RCL FOODS LIMITED. Audited Results for the Year Ended 30 June 2014 Investor Presentation: 28 August 2014

Transcription

1 RCL FOODS LIMITED Audited Results for the Year Ended 30 June 2014 Investor Presentation: 28 August 2014

2 Salient features Results summary Strategic overview Key issues and financial review Operational reviews Prospects Salient features: Twelve months ended 30 June 2014 Statutory Pro forma GROUP REVENUE R19.7bn GROUP REVENUE R22.6bn HEBITDA R1.1bn HEBITDA R1.4bn HEBITDA margin 5.6% HEBITDA margin 6.1% EPS (41.4) cents EPS 50.2 cents RESULTS FOR THE YEAR ENDED 30 JUNE

3 Salient features Results summary Strategic overview Key issues and financial review Operational reviews Prospects Salient features: twelve months ended 30 June 2014 Results include 12 months of Foodcorp (only two months in the comparative period) and six months of TSB Rainbow s results have improved but remain depressed TSB s six months results have been compromised by the high level of imports, the three-month off crop season from January to March, and the impact of the sugar industry strike Acquisition of 49% of Botswana based Senn Foods Logistics, results to be included from 2015 financial year Material financing costs resulting from foreign exchange losses on the early redemption of Foodcorp s Euro denominated debt Material IFRS 2 costs relating to the restructuring of the BEE shareholding Material transaction costs associated with the significant corporate activity Necessitated the publishing of a set of pro forma results to provide a better understanding of the Group s underlying performance RESULTS FOR THE YEAR ENDED 30 JUNE

4 Strategic overview: RCL Foods evolution Value Creation Focus Creation of RCL Foods One Company Philosophy Africa Strategy Remgro s chosen platform for Food Acquisition of Foodcorp and TSB JVs in Zambia (chicken) and Botswana (distribution) RESULTS FOR THE YEAR ENDED 30 JUNE

5 Revenue (R millions) Strategic overview: Creation of RCL Foods Revenue growth May 2013 Acquired FoodCorp Jan 2014 Acquired TSB Sugar Created scale through acquisition of Foodcorp and TSB Defined Africa strategy Entered into JVs with Zambeef and Senn Foods Dec 2004 Acquired Vector Logistics (PF) Embed One Company philosophy Establish leadership and governance through RCL Foods Executive Committee Empower central functions Note (1): Unaudited pro forma revenue (refer to slide 20) RESULTS FOR THE YEAR ENDED 30 JUNE

6 Strategic overview: RCL Foods evolution Value Creation Focus Creation of RCL Foods One Company Philosophy Africa Strategy Remgro s chosen platform for Food Acquisition of Foodcorp and TSB JVs in Zambia (chicken) and Botswana (distribution) RESULTS FOR THE YEAR ENDED 30 JUNE

7 Strategic overview: Value creation through growth and margin focus Growth drivers Invest behind brands Partner with key strategic customers Drive sharper category focus Drive strategic acquisitions/jvs Expand into Africa Implement right organisation to deliver growth ambition Margin drivers New business model for chicken Improve mix through sharper category focus, strategic acquisitions and expansion into Africa Maximise opportunities/synergies across the group Broaden ownership of value chain Implement right organisation optimising benefits and costs RESULTS FOR THE YEAR ENDED 30 JUNE

8 RCL Foods ambition is to build an African food business of scale with compelling brands and a sustainable value chain that delivers to consumer and customer needs. We will double our business in five years, whilst driving steady and sustainable improvement in operating margin. Categories Core: Optimise SA, Build ROA* Added Value: Accelerate SA, build ROA Markets Accelerate SA Build ROA Grow through Strong Brands Partner with Strategic Customers Optimise Value Chain Right People, Right Organisation *ROA- Rest of Africa RESULTS FOR THE YEAR ENDED 30 JUNE

9 Strategic overview: Category focus New Categories ADDED VALUE Accelerate in SA Build in ROA Speciality, Pies, Chicken Food Solutions Grocery, Baking, Beverages, Chicken AV Optimise in SA Build in ROA Chicken, Sugar, Grains (Wheat, Maize), Animal Feed CORE RESULTS FOR THE YEAR ENDED 30 JUNE

10 Strategic overview: Market Focus ACCELERATE SOUTH AFRICA BUILD REST OF AFRICA Grow ahead of market in key categories Steady and sustainable improvement in operating margin Invest behind growth opportunities Joint ventures with food or route to market players Broader ownership of value chain Strategic partnerships with key SA customers RESULTS FOR THE YEAR ENDED 30 JUNE

11 Strategic overview: Growth through strong brands Strong market positions and leading brands across multiple product categories Sugar Chicken Pies Beverages Bread Grocery Sugar-Sweetener Sugar-Speciality Sugar-Consumer Chicken - Mainstream Chicken - Added Value Pies Beverages Baking Mayonnaise Peanut Butter Rusks Sorghum Dry Pet Food Wet Pet Food 0% 25% 50% 75% 100% Grow key markets by driving penetration and consumption whilst growing market share Drive category leadership by investing behind our brands and partnering with retailer owned brands where relevant Grow with innovation driving new products and solutions to address consumers needs Acquire new brands/businesses enabling entry into new strategic growth categories Note: Category shares include DOB; Green indicates category leader RESULTS FOR THE YEAR ENDED 30 JUNE

12 Strategic overview: Partner with strategic customers RCL Foods delivers best in class service and builds its brands together with strategic partners Speciality Foods Food Solutions Dealer Own Brands Joint Business Partnerships Speciality Foods division is a a major supplier of superior Ready-to- Eat and convenience food products to SA s premium food retailer, Woolworths. The leading supplier of chicken products to the food service industry in SA, providing tailored chicken solutions for leading customers including KFC, Nando's, Chicken Licken and Steers. Established partnerships with various Retailers in sugar, mayonnaise, peanut butter, pet food and chicken categories, as well as premixes and flour for in-house bakeries where customised Dealer Own Brand products are produced and packaged. Strategically pursuing Joint Business Partnerships with Retailers in key categories where there are common growth and profitability ambitions. RESULTS FOR THE YEAR ENDED 30 JUNE

13 Strategic overview: Optimising the value chain Realise opportunities and synergies across the Group Maximise growth opportunities across RCL Foods Foodcorp Innovation capability Rainbow Food Service capability New scale and relationship synergies Optimise resources and costs Finance and IT: Optimise systems and financial management, e.g. insurance Sourcing/Procurement: Scale and Synergies HR: People management & Right organisation Leverage our unique route to market capability with Vector Logistics Warehousing and distribution Call centres, sales and merchandising Debtors and information management RESULTS FOR THE YEAR ENDED 30 JUNE

14 Leadership Standards Strategic overview: Right people and organisation Develop talent, build leaders and create the right organisation to enable our growth ambition. Drive performance focus and accountability across businesses to ensure delivery of results in line with our ambition. Delivery RESULTS FOR THE YEAR ENDED 30 JUNE

15 Strategic overview: What differentiates us? Portfolio of leading consumer brands Significant platform for expansion Unique, integrated business model Support of a highly regarded strategic shareholder Experienced management team with strong track record Positioned to deliver on the African opportunity RESULTS FOR THE YEAR ENDED 30 JUNE

16 Strategic overview: F15 Deliverables Implement new organisation Implement destination organisation Restructure for focus; optimise benefits and costs Deliver on opportunities and synergies Improve underlying performance Execute Category Growth Strategy (including acquisitions) Increase investment behind brands Continue with Rainbow recovery Vector and Africa scaled Distribution and synergies across Group Sales and merchandising service for entire Group Continue to drive Africa agenda and investment RESULTS FOR THE YEAR ENDED 30 JUNE

17 Salient features Results summary Strategic overview Key issues and financial review Operational reviews Prospects Key financial issues: year ended 30 June 2014 RCL Foods 2014 financial results have been materially affected by the following corporate activity: Redemption of Foodcorp s Euro-denominated Senior Secured Notes (SSN s) at the earliest opportunity SSN s redeemed in two tranches - 103% in November 2013 and the remaining % in April 2014 which crystalised material forex losses (net of hedges) Restructuring of the BEE shareholdings resulting in material IFRS 2 charges Transaction costs associated with these transactions, as well as with the buyout of the remaining 35.8% minority interest in Foodcorp, the acquisition of TSB and the R790.2m pro rata minority rights offer As such a set of pro forma 2014 financial results have been published By assuming that all corporate activity had taken place on 30 June 2013, the pro formas represent a normalised income statement and a better reflection of the underlying performance RESULTS FOR THE YEAR ENDED 30 JUNE

18 Financial review: Year ended 30 June 2014 Headline earnings from continuing operations Reconciliation between Actual and Pro forma Rm (19.3) (332.6) Actual Debt refinancing TSB full year BEE transactions Transaction costs Pro rata share issue Foodcorp minority buyout Pro forma RESULTS FOR THE YEAR ENDED 30 JUNE

19 Financial review General operating environment General economic environment in South Africa remains challenged Labour unrest High unemployment Depreciating currency Pedestrian growth of the SA economy All adding pressure on already stretched consumers Above inflation cost increases continue (fuel/power) Commodity market volatility ongoing Customers/Competitors aggressively fighting for volume/market share RESULTS FOR THE YEAR ENDED 30 JUNE

20 Financial review: year ended 30 June 2014 Statutory 2014 Pro forma 2014 Actual 2013* Revenue Rm Headline EBITDA Rm Headline EBIT Rm Effective tax rate % 28.8 (12.6) Headline earnings continuing operations Rm (332.6) 18.8 Cash generated by operations Rm n/a Net cash and investment in money market Rm n/a Final dividend per share Cents Headline earnings per share continuing operations Cents 45.1 (47.7) 4.8 Capex Spend (excluding intangibles) Rm n/a NAV per share Cents n/a Return on equity % n/a (3.5) 0.5 Pre-IAS Pro forma 2014 Actual 2013* Headline EBITDA Rm Headline EBITDA margin % * Restated for IAS 19R, not material RESULTS FOR THE YEAR ENDED 30 JUNE

21 R million Financial review summary: Year ended 30 June (588.2) (12.1) (332.6) Finance cost includes R561.0m fair value adjustments to Foodcorp s Euro debt and related hedges (1043.5) Headline earnings from continuing operations Minority interest from continuing operations Share of profit from JV & associate Taxation Finance income Finance cost Depreciation and amortisation HEBITDA RESULTS FOR THE YEAR ENDED 30 JUNE

22 Financial review: operating results summary Segmental analysis Revenue (Rm) * Two months only 2014 Pro forma 2014 Actual Foodcorp * Rainbow TSB n/a Vector Sales between Segments Foodcorp to Rainbow (62.0) (62.0) n/a Sales between Segments Rainbow to Foodcorp (51.7) (51.7) n/a Sales between Segments TSB to Foodcorp (27.1) (13.6) n/a Sales between Segments Vector to Foodcorp (21.5) (21.5) (3.4) Sales between Segments Vector to Rainbow (814.2) (814.2) (725.8) Total Operating profit (Rm) 2014 Pro forma 2014 Actual Foodcorp * Rainbow (2.6) 0.6 (3.1) TSB n/a Vector Unallocated group costs (29.9) (150.4) (72.6) Total RESULTS FOR THE YEAR ENDED 30 JUNE

23 Financial review: Cash flow summary Cash generated by operations increased by 75.4% Rm Opening balance (including money market investment and net of overdraft) Operating profit adjusted for non-cash flow items Working capital movement 73.2 Net finance cost paid (530.5) Tax paid (48.9) Capital expenditure (including intangibles) (672.4) Acquisition of joint venture and non-controlling interest in subsidiary (616.4) Issue of shares Interest-bearing liabilities ( ) Dividends received 27.7 Discontinued operation - net cash inflows 33.8 Cash acquired in common control transaction (TSB acquisition) Proceeds on preference shares and disposal of PP&E Other (73.5) Closing balance RESULTS FOR THE YEAR ENDED 30 JUNE

24 Financial review Working capital movement (Rm) Net Trade payables Inventory and biological assets (137.4) Trade receivables (337.6) Working capital impacted by the acquisition of TSB on 01 January 2014 RESULTS FOR THE YEAR ENDED 30 JUNE

25 Financial review RCL Foods capital expenditure programme directed at Foodcorp and TSB Rm 30 June June 2013 Total expenditure (excluding intangibles) Foodcorp expenditure amounts to R307.2m, of which R112.2m was related to expansion and capacity building TSB expenditure amounted to R148.2m for the six months, largely attributable to the investment to maintain the sugar mills and the expansion of the Molatek operations Capex within Rainbow remains limited to necessary replacement items R173.0m has been contracted and committed, but not spent A further R200.1m has been approved, but not contracted RESULTS FOR THE YEAR ENDED 30 JUNE

26 Key financial issues Assessment of impairment A restoration of normal trading conditions is required for the poultry industry in South Africa to survive Rainbow and RCL Foods Boards continue to assess the need for an impairment of assets A return to adequate profitability is dependant on the local industry returning to relative supply/demand balance, of which the successful implementation of permanent anti-dumping duties from 01 January 2015 is one part An impairment will need to be raised should the supply/demand equilibrium not be restored or, despite management intervention, there is no meaningful improvement in Rainbow s profitability RESULTS FOR THE YEAR ENDED 30 JUNE

27 Operational review - Foodcorp Revenue (Rm) 2014 Pro forma 2014 Actual Foodcorp Rainbow TSB n/a Vector Sales between segments (976.5) (962.9) (729.2) Total Operating profit (Rm) Pro forma Actual 2013 Foodcorp Rainbow (2.6) 0.6 (3.1) TSB n/a Vector Unallocated group costs (29.9) (150.4) (72.6) Total The opportunity Management Foodcorp will drive innovation in existing brands and categories and expand into new brand categories Being part of RCL Foods enables greater product innovation and investment in new opportunities Sizeable capital investments in 2013/4 to expanded factories and milling capacity Opportunity to harness the selling, distribution and credit management synergies across the Group Cliff Sampson Managing Director Appointed: October 2013 Divisional Managing Director of Foodcorp Consumer Brands since joining in 2008 Previously Managing Director of National Brands (AVI) for eight years 2013 RESULTS FOR THE YEAR ENDED 30 JUNE

28 Operational review Foodcorp Brand investment results in Foodcorp s core brands enjoying leading market positions Category position Eight Foodcorp brands enjoy either #1 or #2 category positions in their segments Category share Foodcorp growth Market growth Food Brands National focus Dry Dog food 1 53% 7.4% 6.1% Dry Cat food 2 30% 17.1% 1.5% Peanut butter 1 48% 2.4% 7.1% Beverages 1 70% 0.5% 2.1% Rusks 1 40% 0.9% (4.2%) Pies 1 32% (1.4%) 2.6% Mayonnaise 2 43% (1.1%) 0.6% Sorghum 2 28% (0.4%) 3.1% Flour 4 14% (1.2%) 0.4% Private label Largest single supplier to Woolworths Speciality Regional focus Bread 4 7% 1.0% 0.8% Maize 5 3% 3.1% 1.4% Source: AC Nielsen RESULTS FOR THE YEAR ENDED 30 JUNE

29 Operational review Foodcorp Foodcorp had an acceptable trading performance, amidst tough trading conditions and constrained consumer spending Net revenue from continuing operations for the year was R7.8bn an increase of 6% over the comparable period (only two months included in the RCL Foods comparative) Operating profit was below expectation, but in line with prior year, at R455.2m, a margin of 5.9% Operating profit includes additional R96.0m depreciation and amortisation as a result of the purchase price allocation Grocery, Beverage and Speciality divisions performed well Milling division was in line with prior year Baking and Pie divisions performance was lower than the prior period; receiving focused management attention RESULTS FOR THE YEAR ENDED 30 JUNE

30 Operational review Foodcorp Foodcorp had an acceptable trading performance, amidst tough trading conditions and constrained consumer spending Selling price increases were necessary in certain categories as a result of higher commodity and energy costs, as well as an increase in packaging materials New management team appointed in the Baking division and this has already begun to bear results The disposal of the Fishing division to Oceana Group Limited was approved by the Competition Commission subject to certain divestiture conditions, one of these conditions is not acceptable to both parties and has subsequently been appealed. The parties have extended the sale of business agreement to 30 September 2014 RESULTS FOR THE YEAR ENDED 30 JUNE

31 Foodcorp: Innovation The Seventh Floor The facility is situated in Black River Park in Observatory, Cape Town An innovation centre dedicated to cooking up new food concepts for South African consumers State-of-the-art development kitchen with an adjacent Chocolate Studio, a lavishly decorated dining room, a bar, three meeting rooms, the Weber terrace and the Theatre of Food Foodcorp strives for innovation through leading edge technology, a commitment to quality, and the use of organic materials Foodcorp created a development kitchen that incorporates solar heating, water recycling (our dishwater water is recycled seven times), and energy saving appliances and equipment. Efficient waste programmes are promoted, such as the InSinkErator Waste Disposers and contracting a recycling company for regular collections. An organic herb garden just off the Weber balcony keeps the kitchen well supplied. Its development kitchen is open to all Foodcorp s retail partners for product demonstrations RESULTS FOR THE YEAR ENDED 30 JUNE

32 Foodcorp: New product launches Ultra Dog Canine Cuisine Nola Tangy Yum Yum Double Crunch Supreme Turbo American Cookies RESULTS FOR THE YEAR ENDED 30 JUNE

33 Revenue (Rm) Operational review Rainbow Integrated supply chain from farm to fork 2014 Pro forma 2014 Actual Foodcorp Rainbow TSB n/a Vector Sales between segments (976.5) (962.9) (729.2) Total Operating profit (Rm) 2014 Pro forma 2014 Actual Foodcorp Rainbow (2.6) 0.6 (3.1) TSB n/a Vector Unallocated group costs (29.9) (150.4) (72.6) Total Rainbow pre-ias 39 operating profit (12.5) The opportunity Consumption and long-term volume growth trends expected to continue Focus on value-added products and strategic customers (quick-service restaurants) Industry at a cyclical low, affected by dumping and record feed input costs Tariffs and anti-dumping protection are key to restoration of acceptable profit margins New season crops anticipated to restore global feed stock levels Recently announced injection cap is a positive development Management Scott Pitman, Managing Director Appointed: January years experience in marketing and sales Previously headed up marketing for Robertsons, Distell, Unilever and Rainbow Chicken RESULTS FOR THE YEAR ENDED 30 JUNE

34 Operational review Rainbow Rainbow s pre-ias 39 operating profit, at R99.4m, is significantly up on the loss of R12.5m this time last year This is despite feed costs being up 9.8% (Rand per ton) to a new record high, little change to dumped imports, and the industry consequently remaining in crisis Rainbow s improvement in result is due to the implementation of a new business model, designed to deliver a more sustainable profit (even in down-markets) RESULTS FOR THE YEAR ENDED 30 JUNE

35 Operational review Rainbow Significant time was spent on delivering the new Rainbow business model: Alignment of bird volumes with profitable demand (smaller if necessary) More birds for QSR customers (20% more achieved) Step change in costs (only 1.9% opex growth) Substantially reduced production of IQF (40% reduction already) Rapid value added growth Strategic customer alignment and growth Operating expense growth (excluding feed cost) RESULTS FOR THE YEAR ENDED 30 JUNE

36 Operational review Rainbow Food Solutions After a tough period for QSR s in the first half, key customers have started to grow volume with solid, single figure volume growth Rainbow s step changed ability to produce more QSR weight range birds from the same flocks, will mean less agriculture capex going forward RESULTS FOR THE YEAR ENDED 30 JUNE

37 Operational review Rainbow Retail Simply Chicken added value ranges have grown to record market shares, in chilled processed meats and freezer to fryer After a year of cost reductions and consequently higher innovation, Rainbow is currently in trade with a raft of innovation, to resume the pressure on growing this reliable part of the business RESULTS FOR THE YEAR ENDED 30 JUNE

38 Operational review - TSB Revenue (Rm) 2014 Pro forma 2014 Actual Foodcorp Rainbow TSB n/a Vector Sales between segments (976.5) (962.9) (729.2) Total Operating profit (Rm) 2014 Pro forma 2014 Actual Foodcorp Rainbow (2.6) 0.6 (3.1) TSB n/a Vector Unallocated group costs (29.9) (150.4) (72.6) Total The opportunity Significant growth potential into Africa with huge diversification potential Greenfield sugarcane development project in the Massingir District of Mozambique. The project is still in the feasibility phase. Management John du Plessis Managing Director Appointed: years sugar industry experience, previously held managerial and executive positions at Royal Swaziland Sugar Corp (Swaziland), Booker Tate (United Kingdom), Zambia Sugar (Zambia) and Illovo Sugar (South Africa) RESULTS FOR THE YEAR ENDED 30 JUNE

39 Operational review TSB Results for the six months only Operating profit of R79.5m and an operating margin of 3.2% Results negatively impacted by unprecedented levels of sugar imports Industry wide strike affected profitability Production levels forced lower TSB produced 190kt of sugar compared to 246kt in the comparative period last year Lower output due to strike and extreme wet conditions during the start of 2014/2015 milling season Turbidity problems and increased energy costs due to higher moistures in bagasse impacted the bottom line Massingir Massingir is TSB s proposed greenfield expansion in Mozambique. Feasibility studies are ongoing with a final decision on the project likely by December 2014 R52.2m of setup costs relating to the project is currently recorded as work in progress with a further R45.7m budgeted for 2015 RESULTS FOR THE YEAR ENDED 30 JUNE

40 TSB Agronomics Cane is provided per season June 2014 June 2013 June 2012 Cane crushed (000) Raw sugar produced (000) Cane : Sugar ratio Sucrose % 14.2% 13.8% 14.2% TSB Managed Farms Hectares managed Cane yield per hectare Capacity Cane capacity (000) Capacity utilisation 86% 86% 94% TSB Production Share 27.4% 28.7% 33.7% RESULTS FOR THE YEAR ENDED 30 JUNE

41 Operational review Vector Optimisation of outbound supply chain Revenue (Rm) 2014 Pro-forma 2014 Actual 2013 Foodcorp Rainbow TSB n/a Vector Sales between segments (976.5) (962.9) (729.2) Total Operating profit (Rm) 2014 Pro-forma 2014 Actual Foodcorp Rainbow 2013 (2.6) 0.6 (3.1) TSB n/a Vector Unallocated group costs (29.9) (150.4) (72.6) Total The opportunity Opportunity to leverage Vector s business model and skills into the ambient area within Foodcorp and TSB Sugar Significant investment in new capacity and systems will facilitate higher volumes and improved operational efficiency (c.r13 bn value of goods moved through Vector system annually) Well positioned for future growth Management Chris Creed Managing Director Appointed: January 2011 Marketing and sales roles within Bristol Myers Squibb, Adcock Ingram, Capespan Appointed Rainbow Farms Distribution Director in 2007 RESULTS FOR THE YEAR ENDED 30 JUNE

42 Operational review Vector Sales volumes remain under pressure Subdued economic environment continues to constrain trading partners and organic growth Total revenue up 15.1% to R1.7bn Pleasing growth in Primary Transport, Bulk Storage and new business from Burger King and Captain DoRegos in the secondary network Pick n Pay basket and Sea Harvest successfully introduced into the network Inland network optimisation initiatives Pleasing progress and cost saving benefits offset by higher manpower, electricity and fuel costs Second sales and merchandising unit established Historical litigation impacts Relates to a number of drivers from Roodepoort who were dismissed for misconduct in year 2005 Added an additional cost of R16.6m Operating profit reflects modest growth of only 4.3% to R150m (excluding the settlement cost, growth would have been 15.9%) Growth remains key 49% interest in Senn Foods Logistics was acquired with effect from May 2014 for R79.9m Focus on internal efficiencies, corporate governance and accreditation initiatives for the benefit of Vector principals and customers Investing in the network: construction of a new facility to the value of R140m in the Coega Development Zone initiated RESULTS FOR THE YEAR ENDED 30 JUNE

43 Operational review Vector Revenue, Operating Cost, Operating Profit : F14 vs. F13 (Rm) 15.1% revenue growth: 15.1% 16.7% Improvements in primary transport and bulk storage Revenue Operating Costs Operating profit Operating Cost and Operating Profit excl litigation : F14 vs. F13 (Rm) 15.5% Operating Costs excl litigation % Operating profit excl litigation 4.3% New business growth in secondary distribution network from Captain DoRegos, the expansion of Burger King, growth of the Pick n Pay basket and the introduction of Sea Harvest Subdued growth by principles partially offsets new business Cost containment initiatives, including the restructure of the Inland network, benefits operating costs; largely offset by the impact of litigation and start-up costs relating to the second sales and merchandising structure Operating profit improves by 4.3%, negatively impacted by the costs of litigation Excluding impact of litigation, operating profit would have grown by 15.9%, in line with revenue growth RESULTS FOR THE YEAR ENDED 30 JUNE

44 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Operational efficiency Vector 2.1% 1.0% -1.9% Volume Inventory Service Level F13 F14 Stock Holding Trend Year-on-year stockholding increased by 1% while volume grew by 2.1% Operational efficiency Year on year stock levels increased by 1% with 2.1% volume growth driven predominantly by new business Service levels declined by 1.9% driven by supply issues from various principals. Despite these issues, overall service levels are still in line with industry norms Advanced Planning systems are assisting in maximising service from reduced stockholding RESULTS FOR THE YEAR ENDED 30 JUNE

45 Operational review - Vector Roodepoort Secondary distribution business Network Optimisation Optimisation of facilities in Gauteng improved efficiencies as expected Midrand Campus As part of the on-going network optimisation, the secondary distribution business based at Roodepoort was moved to the Midrand campus in November The Roodepoort operation is being used as a bulk storage facility Bulk storage The Klerksdorp depot was mothballed at the end of June 2013 as part of the network redesign RESULTS FOR THE YEAR ENDED 30 JUNE

46 Acquisition of Senn Foods Logistics - Vector Refrigerated fleet Vector acquired a 49% interest in Senn Foods Logistics (Pty) Ltd, based in Botswana, for P65.5 million (R79.9m) Botswana Cold storage capacity is being expanded Effective from May 2014 Senn Foods Logistics is the largest cold chain distribution business in Botswana and is involved in the distribution of dry, frozen and chilled foodstuffs Represents most of Vector s principals in Botswana including Rainbow, McCain, I&J and Fry s as well as QSR customers Chicken Licken, Nandos, Spur and Wimpy Senn Foods is currently expanding their capacity RESULTS FOR THE YEAR ENDED 30 JUNE

47 Salient features Results summary Strategic overview Key issues and financial review Operational reviews Prospects Prospects Sustainable improvement in consumer spending is unlikely: the impact of this is pervasive across all RCL Foods segments Poultry industry remains in crisis: the recently announced anti-dumping protection will be key to the survival of the industry A good production season is expected for TSB: a lower level of sugar imports signifies normalisation in the market and better marketing conditions are expected Redemption of Foodcorp s Euro denominated debt has removed the significant foreign currency valuation volatility: will result in a more stable and a lower cost of funding RCL Foods continues to explore opportunities in strategic growth markets in the food sector in South Africa and sub-saharan Africa: in line with long-term aspirations RESULTS FOR THE YEAR ENDED 30 JUNE

48 Appendices RESULTS FOR THE YEAR ENDED 30 JUNE

49 Disclaimer THIS PRESENTATION (WHICH SHALL BE DEEMED TO INCLUDE ANY INFORMATION WHICH HAS BEEN OR MAY BE PROVIDED IN WRITING OR ORALLY IN CONNECTION HEREWITH) ("PRESENTATION") CONTAINS INFORMATION PERTAINING TO RCL FOODS LIMITED ("COMPANY"). THE PRESENTATION MAY NOT BE VIEWED BY PERSONS WHERE TO DO SO WOULD CONSTITUTE A BREACH OF ANY APPLICABLE LAWS OR REGULATIONS. PERSONS ACCEPTING THIS PRESENTATION REPRESENT AND WARRANT TO THE COMPANY THAT THEY ARE DOING SO FOR INFORMATION PURPOSES ONLY AND AGREE TO THE FOLLOWING TERMS AND CONDITIONS. Neither the Company nor its employees, directors, representatives or advisors ("Related Persons") make any representation or warranty, express or implied, as to or the accuracy, completeness or fairness of any information, statements, representations or forecasts contained in the Presentation and no reliance may be placed on the Presentation. Neither the Company nor the Related Persons nor any other person shall be liable for any loss, damage, claim or costs (whether direct, indirect or consequential) whatsoever and howsoever suffered or incurred by any person as a result of or arising from placing reliance on, acting on or refraining from acting on anything contained in, or omitted from, the Presentation, whether the loss, damage, claim or costs arises as a result of negligence or gross negligence. The Presentation is being made available in good faith and for information purposes only. The Presentation does not constitute an offer, solicitation or invitation to purchase or subscribe for any shares in the Company and shall not form the basis of any agreement with the Company. Prospective investors who make an investment in the Company may not rely on the Presentation nor any part thereof in relation to such investment. The information disclosed in the Presentation is only current as of the date of the Presentation. Neither the Company nor the Related Persons shall have any obligation to review, update or correct the information in the Presentation after the date of the Presentation nor to notify recipients of any inaccuracy, incompleteness or change in the information contained in the Presentation. The Company shall however be entitled to update, amend, supplement or otherwise alter the information contained in the Presentation without notice. The Presentation may contain "forward-looking" statements. Such statements are only predictions and reflect significant assumptions and subjective judgments by the Company concerning anticipated future events or performance. These assumptions and judgments may or may not prove to be correct and are subject to inherent risks and uncertainties. Those risks and uncertainties include factors and risks specific to the Company as well as general economic conditions and conditions in the market. Actual events or results may differ materially from the events or results expressed or implied in any forward-looking statement and such deviations are both normal and to be expected. Whilst the Company is of the opinion that the views expressed in any such forward-looking statements are based on reasonable assumptions, neither the Company nor the Related Persons makes any representation or warranty as to the accuracy or likelihood of fulfilment of any forward-looking statement, or any events or results expressed or implied in any forward-looking statement. Any forward-looking statements made in the Presentation reflect views held as at the date of the presentation. Prospective investors should not construe the contents of the Presentation as legal, tax, investment or other advice. In making an investment decision, prospective investors must rely solely on their own analysis of the legal, tax, financial and other consequences of an investment in the Company, including the merits of investing and the risks involved, and are advised to consult their own professional advisors concerning such matters. Prospective investors will be solely responsible for their own assessment of the market position of the Company and forming their own view of the future performance of the Company and arriving at an investment decision with regards to the Company. It is the responsibility of each prospective investor to satisfy itself as to full compliance with the applicable laws and regulations. Prospective investors should inform themselves as to the legal requirements applicable to them in respect of the acquisition, holding and disposition of an interest in the Company. 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This Presentation is intended for distribution to, and is only directed at, the recipient on the basis that: (A) in the United Kingdom, they are (i) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order ); or (ii) high net worth entities falling within Article 49(2)(a) to (d) of the Order; or (B) they are outside the UK and are persons to whom it can otherwise lawfully be distributed under local law (all such persons together in (A) and (B) being referred to as relevant persons ). Persons who are not relevant persons should not take any action on the basis of this Presentation and should not act or rely on it. By accepting this Presentation the recipient confirms that he or she is a relevant person. Any investment or investment activity to which this Presentation relates is only available to (i) in the United Kingdom, relevant persons and, (ii) in any member state of the European Economic Area other than the United Kingdom, qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EC), as amended by the 2010 PD Amending Directive (Directive 2010/73/EU), and will be engaged in only with such persons. RESULTS FOR THE YEAR ENDED 30 JUNE

50 Strategic overview: RCL Foods in context Rupert Family Food, Liquor & Home care Banking Healthcare Insurance Industrial Infrastructure Media & Sport RCL Foods is Remgro s chosen platform for its food strategy in sub-saharan Africa RESULTS FOR THE YEAR ENDED 30 JUNE

51 Strategic overview: Africa opportunity Africa 2050 Opportunity Population will more than double to 2 billion, 22% of world s population 1 in every 4 people in sub-saharan Africa lacks adequate food for a healthy life style Workforce will become the largest in the world, 25% of the world s workers Potential to become an agricultural power house with 60% of the world s available farmland Food demand is predicted to increase by 50% by 2030 and 70% by 2050 RESULTS FOR THE YEAR ENDED 30 JUNE

52 Strategic overview: What differentiates us? Portfolio of leading consumer brands Unique, integrated business mode Significant platform for expansion Leading market position in many categories Best known brands that span staples to top-end, value-added offerings Emerging middle-class displays strong brand loyalty Own the route to market through integrated outbound supply chain Strategic customer relationships World-class technology and systems delivering a highly efficient distribution service The transformational acquisitions of Foodcorp and TSB Sugar have established a business of significant size and scale with diversification to counter cyclicality Opportunity to realise synergies (distribution, sourcing, IT systems, funding) across the Group 4 Positioned to deliver on the African opportunity 5 Experienced management team with strong operational track record 6 Support of a highly regarded strategic shareholder RCL Foods is currently pursuing a number of projects in sub-saharan Africa in addition to the greenfield sugar cane project in Mozambique Extensive research and analysis to identify suitable investment opportunities against very specific criteria Management team has extensive knowledge and experience in the South African food industry Delivered steady, through-the-cycle revenue growth (11% CAGR since 2000) Depth of management with experienced senior management at every business segment level Remgro is a highly regarded investment holding company with substantial size and influence Adds value by providing strategic guidance and financial support An investment partner of choice RESULTS FOR THE YEAR ENDED 30 JUNE

53 Foodcorp overview Foodcorp is a leading manufacturer of quality branded and private label food products Product range includes Peanut butter, pet food, mayonnaise, edible oils, breads, bakery products and wheat flour Certain traditional SA products such as rusks, sorghum meal, mageu and white maize meal It manufactures and sells a wide range of quality convenience ready to eat products including pies, a range of products, speciality breads and cakes for Woolworths and other retailers Foodcorp positions products to appeal to the mass consumer market, representing approximately 70% of the total South African population Foodcorp supplies most products nationally to major retail and wholesale outlets Including Shoprite-Checkers, Woolworths, Pick n Pay, Spar and Walmart-Massmart, independent retailers, forecourts and the food services industry Managed under six larger production units Grocery division, Milling division, Baking division, Pie division, Beverage division and Speciality division RESULTS FOR THE YEAR ENDED 30 JUNE

54 Foodcorp: Grocery and Pie Divisions Grocery The Grocery Division consists of a portfolio of well recognised brands with market leading positions Includes a wide range of grain and edible oil based products, sorghum, peanut butter, rusks, a range of pet foods, as well as salad dressings, dips and spreads Pie The Pie Division produces a range of high quality, predominantly meat pies under the Piemans brand that are sold in these formats: frozen unbaked, frozen baked and chilled baked One mega site which includes 6 operations Botswana Limpopo Botswana Limpopo Province North West Randfontein Gauteng Free State Lesotho Mpumalanga Swazila nd KwaZulu Natal Mpumalanga Krugersdorp Centurion Gauteng Swazila North West nd Free State Lesotho KwaZulu Natal Northern Cape Western Cape Molteno Eastern Cape Northern Cape Western Cape Eastern Cape Brands Brands RESULTS FOR THE YEAR ENDED 30 JUNE

55 Foodcorp: Beverage and Milling divisions Beverage The Beverage Division produces a maize-based health drink under the Mageu No 1, Smooth, Phuzimpilo and Mnandi brands Milling The Milling Division operates the largest single site flour mill in Southern Africa and a maize mill, both based at the same site in Pretoria Northern Cape Western Cape Botswana North West Eastern Cape Free State Limpopo Province Mpumalanga Pretoria Gauteng Swaziland Lesotho KwaZulu Natal Northern Cape Western Cape Botswana North West Eastern Cape Free State Limpopo Province Mpumalanga Pretoria Gauteng Swaziland Lesotho KwaZulu Natal Brands Brands RESULTS FOR THE YEAR ENDED 30 JUNE

56 Foodcorp: Baking and Specialist divisions Baking The Baking Division is the fourth largest bakery group in the country, operating seven bakeries and distributing its products in five of the country s provinces. Speciality The Speciality Division produces a range of superior ready to eat products, including speciality breads, mainly for Woolworths. The product range includes sandwiches, muffins, desserts, snack foods, scones, rye breads, cake products, pastries and croissants Western Cape Northern Cape Botswana Limpopo Province Tzaneen Polokwane Mpumalanga Bushbuckridge Rustenburg Pretoria Nelspruit Benoni Swaziland North Gauteng West Eastern Cape Free State Lesotho KwaZulu Natal 2 sites Northern Cape Western Cape 1 site Botswana Limpopo Province Mpumalanga Johannesburg Pretoria Swazil North Gauteng and West KwaZulu Free Natal State Eastern Cape Lesotho Brands Brands RESULTS FOR THE YEAR ENDED 30 JUNE

57 Rainbow: Infrastructure 209 rearing, laying and broiler farms and hatcheries 30m birds on the ground 5 feed mills 1.1m tons per year 4 primary processing plants nearly 250m birds per year 2 further processed plants 27,000 tons per year Polokwane Limpopo Province Tzaneen Windhoek Namibia Northern Cape Botswana North West Rustenburg Roodepoort Klerksdorp Free State Bloemfontein Wolwehoek Lesotho Mpumalanga Nelspruit Midrand Swaziland Carolina KwaZulu Natal Newcastle Pietermaritzburg Hammarsdale Durban Eastern Cape Western Cape Cape Town Worcester George Port Elizabeth East London RESULTS FOR THE YEAR ENDED 30 JUNE

58 Rainbow: Complex business chain Integrated supply chain from farm to fork GP operation Agriculture Processing Grandparent chicks Grandparent farms Parent farms Broiler farms Rearing 21 weeks Laying 40 weeks Hatching 3 weeks Rearing 21 weeks Laying 40 weeks Hatching 3 weeks Growing 34 days Broilers Processing 4 plants + 2 FP plants World s oldest pedigree broiler breed Located in Carolina and East London to ensure optimal bio-security 3 broad agricultural regions - Northern, KZN, W Cape Feed supply 5 feed mills producing 1.1m tons pa Around 80% of production to Rainbow Consumers Brands Customers Distribution Grade A Quality, Grade A Taste They taste so good cos they eat so good Foodservice Retail Wholesale The consumer is at the heart of our business The Chicken Experts RESULTS FOR THE YEAR ENDED 30 JUNE

59 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 Rainbow: Imports and feed costs 1. Imports are higher than ever and remain the key culprit 2. Feed costs were up another 10% on top of record highs Imports Imports - Total Chicken (Excl MDM) - Tons per month Feed costs +10% R/Ton % F14 F13 F12 F11 F10 RESULTS FOR THE YEAR ENDED 30 JUNE

60 Rainbow: Market changing factors update Trade remedies Dti implemented a tariff on bone-in portions in August 2013, which affected non EU countries Subsequent to year-end, the Dti implemented interim anti-dumping duties against key EU countries effective until 1 January 2015, whilst they complete their research and a decision is reached on permanent duties Injection cap Rainbow remains supportive of Government s intended 15% cap on injection Rainbow s stance, because of its strategy of building consistent brands that consumers demand, has been to inject lower than the industry for years (despite the relative financial penalty) Rainbow welcomes the leveling of these playing fields which is in consumer interests RESULTS FOR THE YEAR ENDED 30 JUNE

61 TSB: Cane Supply Area TSB s three mills in South Africa are Malelane, Komati and Pongola RESULTS FOR THE YEAR ENDED 30 JUNE

62 TSB Mills Mill Mill Established Tons sugar produced Notes Nkomazi Malalane Nkomazi produce approximately tons of sugar per year Komati Pongola Pongola Pongola produce approximately tons of sugar per year. Adding Pongola to Nkomazi, TSB current produces 27% of the total SA production Malalane Mill RESULTS FOR THE YEAR ENDED 30 JUNE

63 RSA Mills 2015 Summary Other Raw Materials Bagasse to Molatek 138,000t Molatek Cane 5.5 mtc Extraction Raw House Crystallisation Molasses 201,000t Molasses sold 30,000t Animal Feed 340,000t Bagasse 1,373,000t Steam Refinery Boilers & Power Plant Refined Sugar 492,000t Brown Sugar to Market 157,000t Raw Export 30,000 (shipments) RESULTS FOR THE YEAR ENDED 30 JUNE

64 RSSC Mills 2015 Summary Cane 3.41 mtc Extraction Raw House Crystallisation Molasses t Distillery Bagasse t Steam Refinery Total Production 28.9 mil Potable Refined Sugar t Other Sugar Boilers & Power Plant Brown Sugar t SSA MSP US Regional SACU Europe t t t t t RESULTS FOR THE YEAR ENDED 30 JUNE

65 Molatek Animal Feeds Products Molatek sells ± tons of manufactured product Molatek Sales Products are sold in bulk bags - 40 kg - 50kg Bulk Bags Energy Feeds Concentrates Lick Supplements Malalane Mill RESULTS FOR THE YEAR ENDED 30 JUNE

66 TSB: Booker Tate in a nutshell Booker Tate provides development, management and technical services to sugar and agribusiness industries throughout the world Founded in 1988 from the amalgamation of Booker Agriculture International (BAI) and Tate & Lyle Agribusiness (TLA) with a sugar history stretching back to the 18 th century Booker Tate has successfully completed over assignments in 120 countries over 50 years Booker Tate has recently worked in Belize, Burkina Faso, Colombia, Dominican Republic, Guyana, Indonesia, Kenya, Mozambique, Nigeria, Papua New Guinea, Peru, Sierra Leone, South Africa, Sri Lanka, Sudan, Suriname, Swaziland and USA RESULTS FOR THE YEAR ENDED 30 JUNE

67 TSB: Royal Swaziland Corporation 27.42% Shareholding RSSC Key Parameters Metric Actual 2014 Area harvested Ha 19,591 Cane Estate Tons 2,008,893 Cane Outgrowers Tons 1,356,162 Cane total Tons 3,365,055 Sugar 96 Pol Tons 433,255 Ethanol Litres 29,667,000 RESULTS FOR THE YEAR ENDED 30 JUNE

68 TSB: Quality Sugars, Sugar Marketing and Specialities White Sugar Brown Sugar Sticks Castor & Icing Specialty Brown Sweetener RESULTS FOR THE YEAR ENDED 30 JUNE

69 Vector: Operational review Customers Principals Customer Secondary Distribution (CSD) Vector is contracted by the customer to deliver their full basket of products directly to the outlets New customers in 2014 Burger King national rollout and Captain DoRegos Principal Secondary Distribution (PSD) Vector is contracted by the principal to deliver to all retailers, wholesalers and general trade New principals added to this business during 2014 include Sea Harvest and Nature s Garden RESULTS FOR THE YEAR ENDED 30 JUNE

70 Vector: Infrastructure Windhoek plant-based cold stores distribution sites Namibia Cape Town Worcester George Northern Cape Western Cape Botswana North West Port Elizabeth Rustenburg Roodepoort Free State Bloemfontein Eastern Cape Wolwehoek East London Polokwane Lesotho Limpopo Province Tzaneen Mpumalanga Nelspruit Midrand Swaziland Carolina KwaZulu Natal Newcastle Hammarsdale Durban Vector infrastructure National footprint including Windhoek 5 plant-based cold stores 16 distribution sites Capacity pallets Employees Customer Drop Points cases delivered daily (61m cases pa) Tonnage tons pa Fleet of 401 vehicles (primary 131 / secondary 270) ISO and ISO accreditation for all Warehouses ISO and OHSAS across Peninsula, Midrand, Thekwini and Roodepoort RESULTS FOR THE YEAR ENDED 30 JUNE

71 Vector: Services Manufacturers (PBCS) Primary Warehousing (VCS) Primary Transport (VPT) Principal Secondary Distribution (PSD) Customer Secondary Distribution (CSD) Sales Solutions (VSS) Credit & Information Management 2008 Plant Based Cold Stores 2002 Primary Warehousing 2007 Primary Transport 1966 Secondary Warehousing & Transport 2001 Secondary Warehousing & Transport 2004 call centres, sales and merchandising 2001 Debtors and information management % 2% Sources of revenue 94% Principal Secondary Distribution (PSD) Customer Secondary Distribution (CSD) Bulk Storage (VCS) % 9% 9% 20% 23% Primary Transport (VPT) Sales and Merchndising (VSS) Plant Based Cold Storage (PBCS) 33% In December 2004 Rainbow acquired the Vector business which comprised 94% Principal Secondary Distribution; Since then: Vector manages the entire Rainbow Outbound Supply Chain Vector now offers a fully integrated and cost effective outbound supply chain to customers and principals The business is more balanced and diversified with service offerings covering the full outbound supply chain RESULTS FOR THE YEAR ENDED 30 JUNE