX YELLOW MAIZE RAND PER TON 4 500 4 000 3 016 3 500 2 924 3 000 2 352 1 770 1 953 2 500 2 000 1 500 Sep 14 Mar 15 Sep 15 Mar 16 Sep 16 Mar 17 Sep 17 Mar 18 Sep 18 Results presentation 2018 29
CBOT USD SOYA BEANS 430 410 390 370 309 300 316 309 350 330 310 299 290 270 250 Sep 14 Mar 15 Sep 15 Mar 16 Sep 16 Mar 17 Sep 17 Mar 18 Sep 18 Results presentation 2018 30
RAND VS US$ 18 14.14 16 13.71 13.55 13.84 14 11.28 12 10 Sep 14 Mar 15 Sep 15 Mar 16 Sep 16 Mar 17 Sep 17 Mar 18 Sep 18 Results presentation 2018 31
LAYER PRODUCTIVITY INDEX 135 130 125 120 115 110 105 100 95 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Results presentation 2018 32
BROILER PRODUCTIVITY INDEX 125 120 115 110 105 100 95 90 85 2010 2011 2012 2013 2014 2015 2016 2017 2018 Results presentation 2018 33
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