Results presentation for the six months ended 31 March 2017
AGENDA Business Overview: H Lourens Financial Overview: A Muller Operational Overview: H Lourens Outlook and management focus: H Lourens Interim Results Presentation 2017 2
BUSINESS OVERVIEW • The raw material cycle has peaked • Quantum Foods showed resilience through the cycle • Conservative business model succeeded in RSA • Rest of Africa business struggled Operating Cash Revenue Profit HEPS generated 13% 5% 16% R89m Interim Results Presentation 2017 3
RAND VS US$ 18 14.76 16 13.71 13.84 13.42 14 12.13 11.28 12 10 Sep 14 Mar 15 Sep 15 Mar 16 Sep 16 Mar 17 Interim Results Presentation 2017 4
SAFEX YELLOW MAIZE RAND PER TON >R2 500/ton 20 months 4 500 4 000 3 500 3 000 2 500 2 000 1 500 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Sep 16 Dec 16 Mar 17 Interim Results Presentation 2017 5
FINANCIAL OVERVIEW
STATEMENT OF INCOME 2017 2016 % Six months ended 31 March Rm Rm change Revenue 2 040.9 1 807.6 13 Operating profit* 42.3 76.5 45 Income from associates 0.4 (0.3) Net finance income 2.5 5.2 Profit before tax 45.2 81.4 Tax (13.1) (20.7) Profit for the period 32.1 60.7 * Operating profit includes capital items 3.7 36.1 Adjusted operating profit 38.6 40.4 5 Adjusted operating margin 1.9% 2.2% EPS - cents 13.9 26.0 47 HEPS - cents 12.4 14.8 16 Interim Results Presentation 2017 7
REVENUE ANALYSIS Total R2 041 million (2016: R1 808 million) R763m R498m R675m R105m 37% 25% 33% 5% Animal Eggs Farming Africa feeds 2016 : R631m 2016 : R483m 2016 : R622m 2016 : R72m 35% 27% 34% 4% Interim Results Presentation 2017 8
SEGMENT RESULTS 2017 2016 Adjusted operating profit for the six months ended 31 March Rm Rm Eggs (22.0) (20.9) Farming 37.2 31.3 Animal Feeds 40.4 31.3 Other African countries (9.4) 3.0 Head Office costs (7.6) (4.3) Total 38.6 40.4 Interim Results Presentation 2017 9
STATEMENT OF FINANCIAL POSITION 31 Mar 2017 30 Sep 2016 Rm Rm Non-current assets 1 062.0 1 071.7 Net working capital 649.8 687.4 Non-current liabilities (238.5) (236.1) Cash 129.0 79.5 Total net assets 1 602.3 1 602.5 Borrowings (6.4) (6.4) Equity 1 596.0 1 596.1 Interim Results Presentation 2017 10
STATEMENT OF CASH FLOW 2017 2016 Six months ended 31 March Rm Rm Cash operating profit 67.3 78.4 Working capital inflow/(outflow) 50.1 (116.1) Change in exchange rates (0.1) 10.0 Cash effect from hedging activities (14.4) (1.7) Tax paid (16.2) (14.5) Net finance income 2.5 5.2 Cash generated by/(utilised in) operations 89.2 (62.0) Shares repurchased (5.9) - Dividends paid (13.8) (23.3) Capital expenditure (26.9) (45.9) Business combinations - (50.2) Proceeds from sale of assets 7.0 119.3 Net cash increase/(decrease) 49.5 (38.8) Interim Results Presentation 2017 11
CAPITAL EXPENDITURE Rm Approved YTD Future 2017 March 2017 cash flow Maintenance capex - SA 36.5 11.2 25.3 Maintenance capex - Other African countries 13.8 10.2 3.6 Olifantskop feed mill expansion 6.4 5.5 0.9 Hartbeespoort broiler hatchery expansion 11.5 - 11.5 Efficiency upgrade packstation 18.3 - 18.3 Total 86.5 26.9 59.6 Interim Results Presentation 2017 12
SENSITIVITIES Effect of movement in: Impact Movement Rand value EBIT/annum Selling prices Eggs dozens R/doz Eggs 1% 14c R10m Raw material costs Maize R/ton Eggs R100 R6m Soya bean meal R/ton Eggs R100 R1m Conversion costs Layer farm FCR kg/doz Eggs 1% 6c/doz R4m Assumptions: Feeds and farming business adjust selling prices with raw material cost changes Interim Results Presentation 2017 13
OPERATIONAL REVIEW: FEEDS
NOVA Pleasing FEEDS performance in volatile conditions • Astute price/volume management especially towards end of maize season • Segments of customer base under severe pressure - credit management key • External volumes increased by 3.5% (excl Olifantskop) • Operating margin per ton flat • Continuous improvement in operational efficiencies Interim Results Presentation 2017 15
OPERATIONAL REVIEW: FARMING
FARMING Solid OPERATIONS performance in difficult conditions BROILER FARMING Volumes (kg) live birds sold • Growth in birds per week sold • Market requirement for a smaller bird 5.6% • Margins consistent with major contracts • Breeder results best in class • Broiler South results remain excellent • Broiler North results continue to improve • Broiler asset utilisation close to full capacity • Converting layer hatchery into broiler hatchery in Western Cape Interim Results Presentation 2017 17
FARMING OPERATIONS Slow improvement LAYER FARMING • Margin in livestock business under pressure • Breeder results exceed international standards • Significant decline in day old pullet sales • Increase in point of lay hen sales • North and South breeder operations being consolidated to increase utilisation • Commercial layer results slowly improved • Opdiefontein layer farm being re-populated • Closing two smaller layer farms in Gauteng/North West Interim Results Presentation 2017 18
OPERATIONAL REVIEW: EGGS
EGG BUSINESS • Operational indicators improved Price • New business model in Gauteng show early signs of success 5.9% • Grader replacement at Sova Packstation successful • Consolidation of Safe Eggs and Sova pack station in process Volumes • Terminated a contract farm supply agreement in Western Cape • Improved product mix (1.8%) • Costs well controlled • Solid base established for further improvement Interim Results Presentation 2017 20
OPERATIONAL REVIEW: REST OF AFRICA
REST OF AFRICA Margin pressure throughout value chain ZAMBIA • Weak consumer demand due to macro economic factors • High raw material costs due to regional drought • Day old broiler over supply challenge • Mega Eggs expansion of 35% now complete • Egg and feed depot distribution model implemented • Business remained profitable during challenging period Interim Results Presentation 2017 22
REST OF AFRICA UGANDA • Drought persists pushing raw material prices upwards • Unable to recover high raw material costs • Avian Influenza outbreak had negative impact on sales prices due to border closures • Farm and hatchery performance not up to expectations • Two new key appointments made Interim Results Presentation 2017 23
REST OF AFRICA MOZAMBIQUE • Mozambique economy under severe strain • Experienced high mortalities (30%) due to extreme weather conditions • Farm performance not on standard • Re-aligned sales focus towards formal retail • Expect lower raw material prices for H2 • The next 18 months will be challenging Interim Results Presentation 2017 24
OUTLOOK AND MANAGEMENT FOCUS
OUTLOOK FOR 2 nd HALF OF 2017 • The ZAR/USD remain crucial for raw material costs • Further decline in per capita income in RSA anticipated • Expect benefit of lower feed costs › Egg business › Layer livestock › Zambia, Uganda and Mozambique • Broiler & Feed business to remain stable • Expect operational improvement from Rest of Africa Interim Results Presentation 2017 26
MANAGEMENT FOCUS AREAS • Continuous improvement in layer farming operation • Continuous re-positioning of egg business • Execute price enhancement strategies in Zambia and Uganda • Complete Olifantskop capacity increase • Maintain margins in feed and broiler business • Share buy back programme to continue Interim Results Presentation 2017 27
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