2016 SunRice Update Laurie Arthur, SunRice Chairman RGA Annual - - PowerPoint PPT Presentation

2016 SunRice Update

Laurie Arthur, SunRice Chairman RGA Annual General Meeting 5 August 2016

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• FY 16 Performance
• Growth Strategy Update
• Key Focus Areas in FY17
• FY17 Outlook & Global Market
• Capital Restructure Update
• Vesting/SEEL Review
• Questions

Agenda

REVENUE

$1.27

billion

1.9%

increase

NET PROFIT AFTER TAX

$52.0

million

5.8%

increase

DIVIDEND PER B CLASS SHARE

33.0

cents

6.5%

increase

PADDY PRICE

$403.60

Medium Grain (Reiziq)

2.3%

increase

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Another Strong Performance in FY16

• 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
• perational 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

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Strategy Continues to Deliver Results

Track Record of Delivery

• Strong track record of accurate market

guidance for A and B Class Shareholders

• Demonstrated ability to balance the needs
• f 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

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Growth Strategy has Delivered Results

1.00 1.07 1.15 1.25 1.27 0.90 1.00 1.10 1.20 1.30 1.40 APR 12 APR 13 APR 14 APR 15 APR 16

NSV (A$ Billion)

3yr CAGR of 6%

22.70 36.00 33.50 49.20 52.00 20 25 30 35 40 45 50 55 APR 12 APR 13 APR 14 APR 15 APR 16

NPAT (A$m)

3yr CAGR of 13%

$275.00 $317.34 $293.61 $394.62 $403.60 220 260 300 340 380 420 APR 12 APR 13 APR 14 APR 15 APR 16

Paddy Price (A$/tonne)

Reiziq Medium Grain

$5.12 $5.51 $5.67 $6.37 $6.84 4.50 5.00 5.50 6.00 6.50 7.00 APR 12 APR 13 APR 14 APR 15 APR 16

NTA per B class share

1.00 2.00 3.00 4.00 5.00 2011 2012 2013 2014 2015 2016

Share Price ($) & TSR

Share Price

5yr TSR CAGR of 14%

65.9% 61.7% 43.6% 43.9% 46.6% 39.7% 38.2% 30.4% 30.5% 31.8% 20% 40% 60% 80% 100% APR 12 APR 13 APR 14 APR 15 APR 16

Gearing %

Debt / Equity Debt / Debt + Equity

• 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

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Key Focus Areas in FY17

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)

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C16 Global pricing – Medium Grain

Source: SunRice

• In June, FAO’s Japonica Rice

Price Index declined by 7 points to 223 points due to weakness in the short/medium grain market. Between January – June, the FAO Index had declined by 13% y-o-y.

• US MG prices declined another

$40/tonne over June-July.

• Spot paddy cash prices at lowest

level of the US marketing year.

• US growers being required to

move or sell old stock by storage sheds and banks.

• April-May paddy sales pricing

estimated $60-75/tonne under Californian cost of production.

• USDA forecast planted area for

MG in California increased by 34% to 510,000 acres (206,477ha).

• Egypt switched from

exporting to importing prior to Ramadan

$USD per tonne Note: Cash price does not include storage and drying costs, which are deducted from this amount

9 250 300 350 400 450 500 550 600 650

Cash Trading Date

California

21-Month Cash Paddy Prices Cash Rice Network / Cal Rice Exchange

2014 Crop USA 2015 Crop USA

C16 Global pricing – Long Grain

• El Nino weather pattern has

ended and there are predications

• f 60% likelihood of La Nina

building over 2016, which will be associated with heavy rainfall benefitting both main and secondary season crops this year.

• FAO estimates the Philippines’

2016 rice imports to decline 20% to 1.6 million metric tonnes.

• Harvesting of Vietnamese 2016

main winter-spring paddy crop, which accounts for about 45% of annual production, is complete. The crop was significantly impacted by lower irrigation water availability and salt water intrusion into the Mekong Delta.

• FAO estimates Vietnam 2016

rice exports to decline due to a combination of tighter export availability and reduced demand.

*Creed Thai LG 100% B *Selling prices listed are in U.S. dollars per tonne and for Finished Product tonnes (includes costs for milling and yield losses, packing, distribution and administrative charges)

10 100 200 300 400 500 600 700

Thai Long Grain Pricing - US $ / mt

Thai Long Grain

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)

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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

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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

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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

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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

• FY16 result underpinned by the

continued growth of branded sales and

• perational 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

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Summary

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Questions