Tassal Group Lim ited Results Presentation Half-Year 31 December - - PowerPoint PPT Presentation
Tassal Group Lim ited Results Presentation Half-Year 31 December 2007 (H1 2008) 27 February 2008 The follow ing slides should be read in conjunction w ith Tassal Group Lim iteds Appendix 4D: Half Year Report lodged w ith the
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The follow ing slides should be read in conjunction w ith Tassal Group Lim ited’s Appendix 4D: Half Year Report lodged w ith the Australian Securities Exchange on 2 7 February 2 0 0 8
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"Norm alised" H1 2 0 0 8 "Norm alised" H1 2 0 0 7 % I ncrease ( $ '0 0 0 ) ( $ '0 0 0 ) Revenue ( from all sources) 8 2 ,2 8 7 $ 7 3 ,3 4 6 $ 1 2 % EBI TDA 1 6 ,9 3 1 $ 1 5 ,2 5 5 $ 1 1 % EBI T 1 5 ,9 0 4 $ 1 4 ,8 6 0 $ 7 % Profit before incom e tax expense 1 3 ,1 7 5 $ 1 2 ,5 8 4 $ 5 % I ncom e tax expense ( 3 ,8 7 0 ) $ ( 3 ,6 0 9 ) $ Net profit after incom e tax expense 9 ,3 0 5 $ 8 ,9 7 5 $ 4 % Basic earnings per share ( cents) 0 .0 8 0 3 $ 0 .0 7 9 1 $ 2 %
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From an operational perspective the follow ing achievem ents are notew orthy for H1 2 0 0 8 :
numbers to sea, particularly “earlier” season smolt
conversion rates – culminating in 15% improvement on live fish biomass year on year, with fish to be harvested in FY2009 22% up in live fish weight
throughput and efficiencies
sales increasing 18% in the domestic market and the continued achievement of premium returns – delivering 21% increase in normalised contribution margin
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Overall restructured and rebalanced the business w hile at the sam e tim e increasing the scale of the business on a sustainable basis, underpinned by:
practices
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"Norm alised" NPAT $ 9 .3 0 m illion ( + 4 % com pared to pcp)
Pre-Tax Post-Tax $'000 $'000 A-I FRS 11,973 8,454 Agriculture - AASB 141 ( 302) ( 211) Non-Recurring I tems 1,504 1,062 "Normalised" 13,175 9,305 Tax Rate 29.39% “Norm alised” results: “Normalised” results are presented to remove the impact of AASB 141 “Biological Assets” and to add back the non-recurring items. All analysts have modelled Tassal on this basis. Non-recurring items of $1.50 million were incurred in H1 2008 ($1.06 million after tax) with H1 2008 representing a period of restructuring and rebalancing Tassal’s underlying marine and processing operating infrastructure – with a number of these costs
Current forecast of non-recurring items is $1.36 million after tax for FY2008. The non-recurring items can be summarised as follows:
Forecast Forecast H1 H2 FY2008 $'000 $'000 $'000 Marine Net Negligence Claim 402 402 Marine Restructuring Costs 370 185 555 Processing Restructuring Costs 732 240 972 Total Non Recurring I tems 1,504 425 1,929 Tax ( 442) ( 125) ( 567) Total Non Recurring I tems After Tax 1,062 300 1,362
"Normalised" H1 2008 "Normalised" H1 2007 % I ncrease ( $'000) ( $'000) Revenue ( from all sources) 82,287 $ 73,346 $ 12% EBI TDA 16,931 $ 15,255 $ 11% EBI T 15,904 $ 14,860 $ 7% Profit before income tax expense 13,175 $ 12,584 $ 5% I ncome tax expense (3,870) $ ( 3,609) $ Net profit after income tax expense 9,305 $ 8,975 $ 4% Basic earnings per share ( cents) 0.0803 $ 0.0791 $ 2% "Normalised" H1 2008 "Normalised" H1 2007 % I ncrease ( $'000) ( $'000) Revenue ( from all sources) 82,287 $ 73,346 $ 12% EBI TDA 16,931 $ 15,255 $ 11% EBI T 15,904 $ 14,860 $ 7% Profit before income tax expense 13,175 $ 12,584 $ 5% I ncome tax expense (3,870) $ ( 3,609) $ Net profit after income tax expense 9,305 $ 8,975 $ 4% Basic earnings per share ( cents) 0.0803 $ 0.0791 $ 2%
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Statutory ( "A-I FRS") NPAT $ 8 .4 5 m illion ( -3 5 % com pared to pcp) Statutory Results: The magnitude of the EBITDA, EBIT, PBT & NPAT impact for biological assets for H1 2007 was considered “one-off” as the impact was the direct result of a strategy to build processed inventory on hand to the required level to meet both future demand requirements and accompanying sales lead times. The stock level at H1 2007 was considered satisfactory and that level was to effectively be maintained ... accordingly, the comparable H1 2008 impact was negligible
"A-I FRS" H1 2008 "A-I FRS" H1 2007 % I ncrease ( $'000) ( $'000) Revenue ( from all sources) 145,029 $ 127,579 $ 14% EBI TDA 15,729 $ 21,053 $
EBI T 14,702 $ 20,658 $
Profit before income tax expense 11,973 $ 18,382 $
I ncome tax expense ( 3,519) $ ( 5,348) $ Net profit after income tax expense 8,454 $ 13,034 $
Basic earnings per share ( cents) 0.0730 $ 0.1149 $
FY2006 H1 2007 Profit I mpact FY2007 H1 208 Profit I mpact $'000 $'000 $'000 $'000 $'000 $'000 Processed I nventory 1,352 5,079 3,727 5,307 5,693 386 Biological Assets ( Live Fish) 7,072 9,809 2,737 10,267 10,183 (84) AASB 141 Value 8,424 14,888 6,464 15,574 15,876 302 Less Tax ( 1,939) (91) AASB 141 Value After Tax 4,525 211
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Norm alised W aterfall 3 1 - Dec- 0 7 3 0 - Jun- 0 7 3 1 - Dec- 0 6 3 0 - Jun- 0 6 3 1 - Dec- 0 5 3 0 - Jun- 0 5 3 1 - Dec- 0 4 3 0 - Jun- 0 4 $ / H og Kg $ / Hog Kg $ / Hog Kg $ / Hog Kg $ / Hog Kg $ / Hog Kg $ / Hog Kg $ / Hog Kg Revenue 1 1 .7 0 $ 1 1 .6 8 $ 1 1 .6 7 $ 1 1 .6 3 $ 1 1 .2 4 $ 1 1 .8 5 $ 1 2 .3 6 $ 1 2 .8 1 $ Salm on Cost 4 .7 6 $ 4 .8 8 $ 4 .9 2 $ 5 .0 6 $ 5 .0 6 $ 5 .0 5 $ 5 .0 5 $ 5 .7 2 $ Third Party Contract ors 0 .1 5 $ 0 .2 6 $ 0 .3 9 $ Processing & Packaging 1 .6 5 $ 1 .7 7 $ 1 .8 2 $ 2 .6 1 $ 2 .6 2 $ 2 .8 7 $ 3 .0 9 $ 3 .1 5 $ Direct Selling 1 .5 8 $ 1 .3 6 $ 1 .2 7 $ 1 .1 7 $ 1 .2 0 $ 1 .5 7 $ 1 .7 4 $ 1 .6 5 $ Labour & Overheads 1 .1 5 $ 1 .1 1 $ 0 .8 7 $ 0 .8 1 $ 0 .6 1 $ 0 .9 5 $ 0 .9 8 $ 0 .8 9 $ EBI TDA 2 .4 1 $ 2 .3 1 $ 2 .4 1 $ 1 .9 8 $ 1 .7 5 $ 1 .4 1 $ 1 .5 0 $ 1 .4 0 $ Depreciat ion 0 .1 5 $ 0 .1 3 $ 0 .0 7 $ 0 .1 6 $ 0 .1 1 $ 0 .1 1 $ 0 .1 4 $ 0 .4 3 $ EBI T 2 .2 6 $ 2 .1 8 $ 2 .3 4 $ 1 .8 2 $ 1 .6 4 $ 1 .3 0 $ 1 .3 6 $ 0 .9 7 $
Significant investment in additional marketing spend in H1 2008 over H1 2007 of $1.6 million - strategic focus was to accelerate growth of domestic market through both direct and indirect promotional support - spend was to underpin future domestic market growth and to "get set" for H2 2008. Gross margin actually increased by around 21% for H1 2008 over H1 2007. If marketing spend had been maintained at the same $/ Hog kg rate as H1 2007 (i.e. $0.23/ hog kg) then the normalised results would have been an NPAT of $10.45 million.
Marketing spend $ 0 .4 4 kg Marketing spend $ 0 .2 3 kg
Revenue per HOG kg $ 11.70 kg
Sm olt Feed
Processing & Packaging Tassal Salm on Cost
Marine Operations
Direct Selling Labour & Overheads EBI TDA EBI T Dep ’n. 3 1 Decem ber 2 007
$ 4 .7 6 kg $ 1 .6 5 kg $ 1 .5 8 kg $ 1 .1 5 kg $ 2 .4 1 kg $ 2 .2 6 kg $ 0 .1 5 kg
Breakdown confidential
Third Party / Contractors
$ 0 .1 5 kg
Revenue per HOG kg $ 11.67 kg
Sm olt Feed
Processing & Packaging Tassal Salm on Cost
Marine Operations
Direct Selling Labour & Overheads EBI TDA EBI T Dep’n. 3 1 Decem ber 2 006
$ 4 .9 2 kg $ 1 .8 2 kg $ 1 .2 7 kg $ 0 .8 7 kg $ 2 .4 1 kg $ 2 .3 4 kg $ 0 .0 7 kg
Breakdown confidential
Third Party / Contractors
$ 0 .3 9 kg
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Net borrowings at $68.72 million Net debt to equity ratio at 60.94% [ H1 2007: 59.69% ] Capital raising raised $65.7 million net in January 2008
As at As at As at As at As at As at 31-Dec-07 30-Jun-07 31-Dec-06 31-Dec-07 30-Jun-07 31-Dec-06 $'000 $'000 $'000 $'000 $'000 $'000 Current Assets Current Liabilities Cash and cash equivalents 2,032 1,654 5,262 Trade and other payables 21,655 24,356 21,747 Trade and other receivables 17,618 10,809 19,852 Borrow ings 19,787 7,739 17,800 I nventories 35,759 33,110 26,826 Provisions 2,234 2,617 2,020 Biological assets 75,123 66,660 58,892 Other 329 338 320 Other 1,276 892 745 Total Current Assets 131,808 113,125 111,577 Total Current Liabilities 44,005 35,050 41,887 Non-Current Assets Non-Current Liabilities Trade and other receivables 100 100 I nvestments accounted for using Borrow ings 50,967 46,091 43,178 equity method 6,670 6,370 6,072 Deferred tax liabilities 15,489 12,167 7,301 Other financial assets 239 43 43 Provisions 663 602 565 Property, plant and equipment 69,847 63,892 53,174 Other 22
14,851 14,851 14,851 Other 506 489 463 Total Non-Current Assets 92,113 85,745 74,703 Total Non-Current Liabilities 67,141 58,860 51,044 Total Assets 223,921 198,870 186,280 Total Liabilities 111,146 93,910 92,931 Net Assets 112,775 104,960 93,349
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H1 2007 - Strategy to build processed inventory on hand to the required level to meet both future demand requirements and accompanying sales lead times H1 2008 – Strategy was to maintain processed inventory in-line with value add sales growth
30-Jun-06 31-Dec-06 30-Jun-07 3 1-Dec-07 $ '000 $'0 0 0 $'0 0 0 $ '0 00 I nventories 11,270 2 6 ,8 26 3 3 ,1 10 3 5,75 9 Biological Assets 58,362 5 8 ,8 92 6 6 ,6 60 7 5,12 3 6 9 ,6 3 2 8 5 ,7 18 9 9 ,7 70 1 1 0,88 2 30-Jun-06 31-Dec-06 30-Jun-07 3 1-Dec-07 $ '000 $'0 0 0 $'0 0 0 $ '0 00 I nventories 11,270 2 6 ,8 26 3 3 ,1 10 3 5,75 9 Less "Agriculture" I m pact ( 1 ,3 5 2) ( 5 ,0 78 ) ( 5 ,3 07 ) ( 5,6 93 ) I nventories at Cost 9,918 2 1 ,7 48 2 7 ,8 03 3 0,06 6 30-Jun-06 31-Dec-06 30-Jun-07 3 1-Dec-07 $ '000 $'0 0 0 $'0 0 0 $ '0 00 Biological Assets 58,362 5 8 ,8 92 6 6 ,6 60 7 5,12 3 Less SGARA ( 7 ,0 7 2) ( 9 ,8 09 ) ( 1 0 ,2 67 ) ( 1 0,1 83 ) Biological Assets at Cost 51,290 4 9 ,0 83 5 6 ,3 93 6 4,94 0
3 1 - Dec- 0 6 3 0 - Jun-0 7 3 1 - Dec- 0 7 $ '0 0 0 $ '0 0 0 $ '0 0 0 Processed, Frozen Hog & Finished Goods at Cost 1 9 ,4 4 5 2 4 ,4 0 9 2 5 ,9 9 8 Half on Half Grow th 6 .5 1 % Processed, Frozen Hog & Finished Goods - Hog Tonnes Equivalent 2 ,3 1 5 2 ,3 3 0 2 ,5 2 7 Half on Half Grow th 8 .4 5 % Value Add Sales $ '0 0 0 - Half on Half Grow th 1 6 .8 1 % Hog Tonne Equivalent - Half on Half Grow th 1 7 .5 7 %
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H1 2 0 0 8 Cashflow generation w as com parable to H1 2 0 0 7 :
million in planned inventory growth (net of AASB 141 change) with – H1 2008 focus on live fish growth – H1 2007 focus on processed stock build to the required level to meet both future demand requirements and accompanying sales lead times
2008, reflecting an improved collections profile on increased sales
Cessation of contract growing arrangements – Change in hatchery smolt delivery profile from Saltas – Feed supplier contract re-negotiated – Tassal initial price reduction v Skretting improved payment terms
Movement Movement 6 Months 6 Months Period Ended Ended Movement 31/12/2006 31/12/2007 Differential Profit after tax for the period $13,034 $8,454 ($4,580) (Increase) / decrease in deferred tax balances $5,348 $3,519 ($1,829) Depreciation and amortisation of non-current assets $395 $1,027 $632 Depreciation - impact of allocation to cost of live fish and processed fish inventories $3,128 $3,288 $160 Net increment in biological assets ($6,463) ($301) $6,162 Share of associates' and jointly controlled entities' profits ($27) ($170) ($143) Equity settled share-based payment $120 $210 $90 (Gain)/ loss on sale of fixed assts $7 ($71) ($78) Other $92 $0 ($92) Totals after add back of non-cash and other items $15,634 $15,956 $322 Changes in net assets and liabilities: (Increase) / decrease in assets: Inventories (net of AASB 141 Impact) ($11,829) ($2,264) $9,565 Biological assets (net of AASB 141 Impact)) $2,207 ($8,547) ($10,754) Combined inventory category movement ($9,622) ($10,811) ($1,189) Current trade and other receivables ($11,243) ($7,807) $3,436 Current other financial assets $0 ($179) ($179) Other current assets ($327) $363 $690 Non-current other financial assets $0 ($96) ($96) Total (Increase) / decrease in assets: ($21,192) ($18,530) $1,473 Increase / (decrease) in liabilities Current trade and other payables $4,297 ($1,664) ($5,961) Other current liabilities $50 ($9) ($59) Current provisions ($567) ($383) $184 Non-current provisions $29 $61 $32 Other non-current liabilities $0 $22 $22 Total Increase / (decrease) in liabilities $3,809 ($1,973) ($5,782) Net cash used in operation activities for the period ($1,749) ($4,547) ($3,987)
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The strategy implemented in H1 2008 was for a period of restructuring and rebalancing Tassal’s underlying marine and processing operating infrastructure, while at the same time pursuing growth opportunities from a revenue and margin perspective The strategy for H2 2008 is to continue to grow the domestic sales market and Japan - while at the same time allowing live fish to remain in the water during peak growing periods (April to October) Tassal's balance sheet is strong, with low gearing (approx 17% post Superior Gold acquisition) - allowing Tassal to aggressively pursue both organic and acquisitive growth, including fast-tracking its capital expenditure program. Investment fundamentals – minimum 15% ROE Superior Gold is a significant acquisition for Tassal – completed on 15 February 2008. NPAT uplift of $800k for FY2008. Further synergistic and supply benefits are expected to be achieved in FY2009 The Smolt and Salmon Supply Agreement with Petuna is for an initial 3 year period. Petuna will supply Tassal with Smolt – and Tassal will supply Petuna with fully grown
2009 The Agreement with Seafish Tasmania provides Tassal with an environmentally sustainable waste disposal service to Tassal at no cost
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Overarching Strategy - to position Tassal to be globally cost competitive in aquaculture production, together with achieving premium returns from its Sales and Marketing initiatives H1 2008 - Period of restructuring and rebalancing Tassal’s underlying marine and processing operating infrastructure, while at the same time pursuing financial and
H2 2008 – Leveraging recent strategic initiatives we can now aggressively pursue further improvements in growth of the live fish and at the same time maximise our supply to the domestic market FY2009 - with bigger fish we know we can continue to lower the cost of growing and processing and achieve global best practice from a cost perspective In summary, bigger fish will deliver on global cost best practice from a cost of growing and processing perspective - bigger fish will then continue to improve the margins from both the domestic and export markets
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Fish size - increasing fish size is the number one priority for the business - target is an average fish size of 5kg hog by FY2015 Fish survivability - improving fish survivability is fundamental for Tassal - target 90% + survival rate by FY2015 Selective Breeding Program - first commercial stock from the program will be the 2009 Year Class (i.e. harvest FY2011) Processing Review completed - DP&EMP draft with Tasmanian Government - looking to commence construction at Margate later in 2008 Branding opportunities - essential that Tassal has a continuing investment in a strong Tassal "Pure Tasmania" brand Superior Gold - maintains a competitive advantage with other imported products – significant synergies available on supply and trading terms Revenue initiatives - disease issues in Chile and global Salmon growth will allow us to seek out new profitable markets and products Organic growth initiatives to be actively pursued Petuna Agreement underpins sustainable growth and will be actively managed – smolt quality is excellent and harvest supply of Salmon is significant Seafish Tasmania Agreement – sustainable waste services at no cost
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The historical earnings profile between H1 and H2 is not consistent - the NPAT split in the main depends on sales mix, sales pricing and trading terms, new harvest year class growth, processing efficiencies and marketing spend Tassal is well positioned to reap the benefits of the marketing investment made in H1 2008 and the strategic initiatives already implemented in H2 2008 This strategy serves to ensure that the business maintains the momentum to deliver on both its normalised FY2008 NPAT estimated at $21 million At this early stage of the year, management is confident in delivering a normalised NPAT of $30 million for FY2009.
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2007 year saw an all time high volume - despite production problems in Chile. The total volume supplied in 2007 was approximately 1,228,000 tonnes, a 13% increase from 2006. Norwegian volume increased by 20% compared to 2006 - whereas Chile was 2% down on 2006 production levels Global market absorbed the high volume ... supply = demand - albeit that pricing was significantly less Low global prices for Atlantic Salmon driven by Norwegian Salmon Industry growth and Wild Catch Salmon - which reached its highest level in more than a decade at 1,1031,000 tonnes … 23% more than the average catch of the last 10 years The global supply of Atlantic Salmon is expected to grow by only 1% to 2% in 2008, significantly lower than in 2007 mainly as a result of the challenging situation for the salmon industry in Chile – as a result, prices are forecast to improve on the global market There is upward pressure on feed prices – with fish meal and fish oils and other inputs increasing in price in 2007 For Tassal - feed price increases to be actively managed and mitigated – improved and new diets now formulated which have less reliance on the more expensive raw materials and a greater degree of substitutability
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The Chilean Salmon Industry is facing severe operational challenges with respect to the biological situation of ISA in region 10 of Chile - which is thought to be the consequence of poor biosecurity and unsustainable growth. Market commentary is that there will be a downward adjustment of the harvest and activity in region 10 for the period 2008 to 2010 to facilitate the return to a sustainable and profitable Industry. Region 11 is now being built up - with harvesting to ramp up in 2009 Due to the continuing ISA situation in Chile, industry participants are undertaking fundamental restructuring of their freshwater, seawater and processing facilities - effectively a 3 year work out plan required - total smolt input is expected to be significantly reduced in 2008 (up to 40% ) Set out below is a position that Chile is endeavouring to “get to” … as compared to where the Tasmanian Industry “is at”
Biosecurity I ssues - Chile Biosecurity Posit ion - Tasm ania W ork- out Plan - Solutions to be im plem ented Land based sm olt production in a controlled environm ent in order to ensure the supply of high quality sm olt Land based sm olt supply already in place - sm olt considered som e of the best in the world Land based broodstock facility for safe egg-supply Land based broodstock facility in place - eggs from Tasm anian Industry in global dem and Reduce the grow-out in Region X and establish zone m anagem ent with strict I SA containm ent m easures Tasm anian Industry has around 10 grow-out regions (risk diversification) and Tasm ania is split into 2 biosecurity zones (fish m ovem ent strictly controlled)