JAPFA LTD Investor Presentation 2Q2019 Financial Results
Agenda 1 Group Overview 2 Key Highlights 2Q2019 Financial and Operational Analysis 3 4 Other Financial Highlights 5 African Swine Fever in Vietnam Update 6 Appendix: Segment Information and Other Information 1
GROUP OVERVIEW
Group Overview Established in 1975 5 animal protein businesses in Feeding Emerging Asia 5 countries Japfa Ltd’s market capitalisation: approx US$730 million 1 FY2018 revenue: US$3.5 billion 3 1 As at 28 June 2019
Leading Pan-Asian Industrialised Agri-Food Company WHY WE DO IT WHAT WE DO WHERE WE ARE 3 billion people living We produce quality We employ over in our target markets protein staples, dairy, 38,000 people across and packaged food that Singapore, Indonesia, More than 40% of the nourish millions of Vietnam, Myanmar, world’s total people India and China population A leading pan-Asian, industrialised agri-food company dedicated to feeding emerging Asia with essential proteins 4
Vertically Integrated Business Across Entire Value Chain Five Proteins | Five Countries ANIMAL PROTEIN – PT JAPFA TBK ANIMAL PROTEIN – OTHER DAIRY Indonesia Vietnam | Myanmar | India China | Indonesia Vertically Integrated Business Model UPSTREAM ANIMAL FEED PRODUCTION Poultry Feed Cattle Feed Aquaculture Feed Poultry Feed Swine Feed Cattle Feed BREEDING FARMS Poultry Breeding Beef Cattle Breeding Aquaculture Breeding Poultry Breeding Swine Breeding Dairy Cattle Breeding MIDSTREAM MILKING & FATTENING Poultry Commercial Beef Feedlots Aquaculture Commercial Poultry Commercial Swine Dairy Milking FARMS Farming Farming Farming Fattening CONSUMER FOOD DOWNSTREAM Indonesia PROCESSING & DISTRIBUTION Branded Consumer Foods Branded Dairy Products Notes: • Five Proteins refers to Poultry, Beef, Aquaculture, Swine and Dairy. 5 • Five Countries refers to Indonesia, Vietnam, Myanmar, India and China.
Japfa’s Core Competencies Industrialized approach to farming and food production CORE COMPETENCIES FEED UPSTREAM Vertically Integrated Business Model Enjoys economies LARGE SCALE ANIMAL FEED of scale and an • Ability to manage mega-scale farming operations; over PRODUCTION established network 38,000 employees across five countries • Scale of the Group’s animal feed business provides stability to group revenue and profitability BREEDING TECHNOLOGY • JVs with leading genetics companies (Aviagen and Hypor) FARMS LIVESTOCK for superior breeds and genetics FARMING • Advanced feed technology Strong livestock • Combined with best farm management practices MIDSTREAM farming experience MILKING & and expertise ANIMAL HEALTH FATTENING • Best in class bio-security using stringent operating FARMS procedures • In-house vaccine production firm PT Vaksindo STANDARDISATION AND REPLICATION BRANDED • Replication of best practices and infrastructure design across CONSUMER DOWNSTREAM FOODS five protein groups and five countries PROCESSING & • Replication of farm design model in dairy farms, DOC DISTRIBUTION Future growth breeding farms, feedmills, etc driver 6
Japfa’s Emerging Asia: Market Growth GDP US$ trillion 25 Europe North America & 1.3% Japfa Emerging Asia Canada US$22.0t 7.0% 20 2.2% US$14.1t US$19.2t 15 Rest of Asia 2.7% South America & US$14.0t Carribean 10 Japfa operates in the major -0.4% high growth markets of US$5.4t Emerging Asia (Indonesia, China, 5 Vietnam, India & Myanmar) Africa Oceania 3.5% High potential for protein 2.7% US$2.4t consumption growth US$1.6t 0 -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% GDP CAGR 2011 – 2017 Circle size is a diagrammatic reflection of 2017 population *”Rest of Asia” refers to Asian countries excluding Japfa’s *All percentages (%) above refers to 2011- 2017 GDP CAGR Emerging Asia countries 7 *GDP US$ trillion in each circle shows the 2017 GDP constant US$ value *Source: World Bank Data
KEY HIGHLIGHTS
Key Highlights for 2Q2019 • Group’s revenue improved year-on-year, driven by higher animal feed sales volume in main geographies • Group’s profitability mainly impacted by low Average Selling Prices (“ASP”) for both broiler in Indonesia and swine in Vietnam • As a result of the diversified and vertically integrated business model, Japfa was able to deliver a healthy EBITDA Operating Profit Margin Revenue Operating Profit 7.9% US$975.0 million US$77.2 million -4.1ppt y-o-y +8.2% y-o-y -28.6% y-o-y Core PATMI w/o Forex EBITDA PATMI US$110.5 million US$5.0 million US$16.9 million -20.8% y-o-y -83.1% y-o-y -56.0% y-o-y Imbalance in Vietnam impacted Steady Animal feed broiler demand by lower ASP due contribution to business and supply in to African Swine operating profit remains a Fever (“ASF”) Indonesia driven by China stable pillar of affected operations profitability profitability • We define “ EBITDA ” as profit before tax from continuing operations, excluding interest income, finance costs, depreciation and amortisation expenses, and also excluding changes in fair value of biological assets and derivatives, which relate to foreign exchange hedging and foreign exchange adjustment gains/(losses). • We derived “Core PATMI” from “Profit Attributable to Owners of the Parent, Net of Tax” by excluding changes in fair value of biological assets (net of tax) and derivatives, and by excluding extraordinary items 9 attributable to owners of the parent. • “Core PATMI w/o Forex” is an estimate derived from Core PATMI by excluding foreign exchange gains/losses (before tax) attributable to the owners of the parent. We have not made an estimate of the tax impact on foreign exchange gains/losses. This is because the majority of the gains/losses are unrealised and arise from the translation of USD bonds in PT Japfa Tbk and USD loans in Dairy, which have no tax implication
2Q2019 Group Financials Revenue Operating Profit EBITDA PATMI Core PATMI w/o Forex US$ million US$ million US$ million US$ million US$ million +8.2% y-o-y 975.0 901.0 -28.6% y-o-y -20.8% y-o-y -83.1% y-o-y -56.0% y-o-y 139.5 110.5 108.1 38.4 77.2 29.6 16.9 5.0 2Q2018 2Q2019 2Q2018 2Q2019 2Q2018 2Q2019 2Q2018 2Q2019 2Q2018 2Q2019 2Q2019 revenue improved year-on-year but profitability weakened mainly due to PT Japfa Tbk and APO Vietnam Revenue increase driven by volume growth in feed (poultry, swine and aqua) in all markets and sales volumes in Dairy Operating profit dropped by US$30.9 million: PT Japfa Tbk: US$24.4 million reduction due to low broiler ASP as a consequence of oversupply coupled with lower-than- expected demand during Ramadan season APO: US$10.2 million reduction mainly due to lower swine fattening ASP as a consequence of ASF in Vietnam Dairy: Stable operating profit despite higher feed cost PATMI was also impacted by bio-asset fair value losses of US$7.0 million in Dairy and US$4.0 million in APO Vietnam 10
CORE PATMI w/o FOREX ROLLING BASIS
Rolling Core PATMI w/o Forex For The Group Rolling Core PATMI w/o Forex (US$ million) 148.0 133.8 130.2 121.9 116.8 112.5 99.6 91.0 88.3 88.2 71.7 68.5 68.3 3Q2018 58.2 57.4 54.3 4Q2018 38.4 36.7 51.9 1Q2019 15.7 42.0 38.4 33.4 28.3 28.6 27.9 26.6 20.7 18.9 2Q2019 17.6 16.9 15.6 13.6 12.1 9.4 7.3 3.4 -7.1 Dec'14 Mar'15 Jun'15 Sept'15 Dec'15 Mar'16 Jun'16 Sept'16 Dec'16 Mar'17 Jun'17 Sept'17 Dec'17 Mar'18 Jun'18 Sep'18 Dec'18 Mar'19 Jun'19 Note: The bar chart shown above comprises the Group’s segments (PT Japfa Tbk, Animal Protein Other, Dairy and Consumer Food) plus its 12 central purchasing subsidiary, headquarter costs and elimination adjustments between segments.
Rolling Core PATMI w/o Forex For The Core Pillars 1 2 2 2,3 4 17.0 16.4 15.8 5.6 58.1 26.7 56.4 17.2 26.7 24.7 9.7 51.2 28.2 15.0 55.4 41.0 13.8 23.1 36.7 14.2 45.8 16.6 37.6 33.3 91.0 23.4 21.5 16.7 17.4 15.6 6.8 12.3 19.3 22.2 38.4 13.7 27.3 22.7 19.9 27.1 25.7 28.8 31.2 22.2 32.1 30.1 85.0 80.0 77.4 78.0 74.2 36.1 72.1 72.7 70.4 29.1 28.5 59.0 57.0 53.1 38.9 46.2 42.5 34.5 19.3 19.7 18.4 35.2 3.7 -5.1 -10.5 -22.7 -30.3 -34.4 Dec'14 Mar'15 Jun'15 Sept'15 Dec'15 Mar'16 Jun'16 Sept'16 Dec'16 Mar'17 Jun'17 Sept'17 Dec'17 Mar'18 Jun'18 Sep'18 Dec'18 Mar'19 Jun'19 1 Japfa Ltd (Rolling 12M) line chart shown above comprises the Group’s segments (PT Japfa Tbk, Animal Protein Other, Dairy and Consumer Food) plus its central purchasing subsidiary, headquarter costs and elimination adjustments between segments. 2 The Three Core Pillars (PT Japfa Tbk, Animal Protein Other and Dairy) bar chart shown above excludes the Consumer Food segment, the Group’s central purchasing subsidiary, headquarter costs and elimination 13 adjustments between segments. 3 Dairy in darker colour represents Core PATMI w/o Forex of 62% attributable to Japfa Ltd. With effect from 1 Jan 2018, Japfa Ltd consolidates100% of Dairy. 4 Dairy as a whole (darker and lighter colour) represents 100% Core PATMI w/o Forex.
2Q2019 FINANCIAL AND OPERATIONAL ANALYSIS
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