FIRST QUARTER 2019 RESULTS PRESENTATION MAY 2019 CENTURY PACIFIC FOOD, INC. (PSE: CNPF)
BUSINESS OVERVIEW
Investment Highlights • Dominates the canned fish and canned meat categories locally* with a Market 1 growing presence in milk Leadership • Company’s brands are the brands of choice for Filipino consumers • A broad product portfolio catering to different tastes and needs to capture a Multiple Brands 2 larger share of consumers’ wallet and stomach and Products • Diversification of risk and input price exposures Strong Focus on 3 • Innovative marketing campaigns to create must-have and aspirational brands Marketing and • Strong R&D process to launch products and improve profitability Innovation Extensive Market 4 • Products available in 927,000 points of sale locally* Penetration and • A growing network of food service and international accounts Distribution Trusted Partner for • Long-standing relationships with large international private label customers, 5 International initially just for tuna but now also for various coconut products • One of the Philippines' largest exporter of tuna and various coconut products Customers 3 *Source: Nielsen
Strategic Priorities Solidify Explore Establish market dominance, new categories via in- international presence strengthen brands, and house product by pursuing foreign drive up per capita innovation and markets with sizeable consumption in key development, as well as Filipino base and building categories an active search for on world-class export undervalued brands capabilities 1 2 3 5 4 Pursue long-term Increase operational sustainable earnings productivity via high- growth, striking a balance return CapEx projects between consistently and improve depth increasing revenue base and quality of and managing sales coverage profitability 4
FINANCIAL PERFORMANCE & OUTLOOK
FY 2018 Financial Results Highlights TOTAL REVENUE GROWTH BRANDED REVENUE GROWTH +15% +12% +20% +16% 4Q FY FY 4Q GROSS PROFIT OPERATING INCOME NET INCOME EBITDA GROWTH GROWTH GROWTH GROWTH +17% +11% +14% +11% FY FY FY FY 6
FY 2018 Summarized P&L In PHP Mill YTD Dec 2017 YTD Dec 2018 Change YoY HIGHER SALES FROM ALL • Net Revenues 32,907 37,885 15% SEGMENTS with overall growth driven by branded segment Cost of Sales 25,973 29,738 14% Revenue growth from branded • Gross Profit 6,935 8,148 17% business driven almost completely by Operating Expenses 3,893 4,721 21% HIGHER VOLUMES Operating Income 3,429 3,799 11% EBITDA 3,954 4,526 14% Slight expansion in gross margins due • primarily to DIVERSIFIED Financing Cost - Net 107 197 84% OPERATIONS as softer input prices Income before Tax 3,322 3,602 8% OFFSET PRESSURES from other Income Tax 770 768 0% costs Net Income 2,552 2,834 11% Earnings per Share 0.72 0.80 11% Increase in operating expenses driven • primarily by HIGHER FREIGHT AND Margins (%) LOGISTICS COSTS Gross Profit 21.1% 21.5% +0.4 pps Continued INVESTMENT IN BRANDS • Operating Expenses 11.8% 12.5% +0.6 pps Operating Income 10.4% 10.0% -0.4 pps Earnings growth momentum • EBITDA 12.0% 11.9% -0.1 pps continued as TOTAL NET INCOME INCREASED BY A HEALTHY +11% Net Income 7.8% 7.5% -0.3 pps 7
Q1 2019 Financial Results Highlights TOTAL REVENUE BRANDED REVENUE GROSS PROFIT GROWTH GROWTH GROWTH +11% +20% +9% 1Q 1Q 1Q OPERATING INCOME EBITDA NET INCOME GROWTH GROWTH GROWTH +14% +15% +8% 1Q 1Q 1Q 8
Q1 2019 Summarized P&L In PHP Mill YTD Mar 2018 YTD Mar 2019 Change YoY Higher revenues mainly driven by • Net Revenues 8,783 9,744 11% BRANDED OUTPERFORMANCE Cost of Sales 6,781 7,564 12% Consistent volume growth for CORE • CATEGORIES underscored by Gross Profit 2,002 2,180 9% products’ value-for-money proposition Operating Expenses 1,204 1,172 -3% Performance boosted by EMERGING • Operating Income 977 1,116 14% CATEGORIES – most notably MILK EBITDA 1,146 1,323 15% Financing Cost - Net 33 91 176% Steady gross profit margin due • Income before Tax 944 1,025 9% primarily to DIVERSIFIED COST Income Tax 211 232 10% BASE as softer input prices OFFSET Net Income 732 793 8% PRESSURES from other costs Earnings per Share 0.21 0.22 8% Margins (%) Lower operating expenses due to • Gross Profit 22.8% 22.4% -0.4 pps FRONT-LOADED A&P IN 1Q18 lead to Operating Expenses 13.7% 12.0% -1.7 pps margin expansion at operating income and EBITDA level Operating Income 11.1% 11.4% +0.3 pps Increase in financing cost to fund • EBITDA 13.1% 13.6% +0.5 pps STRATEGIC INVENTORY POSITIONS Net Income 8.3% 8.1% -0.2 pps 9
Branded as Key Driver of Growth; Consistent Outperformance Revenue Growth Split 1Q19 Revenue Breakdown In PHP Bill OEM Exports, 14% 20% 21% 9.74 8.78 26% OEM Exports Branded 21% 25% 20% OEM Export 16% 16% 21% 19% 12% 11% +11% YoY 10% Branded, 79% Q1 2019 Q1 2018 9M 2017 Branded OEM Growth 9M 2018 1Q18 2Q18 3Q18 4Q18 1Q19 Revenues Revenues Growth Revenues Revenues Consolidated Revenue YoY Growth Branded Revenue YoY Growth • CONSISTENT DOUBLE-DIGIT REVENUE GROWTH driven by maintained branded outperformance • SUSTAINED DOMESTIC DEMAND despite dampening effects of last year’s inflation and El Niño • Resilience built through years of CONTINUED BRAND-BUILDING and DISTRIBUTION INITIATIVES , plus introduction of new product innovations • TEMPORARY DIP in OEM exports with softness in global demand and normalizing of lower pass-on prices in tuna and coconut 10
Healthy Sales in Core and Emerging; Milk’s Share of Revenue Increases Increased Availability 1Q19 Revenue Breakdown Branded Quarterly Revenues In PHP Bill CNPF Product Availability Relative to Core Branded 20% Total Points of Sale in the Philippines (Marine & Meat), YoY Growth 100% 57% in 1Q19 9.0 80% 76% OEM Exports, 75% 21% 7.7 8.0 7.2 7.2 7.1 50% 7.0 6.4 6.2 6.2 5.7 25% Emerging 6.0 5.3 Branded (Milk), 5.0 0% 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 22% 2017 Current Source: Nielsen • Continued upward sales momentum supported by BRAND LOYALTY and IMPROVING PRESENCE AND PRODUCT AVAILABILITY , particularly in Visayas and Mindanao • INCREASING REVENUE SHARE OF MILK with growth faster than rest of business • Healthy growth in core branded segments due to SUSTAINED MARKET LEADERSHIP , VALUE- FOR-MONEY PROPOSITION , and MAINSTAY STATUS WITH PHILIPPINE HOUSEHOLDS 11
Emergence of Challenger Brands in a Category Poised for Growth Milk Brands Value Proposition Dairy Annual Consumption per Capita in 2018 VALUE-FOR-MONEY INNOVATING in traditional canned product in large and high- liquid milk segment growth powdered milk market Source: Euromonitor • Growth in milk business driven by both CATEGORY GROWTH and MARKET SHARE GAINS • Both CANNED AND POWDERED MILK showing robust year-on-year sales increase with recent gains in brand equity and product availability • PHILIPPINE DAIRY - A HIGH POTENTIAL MARKET WITH CONSUMPTION STILL ONE OF THE LOWEST in the region and versus peers with similar GDP per capita 12
Sustained Market Leadership in Core Branded Categories Meat Market Share Marine Market Share 83% 83% #1 6x #1 #1 March 2019 March 2019 March 2019 46% 46% 32% 32% Emulsified Loaves Canned Tuna Corned Beef 17% 15% 17% 15% 12% 13% 8% 9% 8% 1% 1% Competitor 1Competitor 2 Competitor 3 CNPF Competitor 1 Competitor 2 Competitor 3 Others Competitor 4 CNPF Competitor 1 Competitor 2 Others CNPF Source: Nielsen • MARINE: current campaign focused on affordability in light of a more cost-conscious consumer environment • MEAT: capitalizing on goodwill of top brand by expanding to adjacent categories • HEALTH an emerging theme across all business units 13
Tempered OEM Sales Growth; Recovery Expected in Full Year OEM Export Quarterly Revenues Global Coconut Water Market Global Coconut Water and Other Plant Waters Off-Trade Value Forecast 2016-2021 In PHP Bill 14% 4.0 YoY Growth in 1Q19 3.0 2.7 2.6 2.6 2.6 2.0 2.4 2.4 2.4 2.0 2.0 1.0 0.0 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 Source: Euromonitor 2017 • Decline in OEM sales in line with SOFTNESS IN EXPORT DEMAND and NORMALIZING PASS-ON PRICES OF TUNA AND COCONUT • PIVOT TO GROWTH expected by full-year 2019 • Larger coconut water markets expected to transition to MORE SUSTAINABLE GROWTH LEVELS , with acceleration to come from NEWER TERRITORIES and increased sales of HIGH-VALUE COCONUT MEAT 14
Diversified Cost Base Provides Stability in Gross Profit Margins Consolidated Gross Profit Margins versus Skipjack Tuna Prices Cost of Sales Breakdown monthly with 3-month delay 2500 40.0% Others, 2000 30.0% 25-30% USD 1500 20.0% Main Raw 1000 10.0% Materials, c.50% 500 0.0% Packaging, 20-25% Skipjack Tuna Price per Ton Consolidated Gross Margin Source: http://investor.thaiunion.com/raw_material.html Source: CNPF • Steady gross profitability both year-on-year and sequentially due to DIVERSIFIED COST BASE x • Softer tuna and coconut prices offset HIGHER COSTS OF PACKAGING AND OTHER KEY INPUTS which increased beginning mid-2018 15
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