Interim Results Presentation - Astral Foods
Interim ResultsPresentationfor the 6 months ended 31 March 2020
AGENDA Business OverviewSlide 3 – Chris Schutte Operational OverviewSlide 8 – Andy Crocker, Gary Arnold Industry MattersSlide 26 – Gary Arnold Financial OverviewSlide 29 – Daan Ferreira OutlookSlide 40 – Chris Schutte Additional InformationSlide 445/17/202022
Chris SchutteChief Executive OfficerBUSINESS OVERVIEW5/17/2020
BusinessOverviewOperationalOverviewIndustry MattersFinancialOverviewOutlookSALIENT POINTS Feed input costs increased over the period on higher maize prices,following poor yields and a smaller crop for 2019 Poultry production efficiencies on farm were maintained in line withperformance forecasts Poultry selling prices increased for the period under review, leadingto a partial recovery of higher input costs Extraordinary costs linked to load shedding, the legislated nationalminimum wage and the on-going Standerton water supply contingency COVID-19 costs late March; on-going impact into 2H2020 under thenationwide lockdown complying with health and safety requirements Good start to the 2020 maize planting season with productionprospects for the crop exceeding 15 million tons (2019: 11.3 mmt)5/17/20204
BusinessOverviewOperationalOverviewIndustry MattersFinancialOverviewOutlookKEY FINANCIAL INDICATORS Revenue4.3% Profit before interest and tax @ R546 million8.5% Profit for the period @ R371 million Headline earnings per share @ 951 cps No interim dividend declared5
BusinessOverviewOperationalOverviewIndustry MattersFinancialOverviewOutlookDIVISIONAL OVERVIEWPoultryFeed Feeding cost increased Raw material costs up Bird performance improvement Less internal feed required Broiler sales volumes down External sales volumes up Broiler sales realisations up Expenses well controlled Extraordinary cost impacts Improved Rand per ton marginOther Africa Higher profits from the Mozambique operations6
BusinessOverviewOperationalOverviewIndustry MattersFinancialOverviewOutlookTHE PERIOD IN PERSPECTIVE(R 50R43 million300PBIT H1 F2020OtherExtraordinarycostsBroiler sellingpricesBroiler salesvolumesFeed conversionefficiencyRaw material costPBIT H1 F20192507
Andy CrockerManaging Director: Commercial5/17/2020
ewIndustry MattersOutlookFEED DIVISIONRevenue - R millionOperating profit - R million4 0002503 5093 3033 0002392431H20191H20202001502 0001001 00050-1H2019 Revenue up 6.2% 5/17/20201H2020Raw material costs upAverage selling prices up 6.8%Sales volumes down 0.5% Operating profit up 1.7% Net margin 6.9% 1H2019: 7.2%Expenses well controlledRand per ton margin up9
BusinessOverviewOperationalOverviewIndustry MattersFinancialOverviewOutlookFEED DIVISION SAFEX yellow maize prices increased for the period under review 1H2020avg. R2 703 per ton (1H2019: R2 579) up R124 per ton y-o-y Internal feed sales volumes decreased marginally by 1.2% due toimproved broiler feed conversion rates External feed sales volumes increased by 0.5% predominantly in the dairymarket despite the higher feed prices Expenses were well controlled across the division for the period underreview The average net margin increased (on a Rand per ton basis) for the periodunder review5/17/202010
BusinessOverviewOperationalOverviewIndustry MattersFinancialOverviewOutlookFEED DIVISION – SALES MIX15%14%1H2019697 569 Tons21%1H2020694 083 Tons22%Volume decrease 0.5%59%5%5/17/202059%5%11
BusinessOverviewOperationalOverviewIndustry MattersFinancialOverviewOutlookSAFEX YELLOW MAIZE PRICE5/17/2020Source: CJA Strategic Risk Brokers12
BusinessOverviewOperationalOverviewIndustry MattersFinancialOverviewOutlookSAFEX YELLOW MAIZE PRICE vs. CBOT IN RAND TERMS5/17/2020Source: CJA Strategic Risk Brokers13
BusinessOverviewOperationalOverviewIndustry MattersFinancialOverviewOutlookDURBAN SOYA MEAL PRICE5/17/2020Source: CJA Strategic Risk Brokers14
5/17/2020Commercial
ewIndustry MattersOutlookPOULTRY DIVISION - CONSOLIDATEDRevenue - R millionOperating profit - R million3006 0005 4725 0002875 6442504 0002003 0001502 0001001 00050258-1H2019 Total revenue up 3.1% 5/17/20201H20191H2020Broiler sales volumes down 2.5%Broiler sales realisations up 5.5% 1H2020Operating profit up 11.5% Broiler feed price up 6.0%Net margin 5.1% 1H2019: 4.7%Breeder revenue up R44 million16
BusinessOverviewOperationalOverviewIndustry MattersFinancialOverviewOutlookPOULTRY DIVISION - COMMERCIAL Profits increased for the period under review Broiler selling prices increased with less promotional activity relative to thecomparable period Broiler slaughter numbers at an average of 5.2 million birds per week weremarginally up by 2.3% year-on-year Broiler sales volumes down due to a change in the point of recognition of asale with the new third party distribution agreement, which is based on aconsignment stock model Overhead expenses increased over the comparable period with thelegislated national minimum wage (not included in 1Q2019), exacerbated bythe impact of load shedding nationally and on-going water supply costs inStanderton5/17/202017
ewIndustry MattersOutlookPOULTRY DIVISION – PRODUCT MIX22%22%8%1H2019228 172 Tons8%50%Volume decrease 2.5%13%13%4%2%5/17/202051%1H2020222 437 Tons5%2%18
ewIndustry MattersOutlookCHANGE IN BROILER SELLING PRICE vs. FEED -15-10%Dec-14Oct-140%-20%-30%% Change in broiler feed price5/17/2020% Change in broiler selling priceSource: Own Data19
Gary ArnoldManaging Director: Agriculture5/17/2020Agriculture
BusinessOverviewOperationalOverviewIndustry MattersFinancialOverviewOutlookPOULTRY DIVISION - AGRICULTURE Parent stock sales were higher for the period under review as demand forthe Ross genetics increased Parent breeder productions were good, with an improvement in thenumber of chicks per hen housed Demand for hatching eggs decreased as export markets came underpressure Feed input costs increased due to higher raw material costs adverselyaffecting the live bird production cost Further improvements in on-farm broiler production efficiencies,assisted broiler live cost through an improved feed conversion rate Highly pathogenic bird flu still prevalent in wild birds and ostriches,however no confirmed cases in commercial poultry since May 20185/17/202021
BusinessOverviewOperationalOverviewIndustry MattersFinancialOverviewOutlookBROILER PRODUCTION PERFORMANCE108%106%104%102%100%98%96%Key indicators base-lined to 100% in F201594%F2015F2016Slaughter age5/17/2020F2017F2018Live weightF20191H2020Average daily gain22
ewIndustry MattersOutlookBROILER PRODUCTION PERFORMANCE125%120%115%110%105%100%95%90%85%Key indicators base-lined to 100% in F201580%F2015Mortality5/17/2020F2016F2017Feed consumptionF2018F20191H2020Performance efficiency factor23
5/17/2020
ewIndustry MattersOutlookOTHER AFRICA DIVISION (Zambia, Mozambique & Swaziland)Revenue - R millionOperating profit - R million250202392232001516150101007550-1H2019 Revenue up 7.0% 5/17/20201H20191H2020Sales volumes down 4.0%Average selling prices up 11.5% 1H2020Operating profit up 131.9% Net margin 6.6% 1H2019: 3.0%Mozambique provision fornon-recovery of various taxesin 1H201925
INDUSTRY MATTERS5/17/2020
ewIndustry MattersOutlookPOULTRY IMPORTS PER 0000250002000015000100005000Total poultry 15Dec-14Oct-1406 per. Mov. Avg. (Total poultry imports)Source: South African Poultry Association27
BusinessOverviewOperationalOverviewIndustry MattersFinancialOverviewOutlookINDUSTRY OVERVIEW Based on industry statistics current broiler slaughter numbers are an averageof 19.6 million birds per week For the period under review the industry has remained stable with noconsolidation or divestment Imports during the period averaged 42 907 tons per month (1H2019: 41 774tons), equalling approximately 30% of total consumption An increase in the ad valorem import tariff on bone-in and boneless cuts ofchicken was announced on the 13th March 2020 The tariff on frozen bone-in chicken portions and boneless chicken cutsincreased from 37% to 62% and 12% to 42% respectively The establishment of an oversight committee with representation fromgovernment and all stakeholders will lend support to the implementation of thePoultry Sector Master Plan5/17/202028
Daan FerreiraChief Financial OfficerFINANCIAL OVERVIEW5/17/2020
BusinessOverviewOperationalOverviewIndustry MattersFinancialOverviewOutlookINCOME STATEMENT2020R million2019R million7 0696 7754%5465038%7.7%7.4%Net finance (cost) / income(27)18Profit before tax519521(148)(151)Profit for the period371370Headline earnings369368EPS – Cents951948HEPS – Cents951949Six months ended 31 MarchRevenueOperating profitOperating profit marginTax5/17/2020% change30
BusinessOverviewOperationalOverviewIndustry MattersFinancialOverviewOutlookGROUP SIX MONTHLY REVENUE AND PROFITABILITY7 069(R million)6 5566 1315 8235 7556 6006 7106 37915.7%5 79514.2%5 5114 7006 7754 121201H142H141H152H15External revenue5/17/20201H162H161H17Operating profit2H171H182H181H192H191H20Operating profit margin %31
BusinessOverviewOperationalOverviewIndustry MattersFinancialOverviewOutlookFEED SIX MONTHLY REVENUE(R million)3 7293 2752 9562 9612H141H153 4613 4483 4053 0963 1021H182H183 5093 3033 2711H192H192 5501H14Revenue5/17/20202H151H162H161H17Change in volumes2H171H20Change in feed price32
BusinessOverviewOperationalOverviewIndustry MattersFinancialOverviewOutlookPOULTRY SIX MONTHLY REVENUE(R million)4 5033 3171H144 4362H151H164 6934 4562H161H175 4152H171H185 1245 4725 4055 6441H192H191H203 6502H141H15Revenue5/17/20204 2375 394Change in poultry selling price2H18Change in volumes33
ewIndustry MattersOutlookGROUP SIX MONTHLY OPERATING PROFIT(R 351H142H14Poultry5/17/20201H15Feed2H151H16Other Africa2H16Change in feed priceChange in broiler selling price34
BusinessOverviewOperationalOverviewIndustry MattersFinancialOverviewOutlookBALANCE SHEETMarch 2020R millionSeptember 2019R millionNon-current assets3 1482 658Right of use assets645-Net working capital1 1131 28814%Current assets (excl. cash)3 1482 9826%(2 035)(1 694)20%Non-current liabilities (excl. leases)(744)(705)6%Lease liabilities(664)-Net assets3 4983 2418%Net (surplus cash)(470)(555)15%Equity3 9683 7965%Total3 4983 2418%Current liabilities (excl. borrowings / leases)5/17/2020% change18%35
BusinessOverviewOperationalOverviewIndustry MattersFinancialOverviewOutlookCAPITAL EXPENDITURE1H2020R million2H2019R million1H2019R 8492Outstanding commitments342537753Festive expansion24543565171122909180Six months ended 31 MarchDepreciationProperty, plant & equipmentRight of use assetsTotal capex spendFestive expansion (including advance payments)Standerton silo upgradeOther capexStanderton silo complexOther capex5/17/202036
ewIndustry MattersOutlookWORKING CAPITALMarch 2020R millionSeptember 2019R millionVarianceR million3 1482 982166Biological assets80175942Inventory- Poultry512337175- Feed4282911374063(23)1 2251 15273-256(256)14212418(2 035)(1 694)(341)Trade payables(1 491)(1 133)(358)Other payables(544)(561)171 1131 288(175)Current assets- Other AfricaTrade receivablesAdvance capex paymentsOther receivablesCurrent liabilitiesNet working capital5/17/202037
BusinessOverviewOperationalOverviewIndustry MattersFinancialOverviewOutlookSTATEMENT OF CASH FLOWS2020R million2019R millionCash operating profit715407Share based payments(24)Six months ended 31 MarchLease 1)(345)8352(165)(409)-(1)Movement in cash equivalents(82)(358)Effect of exchange rate changes(3)-Opening balance555789Closing balance470431Working capital movementTax paidNet interest receivedCapital expenditureDividends paidOther cash flow items5/17/202038
BusinessOverviewOperationalOverviewIndustry MattersFinancialOverviewOutlookIN SUMMARY Group operating profit up 8.5% Finance charges up Change in accounting for leases No change in earnings for the period Net impact of lease accounting R(14) million Net cash outflow of R82 million Includes dividend paid of R165 million Capital expenditure of R311 million Surplus cash at 31 March 2020 of R470 million No interim dividend declared Uncertainty around seemingly indefinite lockdown5/17/202039
Chris SchutteChief Executive OfficerOUTLOOK5/17/2020
BusinessOverviewOperationalOverviewIndustry MattersFinancialOverviewOutlookNEGATIVE INFLUENCES EXACERBATED BY LOCKDOWN Unprecedented unemployment rate expected following the hard lockdown, andresultant financial impact on businesses and the economy at large Consumer disposable income will be severely constrained, with a very slowrecovery out of the lockdown as expected by most economists Exchange rate effect on input costs, with the Rand pricing of soya and maizenegatively impacted Higher costs due to COVID-19 with constraints on global supply chains andprice increases of essential inputs QSR sector shutdown (accounting for 20% of poultry consumed) and latepayments, due to this market sector being impacted during the lockdown Product mix change resulting in a shift to lower margin products on slowerfresh, value added and QSR sales Astral’s capacity expansion delayed, due to project commissioning not beingcompleted as a result of the lockdown5/17/202041
BusinessOverviewOperationalOverviewIndustry MattersFinancialOverviewOutlookPOSITIVE INFLUENCES All of Astral’s operations are running like clockwork, and to date nodisruptions have been experienced, with stringent social distancing, screeningand employee welfare measures (sufficient PPE) implemented Above average maize crop for the 2020 harvest season, should result infavourable feed costs from August if not further impacted by local currencyweakness Higher import tariffs on frozen bone-in portions announced in March 2020,should go some way in levelling the playing fields and discouraging unfair trade Production efficiency and product mix opportunities when the Festiveexpansion is completed Progressive genetic improvement of the Ross broiler breed will continue tosupport the group’s best cost strategy5/17/202042
“”Confirmed August 20195/17/2020
ADDITIONAL INFORMATION5/17/2020
ACCOUNTING CONSIDERATIONS – MARCH 2020R millionConsignment distribution modelRecognition of salesRecognition of distribution costsRevenue(166)69Leases – change in accountingAdditional amortisationReallocate lease paymentsRight-of-use assetLease 645(664)COVID-19 relatedAdditional operating expensesImpairment finished goodsIncreased critical stock 5/17/2020OperatingProfit(19)106(122)Service related costsLoad sheddingWater supply interruptionsTotalExpenses95(60)(35)228(19)45
WORLD CORN ENDING STOCKSMillion 755025010%201420152016End Stock5/17/20202017201820192020E2021FMaize stock to use ratioSource: CJA Strategic Risk Brokers46
SOUTH AFRICA – TOTAL MAIZE SUPPLY & DEMAND2014/152015/162016/172017/182018/192019/20E cast5892 0742 4711 0933 6892 6621 01114 2509 9557 77916 82012 51011 27515 2224331633091 19149553965013 8179 7947 46915 62911 98410 73614 572Minus early deliveries004500000Imports651 9642 23701725100Total Supply14 47113 83111 72716 72215 84513 90915 583Domestic Usage Food4 8404 6984 8084 9935 1615 3785 260Domestic Usage Feed5 0415 5205 0045 2765 5085 9106 450376293278313239189216Total Domestic Usage10 25710 51210 09010 58310 90711 47711 926Exports & Sundries2 1538489932 4512 2761 4211 510Plus early deliveries004500000Carry Out (30 Apr)2 0622 4711 0933 6892 6621 0112 146No of days ,84%15,97%Marketing year (May to April)'000 tonsCarry In (1 May)Crop EstimateRetentionsSagis DeliveryGristing, withdrawn & releasedSTU5/17/2020Source: CJA Strategic Risk Brokers47
SOUTH AFRICA – TOTAL MAIZE SUPPLY & DEMAND‘000 Tons4 00030%28,31%3 50025%21,75%3 00020,19%20%2 50016,62%15,97%2 00015%9,87%3 6897,84%1 50010%2 6622 4712 1462 0621 0005%1 0935001 01100%2014/152015/162016/17Carry out5/17/20202017/182018/192019/20E2020/21FMaize stock to use ratioSource: CJA Strategic Risk Brokers48
EL NIÑO SOUTHERN OSCILLATION - FORECAST5/17/2020Source: International Research Institute for Climate and Society (IRI) – Columbia University49
SOUTHERN AFRICA - VEGETATIVE HEALTH INDEXVHI of previous year5/17/2020VHI of current yearSource: NOAA - National Environmental Satellite, Data, and Information Service (VHI)50
BROILER FEED – INGREDIENT INCLUSION & COST 20Contr.Sunflower MealOther0%MaizeSoybean Meal5/17/2020Fish MealF/Fat and Extr SoySoya OilVitamins, Minerals and Medication.Source: Own Data51
OILER SELLING PRICE150%140%Lower brine effect130%120%110%100%90%80%Broiler selling price index5/17/2020Six month averageSource: Own Data52
OILER PRICE vs. FOOD PRICE 00%100%90%90%Broiler selling price index5/17/2020SA food price indexSource: Own Data & CJA Strategic Risk Brokers53
SOUTH AFRICAN PROTEIN PRICE COMPARISONcents / kg9 0008 0007 0006 0005 0004 0003 0002 000Feed Conversion RatePer Capita 5.039,3 kg5,1 kg17,2 kg3,1 kgSource: SAPA, FNB, Red Meat Industry -141 00054
LOCAL BROILER PRODUCTION & MARKET SHARE21%26%4%5%8%20%7%9%AstralRCLCountry BirdDaybreakSovereignGrainfieldsChubby ChickOtherLocal broiler production 19.6 million birds per week5/17/2020Source: Own Estimates55
LOCAL BROILER PRODUCTION & MARKET SHARE18%29%14%6%15%5%3%4%AstralRCLCountry BirdDaybreakSovereign6%GrainfieldsChubby ChickOtherImportsAvg. poultry imports 7.7 million birds per week(6 months ending March 2020)5/17/2020Source: Own Estimates56
TOTAL POULTRY IMPORTS (CHICKEN, MDM, TURKEY)Tons600 000500 000400 000300 000200 000F2017F2018F2019F2020100 0000Oct50 32446 34845 06140 409Nov101 27992 22389 63286 676Dec135 812140 823127 371128 331F201945 06144 571F202040 409% VarF2017F2018F2019F2020bpw*Jan173 187188 065162 545170 449Feb212 399228 295204 659216 314Mar278 057281 102250 646257 443Apr319 933327 753302 318May367 106374 838354 046Jun409 557412 638408 63337 73935 17442 11445 98751 67251 72854 58746 26741 65542 11845 86541 3 981461 454455 06946 436Aug499 952523 205502 30647 237Sep551 867579 661538 60536 299*bpw million birds per week5/17/2020Source: SAPA57
TOTAL POULTRY IMPORTS – COUNTRY OF ORIGINCountry of origin for poultryimports - 2019Country of origin for poultryimports – March 2020 YTDOther 2,8%Other 3,5%US 16,6%US ,1%EU 23,1%EU 17,7%538 605 tons5/17/2020257 443 tonsSource: SAPA58
TOTAL POULTRY IMPORTS – COUNTRY OF ORIGINCountryImports (tons)20192018Brazil2020 YTD348 155268 86964 844United States91 37489 59828 722Poland13 46350 4194 294Argentina33 27837 9399 110Ireland26 32831 2217 450Denmark25 67223 3254 198Spain4 93218 8246 495Thailand9 0118 7281 003Canada7 3056 6581 584Chile4 3622 341454Australia553780427Germany22232646United wazilandOther5/17/2020Source: SAPA59
COVID-19 MEASURES5/17/202060
COVID-19 MEASURES5/17/202061
COVID-19 MEASURES5/17/202062
COVID-19 MEASURES5/17/202063
COVID-19 MEASURES5/17/202064
Chris SchutteChief Executive OfficerTel : 27 (0) 12 667 5468Fax : 27 (0) 86 504 2002email: an FerreiraChief Financial OfficerTel : 27 (0) 12 667 5468Fax : 27 (0) 86 504 1602email: Daan.Ferreira@astralfoods.com5/17/2020
Operating profit - R million 2 000 Operating profit up 11.5% Broiler feed price up 6.0% Net margin 5.1% 1H2019: 4.7% Revenue - R million 5 000 Total revenue up 3.1% Broiler sales volumes down 2.5% Broiler sales realisations up 5.5% Breed
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consciousness. And, as we will see as we progress, dreaming and astral projection are very closely related states of consciousness. Now, astral projection goes under a variety of names. Some other names for the astral projection experience are the following: 1. lucid dreaming, and 2. out-of-body experiences (OBEs).
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an Indian mystic. Using astral projection, Acharya takes him out of the physical world onto the astral planes of the 'afterlife'. Each astral plane teaches something new about life and death, karma and the ego. Through a series of meetings with the 'dead' - including his brother - the author comes to realize how irrational it is to fear death.
