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Results Presentation
for the year ended 30 September 2019
Agenda
Business overviewH Lourens
Financial overviewA Muller
Operational overviewH Lourens
Outlook and management focusH Lourens
Quantum Foods Results Presentation for the year ended 30 September 2019 2
a
Business overview
H Lourens
Quantum Foods Results Presentation for the year ended 30 September 2019 3
Salient features
1. Unfavourable economic environment
• Slow economic growth
• Declining discretionary consumer spend
• ZAR continues to weaken
• Infrastructure challenges at Eskom
2. Quantum Foods: Overview
• Good volume growth in most categories
• Expected margin squeeze in egg business occurred
• Most operational efficiencies improved
Quantum Foods Results Presentation for the year ended 30 September 2019 4
• Revenue R4.4bn
• Operating profit R245m
• HEPS 92.3 cents
• Total dividend per share 33 cents
• Cash generated by operations R178m
• Repurchased 18.6m shares 8.8%
HEPS decreased due to downturn of egg industry
Business overview
Quantum Foods Results Presentation for the year ended 30 September 2019 5
a
Financial overview
A Muller
Quantum Foods Results Presentation for the year ended 30 September 2019 6
Statement of income
For the year ended 30 September2019
Rm2018
Rm%
change
Revenue 4 417.7 4 121.9 7
Operating profit* 245.2 473.3 (48)
Income from associates 0.2 0.7
Net finance income 11.1 23.8
Profit before tax 256.6 497.8
Tax (67.4) (135.6)
Profit for the period 189.2 362.2
* Operating profit includes capital items 0.6 0.9
Adjusted operating profit 244.6 472.4 (48)
Adjusted operating margin 5.5% 11.5%
EPS − cents 92.6 164.3 (44)
HEPS − cents 92.3 163.9 (44)
Quantum Foods Results Presentation for the year ended 30 September 2019 7
Dividends
For 2019
• Dividend at a HEPS cover of 4 times 23 cents
• Special dividend due to 2019 cash position 10 cents
• Interim dividend paid (8 cents)
• Final dividend 25 cents
Quantum Foods Results Presentation for the year ended 30 September 2019 8
Share repurchases
• 10 505 000 shares repurchased and cancelled in 2019 at an average of R3.35 per share
• 8 083 426 shares purchased by subsidiary in 2019 at an average of R3.39 per share
• R142 million returned to shareholders for 2019
• Board intends to continue with repurchase of shares
2017 2018 2019
Dividends plus share repurchases as % of HE 93% 68% 75%
Quantum Foods Results Presentation for the year ended 30 September 2019 9
Revenue analysis
Total R4 418 million (2018: R4 122 million)
2018: R1 460 | 36%
ANIMAL FEED
1 759
EGGS
1 095
FARMING
1 325
AFRICA
239
2018: R1 206 | 29% 2018: R1 233 | 30% 2018: R222 | 5%
Quantum Foods Results Presentation for the year ended 30 September 2019 10
40% 25% 30% 5%
Segment results
Adjusted operating profit2019
Rm2018
Rm
Eggs 38.3 286.7
Farming 112.1 98.5
Animal feeds 89.1 69.4
Other African counties 14.2 31.0
Head office costs (9.1) (13.2)
Profit for the year 244.6 472.4
Quantum Foods Results Presentation for the year ended 30 September 2019 11
Statement of financial position
At year-end2019
Rm2018
Rm
Non-current assets 1 181.5 1 091.9
Net working capital 693.2 574.6
Non-current liabilities (250.8) (228.3)
Cash 219.6 422.5
Total net assets 1 843.5 1 860.6
Borrowings (6.1) (6.2)
Equity 1 837.4 1 854.4
Quantum Foods Results Presentation for the year ended 30 September 2019 12
Statement of cash flow
For the year ended 30 September2019
Rm2018
Rm
Cash operating profit 329.8 547.8
Working capital (outflow) / inflow (109.2) 12.9
Changes in exchange rates 1.3 (7.9)
Cash effect of hedging activities (6.7) 8.9
Tax paid (51.2) (138.0)
Net finance income 14.4 24.4
Cash generated by operations 178.4 448.0
Shares repurchased (35.2) (52.4)
Dividends paid (162.6) (119.7)
Treasury shares acquired by subsidiary (27.4) (2.5)
Advance of loan (6.7) −
Capital expenditure (152.6) (116.0)
Proceeds from sale of assets 3.3 3.8
Net cash (decrease) / increase (202.9) 161.0
Quantum Foods Results Presentation for the year ended 30 September 2019 13
Capital expenditure
2019Rm
FutureRm
RSA
Expansion/efficiency 61.0 2.6
– Feed mills 30.3 2.0
– Layer hatchery 5.6 0.6
– Farms 8.3 −
– Packing stations 13.7 −
– Energy 3.1 −
Replacement/compliance 34.4 63.1
Africa
Expansion/efficiency 47.7 29.7
– Zambia layer farm 13.8 −
– Uganda layer farm and breeders 33.9 29.7
Replacement 9.5 5.2
152.6 100.6
Quantum Foods Results Presentation for the year ended 30 September 2019 14
Sensitivities: Eggs
Effect of movement in: Rand value EBIT/annum
Selling prices
Eggs (R/doz) 1% 15c R12m
Raw material costs
Maize R/ton R100 R7m
Soya bean meal R/ton R100 R2m
Assumption: Egg volume of 7.0 million dozen per month
Quantum Foods Results Presentation for the year ended 30 September 2019 15
a
Operational overview
H Lourens
Quantum Foods Results Presentation for the year ended 30 September 2019 16
Nova Feeds
• Relentless focus on raw material procurement had a
positive effect
• Positive volume growth: CAGR of 3.8% since 2015
• Margins decreased due to product mix changes and
price lead competition
• Cost increases per unit remained under control
• Both Paterson and Pretoria projects completed on
time, within budget
• Projects increased capacity by 16%
Solid performance
Quantum Foods Results Presentation for the year ended 30 September 2019 17
• Improved financial performance
• Breeder efficiency declined − expect little improvement in medium term
• Broiler efficiency remained excellent
• Production of day-old chicks increased by 7.2%
• Change in supply contract to Sovereign Foods
• Costs per unit throughout business under control
• New broiler executive to start 1 January 2020
Broiler farming
Strong performance
Quantum Foods Results Presentation for the year ended 30 September 2019 18
• Improved financial result
• Layer breeders continues to perform above breed standard
• Production of day-old pullets increased by 12.7%
• Point-of-lay sales volumes increased by 5.3%
• Much improved productivity at commercial layer farms
• Cost per unit decreased throughout value chain
Layer farming
Continued improvement
Quantum Foods Results Presentation for the year ended 30 September 2019 19
• All operational efficiencies improved
• Volumes increased by 5.5%
• Prices declined by 14.3%
• Feed prices increased by 16.3%
• South Africa flock estimated at c.28m layers
• Capex programme for graders near completion
• Nulaid remains the egg brand of choice
Nulaid Eggs
Excellent operational performance
Quantum Foods Results Presentation for the year ended 30 September 2019 20
• Financial performance under pressure
• Raw material prices increased in all three countries
• Egg productivity improved
• Uganda breeder farm temporarily moved to Masindi
• Cost affected by devaluation of Kwacha
• Zambia capital cycle completed
• Uganda hatchery capacity increased
• Uganda breeder farm completion by March 2020
• Zambia breeder business returned to profitability
Africa business
Tough trading conditions
Quantum Foods Results Presentation for the year ended 30 September 2019 21
aOutlook 2020
Outlook 2020
Expectations
• Challenging macro business environment
• Stable raw material costs
• Weaker egg prices
• Tough first six months in African business
Quantum Foods’ response
• Ensure egg sales in optimal channels and geographies
• Leverage investments in feeds and hatcheries
• Improve efficiencies throughout layer value chain
• Target cost-saving initiatives
Quantum Foods Results Presentation for the year ended 30 September 2019 23
Quantum Foods Results Presentation for the year ended 30 September 2019 24
a Appendix
Quantum Foods Results Presentation for the year ended 30 September 2019 25
Safex yellow maize Rand per ton
1 500
2 000
2 500
3 000
3 500
4 000
4 500
Sep 14 Mar 15 Sep 15 Mar 16 Sep 16 Mar 17 Sep 17 Mar 18 Sep 18 Mar 19 Sep 19
2 352
2 700
3 016
2 924
1 9531 770
Quantum Foods Results Presentation for the year ended 30 September 2019 26
CBOT USD soya beans
250
270
290
310
330
350
370
390
410
430
Sep 14 Mar 15 Sep 15 Mar 16 Sep 16 Mar 17 Sep 17 Mar 18 Sep 18 Mar 19 Sep 19
299
309 300 316 309
296
Quantum Foods Results Presentation for the year ended 30 September 2019 27
Rand:US dollar exchange rate
10
12
14
16
18
Sep 14 Mar 15 Sep 15 Mar 16 Sep 16 Mar 17 Sep 17 Mar 18 Sep 18 Mar 19 Sep 19
14.14 15.13
11.28
13.84
13.7113.55
Quantum Foods Results Presentation for the year ended 30 September 2019 28
Layer productivity index
95
100
105
110
115
120
125
130
135
140
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Quantum Foods Results Presentation for the year ended 30 September 2019 29
Broiler productivity index
85
90
95
100
105
110
115
120
125
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Quantum Foods Results Presentation for the year ended 30 September 2019 30
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