Presentation to investors January 2014
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Agenda
1
Group overview
2
Business segments
3
Strategic priorities
4
Financial information
5
Equity capital raising
3
3
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3
4
5
Group overview
Presentation team Miles Dally
Rob Field
Chief Executive Officer
Chief Financial Officer
•
Appointed: February 2003
•
Appointed: July 2004
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Miles has 32 years’ experience in the consumer goods industry and served as group Managing Director of Robertsons Holdings Proprietary Limited from 1995 to 2002
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Rob is a Chartered Accountant who qualified with Deloitte & Touche in Durban
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Prior to joining RCL Foods in May 2003 he spent four years as Commercial Director of Robertsons Homecare Proprietary Limited
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During 2009 Rob was appointed as a non-executive director of McCord Hospital
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After the unbundling of Robertsons Holdings Proprietary Limited he accepted the position of Chief Executive Officer at RCL Foods Miles has previously served as non-executive Chairman of SC Johnson SA (from 2008 to 2013) and Co-Chairman of the Consumer Goods Council of South Africa (CGCSA)
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Group overview
RCL Foods in context A member of the Rupert Family group of companies 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 5
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Group overview
History and evolution Where did we come from? Apr 2013 Acquired 49% interest in ZamChick
May 2013 Acquired FoodCorp
Jan 2014 Acquired TSB Sugar Holdings
The recent acquisitions of Foodcorp and TSB Sugar have transformed RCL Foods from a chicken business into a diversified food company of significant scale
22,500
20,000
17,500
Transformational acquisitions (2)
Revenue (R million)
15,000
12,500
Dec 2004 Acquired Vector Logistics
10,000
Combined pro forma revenue of c.R20 bn in FY13
7,500
5,000
2,500
0 '00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
(1)
Listed on the JSE with current market capitalisation of c.R14 bn
Financial Year
Note (1): Unaudited pro forma revenue (refer to slide 18) Note (2): Includes 10 months revenue for Foodcorp and12 months revenue for TSB Sugar
Mar 2013 ZAR3.9 billion rights offer (underwritten by Remgro)
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Group overview
Key Group brands Where are we today? Division
Category
Brands
Category Position (1)
Category Share (1)
Peanut Butter
1
50%
Rusks
1
39%
Mayonnaise
2
45%
Sorghum
2
29%
Dry Pet Food - Cat (2)
2
~26%
Dry Pet Food - Dog (2)
1
~51%
Bread
4
7%
Maize
5
3%
Flour
4
14%
Pilchards
2
8%
Parent Chicks (2)
1
47%
Chicken (3)
1
24%
Pies
Pies
1
33%
Beverages
Beverages
1
~70%
Sugar
Sugar
1
35%
Animal feed (2)
2
~18%
Animal feed (2)
-
~5%
Portfolio of compelling brands that deliver to consumer and customer needs
Milling and Baking
Fishing Poultry
Integrated logistics and sales services
Grocery
Strong market position and leading brands across multiple product categories
Unique ownership of integrated outbound supply chain
Feed
Notes: (1) Sourced from AC Nielsen, unless otherwise stated; (2) Company estimates based on available data; (3) Based on birds processed per week
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2
3
4
5
Group overview
Investment highlights What differentiates us? 1
6
Portfolio of leading consumer brands
2
Support of a highly regarded strategic shareholder
Unique integrated business model
5
3
Experienced management team with strong operational track record
Significant platform for expansion
4 Positioned to deliver on the African opportunity
8
Agenda
1
Group overview
2
Business segments
3
Strategic priorities
4
Financial information
5
Equity capital raising
9
9
1
2
3
4
5
Business segments
Rainbow Chicken Integrated supply chain from “farm to fork” GP operation Grandparent chicks
Agriculture
Grandparent farms Rearing 21 weeks
Feed supply Consumers
Laying 40 weeks
Hatching 3 weeks
Processing Broiler farms
Parent farms Rearing 21 weeks
Laying 40 weeks
Hatching 3 weeks
Growing 34 days
• 4.7 million birds per week
Broilers
Processing 4 plants + 2 FP plants
• 5 feed mills producing 1.1m tons pa • c.70% of production to Rainbow Chicken
Brands
Customers
Distribution Food service
Retail
Wholesale
The opportunity
Management
• 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 high import volumes, 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 shortages • Recently announced injection cap is a positive development Scott Pitman Managing Director Appointed: January 2011 • 19 years’ experience in marketing and sales • Previously headed up marketing for Robertsons, Distell, Unilever and Rainbow Chicken
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5
Business segments
Foodcorp Compelling consumer brands • Foodcorp is a leading South African manufacturer of a diversified portfolio of quality branded food products from basic essentials to top-end desserts and convenience meals • The market leader in five product categories, and its range of products includes some of the leading and best recognised brands in South Africa:
What we do
• Foodcorp manufactures and sells a wide range of quality convenience, ready-to-eat products for Woolworths. (Foodcorp is Woolworths’ largest single supplier)
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 to expand factories and milling capacity • Opportunity to harness the selling, distribution and credit management synergies across the Group
Cliff Sampson Managing Director Appointed: November 2013 • Divisional Managing Director of Foodcorp Consumer Brands since joining in 2008 • Previously Managing Director of National Brands (AVI) for 8 years
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2
3
4
Business segments
TSB Sugar Leading South African sugar producer • Engages in sugar cane agriculture, sugar manufacturing, marketing, sales and distribution • Operates three mills in South Africa, in close proximity to Mozambique with capacity to produce 700 000 tonnes of sugar p.a. • The lowest-cost sugar producer in the South African sugar industry • Selati is the #1 brand in the sugar category in South Africa
What we do
• TSB Sugar also produces animal feed from by-products of the sugar manufacturing process − During the 2013 financial year TSB produced 294 000 tonnes of animal feed
The opportunity
Management
• Positive long-term growth in sugar consumption (50% growth expected by 2030) • Significant growth potential into Africa • Greenfield sugar cane development project in the Massingir District of Mozambique, to develop c.37,500 hectares of sugar cane over the next 10 years − US$1.2 bn project value (TSB Sugar to fund c.25%) • Opportunity to harness the selling, distribution and credit management synergies across the group John du Plessis Managing Director Appointed: 2009 • 25 years sugar industry experience • Previously held managerial and executive positions at Royal Swaziland Sugar Corp (Swaziland), Booker Tate 12 (United Kingdom), Zambia Sugar (Zambia) and Illovo Sugar (South Africa)
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5
Business segments
Vector Logistics Optimisation of outbound supply chain Services Manufacturers (PBCS)
Primary Warehousing (VCS)
Primary Transport (VPT)
Principal Secondary Distribution
Customer Secondary Distribution
Sales Solutions (VSS)
Credit & Information Management
Plant Based Cold Stores
Primary Warehousing
Primary Transport
Secondary Warehousing & Transport
Secondary Warehousing & Transport
Call Centres, Sales and Merchandising
Debtors and Information Management
What we do
Customers / Principals
The opportunity
Management
• 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
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
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Business segments
Zam Chick / Zamhatch Strategic partner in Zambia
What we do
• RCL Foods acquired a 49% stake in Zam Chick in April 2013 • Zam Chick is the chicken broiler operations of Zambeef, itself a fully integrated agri-business • Zambeef is responsible for the day-to-day management of the business, while RCL Foods provides technical expertise • A further investment of a 51% stake in a new hatchery, Zamhatch, was made shortly after the Zam Chick deal was concluded
The opportunity
• The acquisitions represent an important entry into Zambia’s poultry market with a credible strategic partner and open the way for further cooperation • Zambia has a highly attractive demographic profile with a growing, increasingly urbanised population of c.13.6 million and expected GDP per capita growth rate of c.7% p.a. over the next 3 years
Zambeef Products Plc
Partner
• Fully integrated agri-business • Largest producer of chicken and beef products in Zambia (c.US$300 million turnover) • Listed on AIM and Lusaka Stock Exchange
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Agenda
1
Group overview
2
Business segments
3
Strategic priorities
4
Financial information
5
Equity capital raising
15
15
1
2
3
4
5
Strategic priorities
Strategic priorities Where are we headed? RCL Foods’ ambition is to create a diversified food business of scale with compelling brands that deliver to consumer and customer needs in Sub-Saharan Africa Innovating and investing in compelling food brands
• Accelerate product innovation and expansion into new brand categories • Combine strengths in consumer insight to support product innovation and development
Leveraging strategic customer relationships
• Broaden and deepen existing relationships with strategic customers • Differentiated approach to strategic customer management to drive volumes in higher margin business
Growing into Africa
• Accelerate growth in South Africa and into target strategic growth markets in sub-Saharan Africa
Realising synergies across the Group
• Leverage route-to-market experience across the Group • Sourcing synergies • Harness IT expertise and leverage information for profitability
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Agenda
1
Group overview
2
Business segments
3
Strategic priorities
4
Financial information
5
Equity capital raising
17
17
1
2
3
4
5
Financial information
Unaudited pro forma financials The pro forma financial information below has not been audited. It has been presented for illustrative purposes only and may not fairly represent the financial performance or financial position of the company
Revenue (R million)
FY 2013
Revenue contribution 5
Chicken margins at a cyclical low 7
4%
Rainbow Chicken 1
8 144
Foodcorp (10 months) 2, 3
6 471
TSB Sugar
4
24%
40%
5 022
Vector Logistics 1
1 477
Intergroup sales
(729)
Pro forma total
20 384
FY
Revenue (R million)
EBITDA (R million)
EBITDA margin
Rainbow Chicken
2007
4 730
772
16.3%
Foodcorp
2008
5 955
916
15.4%
2009
6 811
573
8.4%
2010
6 953
677
9.7%
2011
6 963
593
8.5%
2012
7 855
615
7.8%
2013
8 891
378
4.3%
TSB Sugar Vector Logistics
EBITDA (R million)
FY 2013
Rainbow Chicken 1
193
Foodcorp (10 months) 2, 3
695
TSB Sugar
4
32%
12%
13%
Pro forma total
2.
Foodcorp audited results for the 10 months to 30 June 2013. In FY13 Foodcorp’s year end was changed from 31 August to 30 June, to be in line with RCL Foods
3.
Includes contribution from discontinued operations
4.
TSB Sugar Holdings audited results for the year ended 30 June 2013
5.
Adjusted for intergroup sales (Vector to Rainbow and Vector to Foodcorp)
6.
Excluding unallocated group costs
7.
RCL Foods audited results. Rainbow Chicken and Vector Logistics only
TSB Sugar
185 45%
Unallocated group costs
RCL Foods audited results for the year ended 30 June 2013
Foodcorp
456 1
1.
Rainbow Chicken
30%
Vector Logistics
Notes and sources:
EBITDA contribution 6
(73) 1 456
Note: Zam Chick is a joint venture and is thus equity-accounted for accounting purposes.
Vector Logistics
18
1
2
3
4
5
Financial information
Debt and hedging profile Notes and sources:
Pro forma (R million) Pro forma net debt position
1
Debt Cash and cash equivalents 2 Pro forma net debt
30 June 2013
1.
Pro forma Statement of Financial Position of RCL Foods (circular to RCL Foods Shareholders dated 12 December 2013)
2.
Includes R450 million investment in money market fund
6 568 (2 875) 3 693
• Foodcorp issued €390m Senior Secured Notes on 4 March 2011
Senior secured notes
• Coupon rate of 8.75% per annum and a maturity date of 1 March 2018 • Payments under the 2018 Notes consists of two components: −
Principal due on 1 March 2018; and
−
Coupon payments due semi-annually on 1 September and 1 March
• Foreign exchange contracts entered into to hedge foreign currency exposure
Hedging
−
Principal hedged 50% through a performance participating foreign exchange contract and 50% through a vanilla forward exchange contract
−
Both for six years: maturing 1 March 2017
• Semi-annual coupon payments partially hedged (50%) at inception using forward exchange contracts maturing on each coupon payment date, until 1 March 2017 • Mark-to-market effects of the hedging arrangements are accounted for in income statement under net financing costs
Actions taken
• Foodcorp exercised its option to redeem 10% of the senior secured notes at 103% of the principal amount plus accrued and unpaid interest prior to 1 March 2014, in November 2013 • RCL Foods has engaged local banks and is committed to improving the quality of its balance sheet
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Agenda
1
Group overview
2
Business segments
3
Strategic priorities
4
Financial information
5
Equity capital raising
20
20
1
2
3
4
5
Equity capital raising
R2.5 bn equity capital raising • RCL Foods is currently considering significant growth and expansion projects in South Africa and the rest of sub-Saharan Africa across the broader food and fast moving consumer goods space • In order to capitalise fully on these opportunities, RCL Foods requires additional capital and has resolved to undertake an equity capital raising of up to R2.5 bn • The equity capital raising is also intended to diversify the shareholder base of RCL Foods, to further increase the free float and to improve the liquidity of the share
Pro Rata Offer • In light of the dilution in percentage ownership of RCL Foods minority shareholders following the acquisition of the TSB Sugar, RCL Foods is undertaking a pro rata share issue in order to restore the percentage free float and percentage shareholdings in RCL Foods to pre-TSB Sugar levels • RCL Foods minority shareholders will be entitled to subscribe for c.1 new RCL Foods share for every 2 RCL Foods shares held on the record date (31 January 2014)
Placement • Following the Pro Rata Offer (and subject to suitable market conditions), the balance of the capital requirement of R2.5 bn will be raised via a placement of RCL Foods shares to new and existing investors • The Placement will be conducted by way of an accelerated bookbuild offering to qualifying investors • The size of the Placement will be finalised following the conclusion of the Pro Rata Offer • The Placement will seek to raise a minimum of R1.275 bn
• The Pro Rata Offer is priced at R16.50 per RCL Foods Share, being a 4.7% discount to the TSB Acquisition Price • The Pro Rata Offer will close on 4 February 2014 and will seek to raise a maximum of R1.225 bn
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