Results presentation for the six months ended 31 March 2017 AGENDA - - PowerPoint PPT Presentation

for the six months ended 31 March 2017

Results presentation

2 Interim Results Presentation 2017

AGENDA

Business Overview: H Lourens Financial Overview: A Muller Operational Overview: H Lourens Outlook and management focus: H Lourens

3 Interim Results Presentation 2017

• The raw material cycle has peaked
• Quantum Foods showed resilience through the cycle
• Conservative business model succeeded in RSA
• Rest of Africa business struggled

BUSINESS OVERVIEW

Revenue Operating Profit 13% 5% HEPS Cash generated 16% R89m

4 Interim Results Presentation 2017

RAND VS US$

10 12 14 16 18 Sep 14 Mar 15 Sep 15 Mar 16 Sep 16 Mar 17

11.28 12.13 13.84 14.76 13.71 13.42

5 Interim Results Presentation 2017

SAFEX YELLOW MAIZE RAND PER TON

1 500 2 000 2 500 3 000 3 500 4 000 4 500 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Sep 16 Dec 16 Mar 17

>R2 500/ton 20 months

FINANCIAL OVERVIEW

7 Interim Results Presentation 2017

STATEMENT OF INCOME

Six months ended 31 March 2017 Rm 2016 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

8 Interim Results Presentation 2017

Total R2 041 million (2016: R1 808 million)

REVENUE ANALYSIS

2016: R631m

35%

Animal feeds 2016: R483m

27%

Eggs 2016: R622m

34%

Farming 2016: R72m

4%

Africa R763m

37%

R498m

25%

R675m

33%

R105m

5%

9 Interim Results Presentation 2017

SEGMENT RESULTS

Adjusted operating profit for the six months ended 31 March 2017 Rm 2016 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

10 Interim Results Presentation 2017

STATEMENT OF FINANCIAL POSITION

31 Mar 2017 Rm 30 Sep 2016 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

11 Interim Results Presentation 2017

STATEMENT OF CASH FLOW

Six months ended 31 March 2017 Rm 2016 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)

12 Interim Results Presentation 2017

CAPITAL EXPENDITURE

Rm Approved 2017 YTD March 2017 Future 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

13 Interim Results Presentation 2017

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

OPERATIONAL REVIEW: FEEDS

15 Interim Results Presentation 2017

• 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

NOVA FEEDS

Pleasing performance in volatile conditions

OPERATIONAL REVIEW: FARMING

17 Interim Results Presentation 2017

BROILER FARMING

• Growth in birds per week sold
• Market requirement for a smaller bird
• 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

FARMING OPERATIONS

Solid performance in difficult conditions Volumes (kg) live birds sold 5.6%

18 Interim Results Presentation 2017

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

FARMING OPERATIONS

Slow improvement

OPERATIONAL REVIEW: EGGS

20 Interim Results Presentation 2017

• Operational indicators improved
• New business model in Gauteng show early signs of success
• Grader replacement at Sova Packstation successful
• Consolidation of Safe Eggs and Sova pack station in process
• Terminated a contract farm supply agreement in Western Cape
• Improved product mix
• Costs well controlled
• Solid base established for further improvement

EGG BUSINESS

Price 5.9% Volumes (1.8%)

OPERATIONAL REVIEW: REST OF AFRICA

22 Interim Results Presentation 2017

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

REST OF AFRICA

Margin pressure throughout value chain

23 Interim Results Presentation 2017

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

REST OF AFRICA

24 Interim Results Presentation 2017

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

REST OF AFRICA

OUTLOOK AND MANAGEMENT FOCUS

26 Interim Results Presentation 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

OUTLOOK FOR 2nd HALF OF 2017

27 Interim Results Presentation 2017

• 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

MANAGEMENT FOCUS AREAS